ACA Repeal “Strong Opposition” Letter

We have sent our letter, and Sarah Kliff is on it!

Sarah Kliff: 6 Nobel Prize–winning economists announce opposition to Senate health bill: “Forty economists, including six Nobel laureates, sent a letter Monday to Senate Majority Leader Mitch McConnell (R-KY) outlining their opposition to the Better Care Reconciliation Act, the Senate bill to repeal and replace Obamacare…

…“At a time when economic change is making life more difficult for all but the relatively well-to-do, denying people to access health insurance is a giant step in the wrong direction,” the letter reads. “The goal should be to hold down health costs and increase access to affordable, quality health coverage for all. Unfortunately, the Better Care Reconciliation Act threatens reduced coverage and higher costs for those who continue to have it.”

Nobel Prize-winning economists Peter Diamond, Oliver Hart, Daniel Kahneman, Eric Maskin, Daniel McFadden, and Al Roth signed on to the letter, alongside 34 other economists.

One of the notable dynamics of the Senate debate is there are plenty of experts and advocacy groups coming out against the bill, but quite few speaking in its favor (although a handful do exist). This is quite different from the Affordable Care Act debate, where Democrats were keen to line up outsider experts like those signed on to this letter to speak favorably of their policy proposals.

And here we are:

ACA Repeal “Strong Opposition” Letter

Senator Mitch McConnell
317 Russell Senate Office Building Washington, DC 20510

Senator Chuck Schumer
322 Hart Senate Office Building Washington, D.C. 20510

Dear Senator McConnell and Senator Schumer:

We write to express our strong opposition to the Senate bill to repeal the Affordable Care Act (ACA). The ACA has provided high quality, affordable health coverage for millions of previously uninsured Americans and helped to slow the growth of health care spending.

Clearly, the ACA is not perfect. Each of us has ways we would like to see the ACA reformed. But the Senate bill, crafted in secret and released without hearings, addresses none of these concerns. Rather, the Senate bill would narrow coverage, and by driving relatively healthy people from the market, raise premiums for those who remain.
Based on our reading of the bill, we believe that the Better Care Reconciliation Act would reduce coverage nearly as much as the House bill that the Congressional Budget Office estimated would take coverage away entirely from 23 million Americans and narrow coverage for millions more. At a time when economic change is making life more difficult for all but the relatively well-to- do, denying people to access health insurance is a giant step in the wrong direction.

The Senate bill will expose millions to increased out-of-pocket health care costs. It would base tax credits on a plan with greatly increased cost sharing and deductibles that could run to $12,000 per family or more. Far from improving Obamacare, the Senate bill would reduce assistance for the millions of people who buy coverage through the state and federal marketplaces. Many now eligible for tax credits would be denied them entirely. States would be allowed to opt out of regulations that allow less healthy people to buy insurance at reasonable rates.

The savings from slashing health subsidies and coverage would go largely to bestowing tax cuts on upper income tax filers. The richest 0.1 percent of tax filers would receive tax cuts averaging over $200,000 per return.

We call on Congress to work on legislation to improve the health delivery system, in general, and The Affordable Care Act, in particular. The goal should be to hold down health costs and increase access to affordable, quality health coverage for all. Unfortunately, the Better Care Reconciliation Act threatens reduced coverage and higher costs for those who continue to have it.

Henry J. Aaron, Stuart Altman, Susan Athey, Barry Bosworth, Karen Davis, Brad DeLong, Gary Burtless, Anne Case, Amitabh Chandra, Philip J. Cook, Janet Currie, David Cutler, Leemore Dafny, Peter Diamond, Ezekiel J. Emanuel, Martin Gaynor, Sherry Glied, Claudia Goldin, Richard G. Frank, Jonathan Gruber, Oliver Hart, Vivian Ho, Jill R. Horwitz, Daniel Kahneman, Lawrence Katz, Ilyana Kuziemko, Frank Levy, Peter H. Lindert, Eric S. Maskin, Daniel McFadden, Thomas G. McGuire, Ellen Meara, Alan Monheit, Daniel Polsky, James B. Rebitzer, Michael Reich, Meredith Rosenthal, Al Roth, Isabel Sawhill, Benjamin D. Sommers, Lawrence Summers, Katherine Swartz, Paul N. Van de Water, Justin Wolfers

Will Competition in Health Insurance Survive? The Odds Are Better After Yesterday

Guest Post from Michael DeLong: Will Competition in Health Insurance Survive? The Odds Are Better After Yesterday

Will competition in health insurance survive?

The answer after yesterday is “perhaps”.

The federal courts, at their lowest district court level, have just weighed in on the side of more competition and fewer behemoth health insurance companies; on the side of more competition and fewer monopolies and near monopolies. This matters for consumers: monopolies are bad news, and monopolies where what is being sold is a very expensive necessity—which health insurance coverage is—very bad news for consumers, and so for societal well-being. If we are to retain a market-based health insurance system, people need effective options. A market in which there is only one insurance company, or two companies that collude to match each other’s prices, has all the bureaucratic drawbacks of a single-payer system plus all the drawbacks of a monopoly.

The federal courts have weighed in because two health insurance companies, Aetna and Humana, decided to attempt a merger to form a behemoth company. President Obama’s Department of Justice decided to challenge the merger. The case went to trial. Last December 21st the Department of Justice wrapped up its case against the $37 billion Aetna-Humana health insurance merger, arguing that it should be blocked. Why? Harm to consumers: the merger would be anticompetitive in that it would harm consumers by making them pay higher premiums and offering them fewer choices. George W. Bush-appointed federal Judge John Bates pondered how to decide this case for a month.

This case and decision is very important for the health, the well being, and the pocketbooks of all Americans who participate or will participate in Medicare. It is most immediately important for the seventeen million senior Americans who have chosen Medicare Advantage plans, which are offered by private companies and in which Medicare pays these companies to cover their benefits. The merger would create Medicare Advantage monopolies in 70 counties and harm competition in 364 counties, where Medicare Advantage serves about 1.6 million seniors, of which almost 980,000 are enrolled with Aetna or Humana. In these areas the resulting MA market would have too few insurance companies for there to be any credible curb to prices by competition.

The merger would also eliminate competition between Aetna and Humana on the public exchanges in at least Florida, Georgia, and Missouri, which would greatly reduce choice for over 700,000 people. This reduction of choice would severely impact people with low or moderate incomes, who make up a disproportionate share of the exchanges.

Judges Bates decided to block the Aetna-Humana merger. He wrote that “the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the transaction’s anticompetitive effects for consumers.” In short, he agreed with the Department of Justice’s argument that if Aetna were to acquire Humana, competition in Medicare Advantage would be greatly harmed. The Department successfully argued that people choose Medicare Advantage because it offers them (given their particular circumstances) a much better deal than traditional Medicare. Medicare Advantage plans, like normal Medicare, cover doctor and hospital visits. But they sweeten the deal by offering things like dental, vision, and hearing benefits in exchange for limiting the network of doctors and hospitals patients can go to. For those who don’t place a high value on choice-of-doctor—or those who positively do not want the hassle but want to be steered—this is not much of a sacrifice. And if you have bad teeth, the dental coverage is worth a great deal. The Justice Department lawyers pointed out that even when Medicare Advantage prices spike, 85% of seniors that change their plans switch to other Medicare Advantage plans, and very few of them switch out into traditional Medicare. Thus they had substantial evidence for their claim that the merger will hurt competition and consumers.

An important part of the background to this case is that Aetna dropped out of the Affordable Care Act’s health exchange in eleven states after the government sued to block the merger. Aetna claimed this was an independent business decision, but the Justice Department said otherwise. It implied that Aetna was attempting to pressure the Obama administration into dropping its opposition to a harmful merger by threatening to weaken Barack Obama’s signature initiative. Lawyers during the case showed exchanges where Aetna CEO Mark Bertolini referred to Obama administration’s decision to block the merger and said that the administration had “a short memory, no loyalty, and very thin skin.” The Justice Department concluded by posing the question: can Aetna evade antitrust scrutiny by just withdrawing temporarily from markets?

Aetna and Humana argued that there would still be effective competition after the merger because they would sell 290,000 Medicare Advantage accounts to Molina—a health insurance company that primarily focuses on Medicaid. Molina has tried in the past to branch out and gain a share of the Medicare Advantage market. It has twice failed, and currently has only 424 Medicare Advantage members! In internal documents produced during the trial, Molina admitted “we do not have the same level of administrative expertise…we are woefully unresourced to take this [divestitures] on.” And 290,000 is a very small share of the 3.1 million Medicare Advantage patients currently covered by Humana. Odds are those 290,000 would soon flow back out of Molina’s coverage.

Past divestitures, most notably in the 2012 Humana-Arcadian merger, have failed to preserve competition. For Aetna-Humana’s claims about preserving competition to be credible, it would have had to propose divestitures orders of magnitude greater—millions of insurance policies—and made them to another insurance company with successful experience in running Medicare Advantage. The Department of Justice’s complaint proposed divesting insurance plans in a total of 364 counties in 21 states to meet antitrust requirements for preserving competition.

The trial could have gone the other way.

Aetna and Humana strenuously argued at the trial that Medicare Advantage and standard Medicare are really very close to each other. They claimed that Aetna-Humana’s market power to raise prices would be sharply curbed by the ability of patients to vote with their feet for traditional Medicare in response. And they claimed that Aetna’s withdrawal from the exchanges—no matter whether it was an independent business decision or a threat—was simply not relevant to the case.

If it had gone the other way, it would have been a substantial defeat for consumers. Past evidence is overwhelmingly clear that health insurance mergers lead to higher premiums. Little if any savings are ever passed on to consumers. Aetna-Humana would have become one of the nation’s largest insurance companies, able to wield substantial market power. The Aetna-Humana behemoth would have been dominant in Medicare Advantage in 364 counties across 21 states with 1.6 million seniors being served. In some counties the merged company would have wielded incredible power—in Polk County, Iowa, Aetna-Humana would have 79% of the Medicare Advantage market; in Shawnee County, Kansas, 100%. That would have been bad news for consumers. But it would have been very good news for investors in and executives of health insurance companies. Aetna-Humana’s profits would have likely jumped way up.

Moreover, a decision the other way would have been a starting gun for a new wave of additional health insurance mergers to further decimate competition.

Therefore Judge Bates’s disapproval of the Aetna-Humana merger is a substantial victory for consumers, for affordable health care, and for the continued survival of a market-based health insurance system. The health insurance merger frenzy over the past decade is likely stopped. Competition in Medicare Advantage going forward will be much stronger than had the merger gone through.

In addition, this outcome to the trial means that the ACA exchanges will also be stronger going forward. Fewer of them will likely fail due to insufficient competition. The danger for the exchanges is that health insurance companies raise prices, and then find that only the expensive-to-treat sign up for policies. Competition that forces health insurance companies to earn profits through efficiency rather than price increases makes the ACA exchanges healthier as well. Some of the exchanges do have their problems. But the solution should be to promote competition between insurers to benefit consumers, not to consolidate health insurance markets into one gargantuan entity. And the more options on the federal and state exchanges, the better the deals available to consumers.

Aetna has withdrawn from several state exchanges. But it has kept its options open so it can return and compete on the markets again if it seems profitable. In some exchanges Aetna lost money. In others it made substantial profits, most notably in Florida: $36 million in 2016.

Our health care and health insurance systems here in America are drastically underperforming: we spend more than twice as much money and resources on doctors, nurses, hospitals, and pharmaceuticals as the typical rich North Atlantic country, and yet on average our health is worse. Unless we want to accept our current broken system, our options are either to disrupt the entire health sector and move to a single-payer system or find ways to make health insurance markets competitive and functional. The ACA was one attempt to do that. The encouragement of competition for Medicare patients via offering government subsidies to insurance companies that would enter the Medicare Advantage market was another. The success of each of these still hangs in the balance. But things look a little brighter now than the looked last falls.

Michael M. DeLong is a community organizer, and was Director of the Coalition to Protect Patient Choice Read the CPPC’s coverage of the Aetna-Humana trial at

Beating America’s Health-Care Monopolists: Fresh at Project Syndicate

J. Bradford DeLong and Michael M. DeLong: Beating America’s Health-Care Monopolists: BERKELEY – The United States’ Affordable Care Act (ACA), President Barack Obama’s signature 2010 health-care reform, has significantly increased the need for effective antitrust enforcement in health-insurance markets. Despite recent good news on this front, the odds remain stacked against consumers.

As Berkeley economics professor Aaron Edlin has pointed out, consumer abstention is the ultimate competitor. Companies cannot purchase or contrive a solution to consumers who say, “I’m just not going to buy this.” But the ACA requires individuals to purchase health insurance, thus creating a vertical demand curve for potential monopolists. Under these conditions, profits – and consumer abuse – can be maximized through collusion. Read MOAR at Project Syndicate

Must-Read: Richard Mayhew: Medicare Reimbursement, Public Options and Medicare Buy-In

Must-Read: Richard Mayhew: Medicare Reimbursement, Public Options and Medicare Buy-In: “There has been a flurry of liberal health wonk reform proposals this week…

…@HuffPostPol: Clinton formally endorses public option and Medicare for under-55s by @citizencohn

…I want to see details just exactly what is meant by the Clinton proposal as it can range from aggressive administrative action small ball (as we talked about in February) to another whack at the legislative pinata…. But before I do a long wonk dive, I just want to re-iterate a very simple point. Most liberal health policy goals have a very simple summary: get more people on insurance that pays providers rates that are closer to Medicare rates than commercial large group rates. Large group rates pay providers between 40% and 100% more than Medicare for physical health service. Moving the entire employer sponsored coverage universe to paying Medicare like rates would knock 30% off of the current bill. We see this in Exchange…. Plans that are profitable tend to be paying providers Medicare plus a little bit while offering narrow networks. We see this in the proposal to move the Medicare buy-in age to 55. We see this in the proposal to have a public option…. All of these efforts are just different ways to achieve an underlying goal of reducing provider compensation by lowering the average payment per service by having more people move from high payment to provider coverage to Medicare based pricing. Everything else is details. Those details matter a lot, but the core policy thrust is fairly simple.

Must-Read: Aaron Carroll: So What Did the Medicaid Expansion Actually Do?

Must-Read: Aaron Carroll: So What Did the Medicaid Expansion Actually Do?: “In 2014, only 26 states and the District of Columbia chose to implement the Patient Protection and Affordable Care Act (ACA) Medicaid expansions for low-income adults…

…Laura Wherry and Sarah Miller…. By the second half of 2014, adults in the expansion states had seen their health insurance coverage increase 7.4%; Medicaid coverage increased 10.5%. This isn’t surprising, as increased coverage was the main intent of the Affordable Care Act. Coverage was found to have ‘improved’ as well (7.1%)…. In Medicaid expansion states, there were increased in physician visits (6.6%), hospital stays (2.4%), rates of diagnoses of diabetes (5.2%) and high cholesterol (5.7%). Of course, this is an observational study…. Insurance coverage is just the first step in improving access. What this study adds are some data showing that expanding Medicaid through the ACA resulted in increased coverage, improved coverage, more physician visits, and more disease diagnosed…

Must-Read: Scott Lemieux: Why Did Obama Do so Well at the Supreme Court?

Must-Read: Scott Lemieux: Why Did Obama Do so Well at the Supreme Court?: “The last week of the Supreme Court’s last full term of the Obama era…

…was a microcosm of his administration’s relationship with the Roberts Court…. In a one-sentence opinion, the Supreme Court left in place a lower court ruling that the president’s DAPA immigration program… was illegal, meaning that it will almost certainly not be implemented before President Obama leaves office. Still, the news… was good. A surprising majority opinion upheld the University of Texas’s affirmative action program, and a somewhat less surprising majority opinion struck down Texas’s draconian abortion statute…. Looking at the Supreme Court’s major decisions during the Obama administration as a whole, the story is similar. The last time a Democratic president successfully passed an ambitious progressive agenda with a Republican-controlled Supreme Court, the result was a constitutional crisis…. [But] the Roberts Court left Obama’s domestic agenda mostly intact, while delivering the Democratic coalition some major victories it would not have been able to win any other way, most notably on abortion and LGBT rights.

One interpretation of the Court’s behavior is that it is isolated from the pressures that have caused the other institutions of American politics to become cripplingly polarized. This interpretation, however, is probably wrong. The relative moderation of the Roberts Court is likely the last gasp of the previous partisan order…. There have been plenty of… major conservative judicial victories during the Obama era, most notably the gutting of the most important civil rights statute since Reconstruction in the 2013 decision Shelby County…. Even worse than the result of the case was the shoddiness of Roberts’s opinion…. Since then, many Republican-controlled states have wasted little time passing discriminatory voting restrictions, undercutting the Court’s conclusion that the strong enforcement of the Voting Rights Act was no longer necessary. While the Roberts Court has permitted the states to engage in a wide array of vote suppression tactics on the one hand, it has prevented state and federal governments from passing campaign finance restrictions on the other. And in lower-profile cases, the Court has consistently ruled against the interests of consumers and the rights of employees when interpreting federal law….

With the admittedly crucial exception of Sebelius, the liberal victories of the Roberts Court were due to one man: Anthony Kennedy…. Since early in the Nixon administration, the median vote on the Court on the most politically salient issues has been a Republican, but a moderate, country-club Republican: Potter Stewart, Lewis Powell, Sandra Day O’Connor, and now Kennedy. The issue going forward is that this kind of Republican is rapidly going extinct…. Future Republican nominees are going to be in the mold of Samuel Alito and Roberts….

The Supreme Court has historically been a centrist institution… [because] elites—from whose ranks Supreme Court justices are generally chosen—tend to have less polarized views than ordinary members of the party…. A decade from now, the Supreme Court will almost certainly not be controlled by either a moderate Republican like Anthony Kennedy or a heterodox liberal like Byron White…. The median vote on the Court will almost certainly be a conservative in the mold of Alito or Roberts, or a liberal in the mold of Ruth Bader Ginsburg…. This polarization is not symmetrical…. Alito is further to the right than Ginsburg is to the left…. Could anything stop the Court from becoming as polarized as the rest of the political order? If current party polarization persists, probably not…. In the short term… whether the Court will be controlled by a liberal Democratic faction or a conservative Republican one… means that the presidential and Senate elections in November will be high-stakes contests indeed.

Must-Read: Brainwrap: West Virginia Sues Federal Government for Trusting West Virginia

Laurence Silberman: West Virginia Sues Federal Government for Trusting West Virginia: “The President… announced the federal government would hold off on enforcing the statutory requirements…

…Accordingly, HHS sent a letter to the States announcing a ‘transitional policy,’ allowing health insurers with certain conditions3 to continue policies that would be outlawed under the statute for a period of a year (later extended for another three years). That left the States holding the bag. They had to decide whether to enforce or not to enforce the very conditions that the federal government determined to abandon for the transitional period. West Virginia initially decided to enforce, but after HHS extended the transitional period, West Virginia opted to decline to enforce the mandates…

Brainwrap: West Virginia Sues Federal Government for Trusting West Virginia: “As far as I can tell, WV Republicans were hoping that the blame for the initial cancellations…

…(from the POV of those whose plans were cancelled) would fall upon President Obama, and that the blame for extending the plans (from the POV of the insurance carriers who had been hoping to pick up some market share from the cancelled enrollees) would also fall upon President Obama. The problem is that Obama/HHS left it up to the states, which means that the fallout for both decisions–whether positive or negative–lay at the feet of the state, not the feds. This apparently led to some amount of embarrassment in the WV corridors of power, I take it. Put another way, West Virginia sued President Obama for trusting West Virginia to make the right decision about how to handle the situation.

Must-Read: Richard Scheffler and Sherry Glied: States Can Contain Health Care Costs. Here’s How

Must-Read: Perhaps even very large health-insurance entities can be made to behave competitively if their regulator is clever enough…

Richard Scheffler and Sherry Glied: States Can Contain Health Care Costs. Here’s How: “THE architects of the Affordable Care Act counted on competition in the health insurance market to keep costs down and quality high…

…[But] its vision of a more competitive insurance market seems to be fading. The nation’s second-largest health insurer, Anthem, is poised to acquire Cigna, the fourth-largest. Aetna, the third-largest insurer, is seeking to acquire Humana, the fifth-largest. If approved by the Justice Department, these mergers would produce companies controlling about 35 percent of the health insurance market. These mergers would likely leave that market with far fewer competitors….

Our research suggests that this apparent failure obscures a potential path to success, one that lies between competition and a fully regulated market…. States could, for instance, either accept all insurers who seek to participate or select a limited number to sell coverage. New York chose the first course, permitting all willing insurers to join; California chose the second, selecting 12 of the 32 insurers that initially showed interest. This choice was critical because Covered California, the state’s marketplace, used its leverage in selecting plans to keep initial premiums low…. New York, by contrast, permitted insurers to offer not just standard plans, but also alternative plans with different cost-sharing and benefit designs.

When we examined the two states, we found that the effect of insurer competition differed greatly. In both states, areas with more hospitals had lower premiums compared with areas with fewer hospitals. But in New York, areas with fewer insurers had higher premiums, suggesting that insurers kept the benefits of greater bargaining power for themselves. In California, by contrast, areas with fewer insurers also had lower premiums. Why? With initial premiums set at modest but adequate levels, and a vibrant marketplace, there was no need to further threaten insurers who might consider large premium increases. If an insurer tried to raise its premiums too far, consumers could easily shop….

Over time, we will learn more about how these alternative designs work. But one point is already clear: The choice between regulation and competition is a false one. To best manage our health care system, we will need both.

Must-Read: Tierney Sneed: Inside Louisiana’s Blockbuster Medicaid Expansion Roll Out

Tierney Sneed: Inside Louisiana’s Blockbuster Medicaid Expansion Roll Out: “Louisiana’s Medicaid expansion marked a major breakthrough for Obamacare…

…Now that the program has been open for enrollment for two weeks, the dramatic success the state has had in bringing residents into the program has attracted national attention. Since June 1… more than 201,000 people have enrolled. The state is well on track to meet its 375,000-enrollee goal, which will save Louisiana an estimated $184 million in the next year. Those numbers are even more remarkable given the obstacles facing the Edwards administration, namely the refusal of the GOP legislature to fund even one new employee to ease the transition to the expanded program….

Without any additional funding for the roll out–meaning no new state employees, no eligibility workers, nor any other new administrative tool to ensure that Louisianans were taking advantage of the expanded coverage–the state had to depend on the infrastructure of existing social service programs, whose participants were eligible for the Medicaid expansion. The tactic had the dual advantage of saving the state money while creating an application process that was minimally burdensome…. That creative approach… helped Louisiana achieve the numbers that it did. ‘Louisiana, through doing this, is definitely being a leader in trying to use these available resources to streamline and make enrollment efficient,’ Samantha Artiga, a Medicaid expert at the Kaiser Family Foundation, told TPM….

To pull together the program, the state sought out the assistance of non-governmental organizations like Robert Wood Johnson Foundation, Kaiser and Milbank. ‘As a former Robert Woods Johnson clinical scholar and someone who had been in academia, my mindset has always been focused on, ‘How do I get grants?’ Gee said. Making matters more difficult, the state was seeking out outside support after the wave of initial grant money–much of it going to early adopter states–had dried up. ‘We missed out,’ Gee said, of the initial round of Center for Medicare & Medicaid innovation grants that went to states that expanded Medicaid right off the bat. ‘So here we are, needing it more than those places probably did without the ability to apply for those types of grants,’ she said. The state did find outside help, though mostly in the form of consulting and technical assistance…