Another day, another executive nullification of a painful piece of Obamacare.
This time, it has to do with health benefits for staffers on Capitol Hill. As Avik Roy discusses, this has been brewing for a while, and the President himself has become personally involved. This should not come as a surprise: Bureaucrats in the Office of Personnel Management (OPM) are hardly likely to issue guidelines contrary to the law without the Presidents prodding. (With perfect timing, Robert E. Moffit, Edmund F. Haislmaier, and Joseph A. Morris of the Heritage Foundation have just published a compelling analysis concluding that the forthcoming OPM decision is on the wrong side of the law.)
At face value, the Presidents decision to avoid a legislative amendment makes little sense. Both Republican and Democratic Congressmen and Senators wanted their staff-members health benefits to be covered by non-taxable payments from the federal government in 2014 and subsequent years. This was the case before Obamacare was passed.
U.S. Senator Tom Coburn, one of the strongest voices against Obamacare in the Senate, had been asking for a bill to amend the law to protect staffers health benefits. A legislative amendment would have forced Republicans to vote for a fix to the law that they have pledged to repealand for the benefit of political staff, instead of citizens! Despite this, the President decided to shun the legislative process. This is the second incident in as many weeks.
On July 27, this blog informed readers that the Administrations one-year nullification of the employer-mandate tax would cost between $10 billion and $13 billion next year alone. On July 30, the Congressional Budget Office (CBO) confirmed that estimate. The breakdown: $10 billion in forgone tax revenue, plus $3 billion more spending on subsidies (tax credits) in health-insurance exchanges, less $1 billion of higher income-tax revenues because fewer workers will enroll in employer-based health plans (thereby increasing their taxable income).
Perhaps more importantly for the future debate over Obamacare, the CBO also claims to follow long-standing procedures governing when and how to take into account such developments, which sometimes include the enactment of legislation, actions by the courts, or decisions by executive branch agencies.
In other words, the CBO will allow the President to line-item veto whichever parts of his signature law he prefers to be rid of. However, this still invites the question of why the President would choose this way to do business.
As noted on June 27, the House Republican majority quickly passed two bills that would have legalized the one-year employer-mandate delay as well as the individual mandate to purchase health insurance (which was the subject of the Supreme Courts narrow decision preserving Obamacare). The President never intended to relieve individuals from the mandate, only businesses. So, the President immediately announced a veto threat.
Republican sources tell me that their two bills would have gone to the Senate in one package. But surely the Democratic-majority Senate could have split them, and forced Republicans to struggle with whether to send the employer-mandate bill alone to the White House. This would have opened them up to the same charges of hypocrisy that they now level against the President.
So, instead of taking opportunities to put Republican legislators on the spot, the President chose the risky course of potentially illegal executive action. The reason can only be that this approach allows him to line-item veto parts of Obamacare without subjecting the changes to CBO scoring that would require pay fors. Although the OPMs decision on staffers health benefits is unlikely to have a significant impact on the costs of Obamacare (maybe $40 million or so a year, according to my back-of-the envelope estimate), the same cannot be said of decisions like the one-year delay of the employer mandate.
To put the cost of that change in to perspective, note that in March 2012, CBO estimated that Obamacare would increase federal spending on Medicaid and CHIP (Childrens Health Insurance Program) in 2014 by $56.25 billion. (I have converted CBOs fiscal year projections to calendar year projections by linear interpolation.) After the Supreme Court decision in June 2012, which allowed states to opt out of Medicaid and CHIP expansion, CBO cut this back to $31.75 billiona savings of $24.5 billion. (And this does not include state savings.) This reflected CBOs estimate that about one third of people initially expected to become eligible for Medicaid under PPACA would not actually become eligible. This would occur because some states declined to expand Medicaid dependency as a result of the Supreme Courts decision.
Some of these projected savings disappeared as state politicians, who were initially expected to take advantage of the opportunity to protect their budgets from PPACAs spending demands, succumbed instead to lobbying by hospitals and other interest groups. As a result, CBOs May 2013 estimate projected that only one fifth of PPACAs potentially new Medicaid dependents would live in states that chose not to expand eligibility. However, this appears to have almost no effect on the CBOs 2014 estimates.
So, one way to appreciate the impact of the Presidents nullification of the employer mandate for 2014 is that it wipes out over half of the same years federal savings to Medicaid resulting from the Supreme Courts decision. In other words, it significantly devalues the efforts of governors and state legislatures who reacted responsibly to the opportunity that the Supreme Court gave them.
If Congress had amended Obamacare to delay the employer mandate, it would have had to find $13 billion of savings from subsidies to health insurers channeled through exchanges, expansion of Medicaid dependency, or other pockets of Obamacare spending. This, of course, would have been intolerable to President Obama. Expect more executive nullification of politically inconvenient parts of Obamacare during the rest of 2013 and 2014.
|John R. Graham is Senior Fellow at the Independent Institute.|