CBO Says Obamacare’s Bailouts Might Make the Government Money. Here’s Why CBO Might Be Wrong

Several weeks ago,
Sen. Marco Rubio
(R-Fl.) and
Washington Post columnist Charles Krauthammer
took aim
at a little known provision within Obamacare known as risk
corridors, dubbing the mechanism a bailout of insurers and calling
for repeal.

The risk corridors are a temporary program designed to share the
financial risk of health plans offered through Obamacare’s
exchanges between insurers and the federal government. In theory,
the sharing is symmetrical: If insurer expenses within those plans
are lower than expected, then insurers pay the federal government a
percentage of the difference between their expected target and
actual spending. If insurer costs turn out to be higher than
expected, because members are sicker and use more expensive medical
care than predicted, the federal government picks up a chunk of the
tab.

The bigger the difference between insurer costs and
expectations, the more that the federal government pays out. When
the law was written, the goal of the provision was to entice
insurers to offer plans in the exchanges by limiting their risk
exposure.

This illustration from the American Academy of Actuaries shows
how it works:

The provision was generally expected to have no budgetary
effect. Some insurers would end up with higher than expected costs.
Some would end up lower than estimated. The payments would balance
each other out.

But while budget neutrality was expected, it wasn’t mandatory.
If insurers paid in more than they received, it was possible that
the government could actually come out ahead. But if all
participating insurers ended up with higher than expected costs
(say because the plan members skewed older and sicker than
projected), then the result would be that taxpayers would simply be
covering a chunk of insurer losses—hence, a bailout.

That possibility began to look more likely as the administration
reported fewer young people signing up than hoped and as insurers
indicated that exchange plans were more adverse than
expected
and could
result in losses
.     

Republicans ran with the idea of ending the program,
talking up the possibility of attaching it to a debt limit
hike
. Health insurers got nervous,
issuing talking points
suggesting that repealing the provision
might result in insurer insolvency.

That’s the backstory. But yesterday, the Congressional Budget
Office (CBO) added another plot point. The nonpartisan budget
analysts estimated that the federal government would end up paying
out about $8 billion through the program. But insurers would pay
about $16 billion into the government for a net public revenue gain
of $8 billion—hardly a bailout, if accurate.

So why does the CBO now believe that the risk corridor program
will essentially make money for the government? Because
that’s what happened with Medicare Part D
, the federal
prescription drug program for seniors, which also relied on a risk
corridor program to entice insurers to offer plans. The
structure was slightly different
, but in broad strokes it
worked the same way, with insurers paying the government when costs
came in lower than expected, and being paid when costs came in
higher.

What CBO is saying, then, is that if Medicare Part D’s
experience with risk corridors is any indication, the government
will ultimately be paid more from the program than it pays out.

So the question we need to ask is whether Medicare Part D
provides a useful guide to what we can expect from Obamacare. And I
think there are a few reasons to be skeptical about the notion that
it does.

When the Part D prescription drug benefit began in 2006,
insurers had a pretty good idea of who was going to participate.
The population of seniors who might be interested in the program’s
drug coverage was pretty well defined, and there wasn’t much reason
to be concerned about high-cost individuals ditching their old
plans for new ones sold through Part D. In fact, as John Goodman of
the National Center for Policy Analysis pointed out in
congressional testimony today
, Part D actually offered
subsidies to employers for maintaining existing drug insurance
programs in order to keep that from happening.

Meanwhile, formerly sky-high prescription drug spending was in
the midst of a significant
slowdown
that started just before Medicare Part D went into
effect. Fewer blockbuster drugs came onto the market. The use of
generics
became more common
. Seniors turned out to be quite
value-focused when choosing drug plans.

The result was that insurers operating in Part D had relatively
predictable sign-ups, and lower than expected costs. Consequently,
they paid far more money back to the government through the risk
corridors program than they were paid.

Is that what we should expect from insurers selling plans
through Obamacare? With Huamana saying in an SEC filing
that the demographic mix in its exchange plans is “more adverse”
than expected, Cigna’s CEO warning
that his company might take a loss on the exchange plans, and
Aetna’s CEO bringing up
the possibility
that the company might eventually pull out of
the exchanges? The gloomy financial outlook for exchange plans is
an industry-wide phenomenon. When Moody’s
cut its outlook for health insurers from stable to negative to
negative last month
, it cited “uncertainty over the
demographics of those enrolling in individual products through the
exchanges” as a “key factor.”

We won’t know how this will work out until it does. But right
now, there are a lot of bad signals. It seems at least plausible
that the future of Obamacare’s exchanges could look less like
Medicare Part D and
more like the health law’s high risk pools
, which ended up with
a smaller, sicker, and more costly (on a per-beneficiary basis)
pool of enrollees than initially projected.

CBO’s score of the risk corridors relied heavily on Medicare
Part D’s history because the federal government doesn’t have a
whole lot of experience with risk corridors in the health insurance
market. That’s understandable, especially given the budget office’s
cautious nature. But it may not actually tell us all that much
about the practical reality of the provision and its probable
costs. As yesterday’s report noted, “the government has only
limited experience with this type of program, and there are many
uncertainties about how the market for health insurance will
function under the ACA and how various outcomes would affect the
government’s costs or savings for the risk corridor program.” An
experience similar to Medicare Part D’s is one possible outcome.
But I’m not sure it’s the most likely one. 

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John Stossel on Your Food's Reputation vs. Government Regulation

Do you like to cook? Throw dinner
parties? Many people enjoy that, but paying for the food, plus
accessories, is expensive. Would you host more often if you could
get your guests to cover the costs? Or suppose you’d like
to go to a dinner party to meet new people in
your neighborhood. Or maybe when you travel, instead of eating at
restaurants, you’d like to see how the locals live. Good news!
Today both cooks and diners can get what they want. A new Internet
business brings them together. The bad news, as John Stossel
writes, is that bureaucrats and the media worry that the dinner
parties are not regulated.

View this article.

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John Stossel on Your Food’s Reputation vs. Government Regulation

Do you like to cook? Throw dinner
parties? Many people enjoy that, but paying for the food, plus
accessories, is expensive. Would you host more often if you could
get your guests to cover the costs? Or suppose you’d like
to go to a dinner party to meet new people in
your neighborhood. Or maybe when you travel, instead of eating at
restaurants, you’d like to see how the locals live. Good news!
Today both cooks and diners can get what they want. A new Internet
business brings them together. The bad news, as John Stossel
writes, is that bureaucrats and the media worry that the dinner
parties are not regulated.

View this article.

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St. Paul Arbitrator Reinstates Cop Fired in Pepper Spray-in-the-Ear Incident Caught on Tape

got his job backLast summer, the police chief in St. Paul,
Minnesota
said he wanted to fire
Officer Matthew Gorans, who was involved
in a violent arrest that had been recorded by a bystander. Gorans
wasn’t on that video, but he was seen on squad car video the city
released, which showed him dragging Eric Hightower, the suspect
resisting arrest, into the backseat by his hair and then pepper
spraying him in the ear. Gorans’ putative penalty was harsher than
for the cop seen on the bystander video kicking Hightower, who was
suspended for 30 days.

Nevertheless, both officers filed union grievances and this week
Gorans, who had cost the city of St. Paul $249,000 in a settlement
for an unrelated police brutality claim in 2010, got his job back
from an arbitrator.
Via the St. Paul Pioneer Press:

The St. Paul Police-Civilian Internal Affairs Review
Commission found that Gorans intentionally sprayed pepper spray
into Hightower’s ear during the arrest, but state arbitrator Harley
Ogata disagreed. He also found Gorans justified in pulling
Hightower into a squad car by his hair as the man resisted
officers’ attempts to get him in the cruiser.

Ogata ruled that Gorans should be suspended for one day for not
filing a complete police report.

“The arbitration decision confirms that officers were dealing with
a volatile and rapidly developing situation involving a known
dangerous individual with a history of violence, and of resisting
and evading arrest,” Chris Wachtler, St. Paul Police Federation
attorney, said in a statement Monday. “The state-appointed, neutral
arbitrator in this case heard the testimony of 20 witnesses over
the course of three days, thoroughly and completely reviewed the
evidence, and reached the correct decision.”

Police Chief Thomas Smith said Monday afternoon he hadn’t had a
chance to review the findings.

“Obviously, I have to respect the process and live with the
arbitrator’s decision,” he said.

The arbitrator reportedly also wrote that “had the city proved
that the grievant had intentionally sprayed Hightower in the ear, a
discharge might have been sustained,” apparently dismissing the
finding of the Internal Affairs commission. The arbitrator also
complained the commission didn’t seek the opinion of a “use of
force trainer” about the pepper spray in the ear. Prosecutors
declined to charge Gorans or the other cop, finding insufficient
evidence to prove intent beyond a reasonable doubt, but the local
FBI office said it was looking into civil rights violations that
could have occurred during the arrest. A lawsuit by the police
union over release of the squad car video without the officers’
faces blurred out, meanwhile, is ongoing.

The arbitrator’s decision is not appealable, so Gorans is back
on the job even though the police chief doesn’t want him there,
because that’s the deal St. Paul’s political leaders gave the
city’s employees, a similar deal police unions across the country
have. They’ve extended privileges to police officers and other
public employees that give them the kind of job security and
protections jobs with that kind of potential to damage the lives of
residents (through police abuse or a
poor education
) should never have.

h/t jimbo

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The Internet is Full of Cool Things, Part 19,354: NFL Helmets Redone in Star Wars Universe

So this has been
around at least since 2013, but what can I tell you? Ferglutz
you, bub, my hyperspatial ramblings ain’t what they used to be.

Here are John Raya’s reworking of NFL franchises as if they
existed in the Star Wars universe. Bonus points on the
Greedos’ helmet, for the non-infinite regress on the helmet worn by
the figure pictured on the helmet (my head hurts), a defining
attribute of the old Dolphins helmet (in which the Dolphin wore a
helmet whose logo
was a giant M
). 

Go here for
the AFC
and here for
the NFC
. And yes,
there’s a team
that involves Jar Jar Binks’ grim visage.

For more work by Raya, go here.

Tip via Tony Pierce’s great Twitter feed.

We’ve become jaded to the immense offerings on the Internet. I
think it’s a worthwhile pursuit to pause a second and point out
whenever we find cool, weird, useless, and fun stuff online. Reason
has been beating the drum about “cultural proliferation” for years
now, and for good reason: We live in an age in which it’s
easier than ever for people to make and consume whatever they want
in ever-more-varied circumstances
. That’s a real flowering of
self-expression and freedom.

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British Spies Use Anonymous-Style Tactics Against Anonymous

Gabriella Coleman
writes
:

We are the government. We are legion. We do not forgive. We do not forget. Expect us.The
latest Snowden-related revelation
is that Britain’s Government
Communications Headquarters (GCHQ) proactively targeted the
communications infrastructure used by the online activist
collective known as Anonymous.


Specifically
, they implemented distributed denial of service
(DDoS) attacks on the internet relay chat (IRC) rooms used by
Anonymous. They also implanted malware to out the personal identity
details of specific participants. And while we only know for sure
that the U.K.’s GCHQ and secret spy unit known as the “Joint Threat
Research Intelligence Group” (JTRIG) launched these attacks in an
operation called “Rolling Thunder,” the U.S.’ NSA was likely aware
of what they were doing because the British intelligence agents
presented their program interventions at the NSA conference SIGDEV
in 2012. (Not to mention the two agencies sharing
close ties
in general.)

Whether you agree with the activities of Anonymous or not — which
have included everything from supporting the Arab Spring protests
to DDoSing copyright organizations to doxing child pornography site
users — the salient point is that democratic governments now seem
to be using their very tactics against them.

The key difference, however, is that while those involved in
Anonymous can and have faced their day in court for those tactics,
the British government has not. When Anonymous engages in
lawbreaking, they are always taking a huge risk in doing so. But
with unlimited resources and no oversight, organizations like the
GCHQ (and theoretically the NSA) can do as they
please.

Read the rest
here
. Read Coleman’s Reason article “Code Is Speech”
here.

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UN Report Details Abuse of Children By Rebels and Government Forces in Syria

A United Nations report
released online yesterday highlights the awful suffering that
children in Syria have endured throughout that country’s ongoing
civil war. Writing in the report, U.N. Secretary-General Ban
Ki-moon
said
, “The suffering endured by the children in the Syrian Arab
Republic since the outset of the conflict, as documented in this
report, is unspeakable and unacceptable.”

The report details how government forces have been torturing
children allegedly associated with rebel groups:

Multiple accounts of children and adult witnesses indicate that
the majority of children were held in the same cells as
adults, and that children as young as 11 years old suffered
ill treatment and acts tantamount to torture to extract confessions
or humiliate them or to pressure a relative to surrender or
confess. Ill treatment and acts tantamount to torture
reportedly included beatings with metal cables, whips
and wooden and metal batons; electric shocks, including to the
genitals; the ripping out of fingernails and toenails; sexual
violence, including rape or threats of rape; mock executions;
cigarette burns; sleep deprivation; solitary confinement; and
exposure to the torture of relatives. Reports indicate that
children were also suspended from walls or ceilings by their
wrists or other limbs, were forced to put their head, neck and
legs through a tire while being beaten, and were tied to a board
and beaten.

The U.N. report is the latest to exposes the extent of the Assad
regime’s brutality. Last month,
a report
was released detailing the slaughter of thousands of
detainees carried out by government forces.

While the scale of the Assad regime’s barbarism is always worth
highlighting, it should be noted that the U.N. report also mentions
that rebels associated with the Western-backed Free Syrian Army
(FSA) have been recruiting children to be used in combat. The FSA
does not have children recruitment as a policy, but some boys feel
pressured to join the fight against Assad:

The FSA Code of Conduct of August 2012 did not mention or
prohibit the recruitment and use of children. However, monitoring
and verification activities indicated that it was not conducted as
a policy or systematically. Interviews with children and their
parents indicated that the loss of parents and relatives, political
mobilization and peer pressure from families and communities,
contributed to the involvement of children with FSA-affiliated
groups. Many boys stated that they felt it was their duty to join
the opposition.

More from the report on the FSA’s recruitment:

13. Boys aged 12 to 17 years were trained, armed and used as
combatants or to man checkpoints. For instance, a 15-year-old
boy reported having been recruited in April 2012 by FSA in
Tall Kalakh (Tartus governorate), and having participated
in military operations.

The report also mentions reports of Syrian government forces
recruiting child soldiers:

The United Nations did not receive reports of children having
been formally recruited by Government forces. However, Government
forces, including the Shabiha militia and the popular
committees/National Defence Forces, reportedly intimidated and
seized young males, including those under the age of 18, to join
their ranks at checkpoints and during raids in pro-Government and
contested areas. In one instance in July 2012, a man reported to
the United Nations that the Syrian Armed Forces had tried to
recruit his 16-year-old son while they were passing a checkpoint in
Deir ez-Zor governorate.

The FSA is not the only rebel group mentioned in the report. The
report refers to rebel groups, such as the jihadist group Jabhat
al-Nusra, which have allegedly killed children. The report claims
that “Armed opposition groups” summarily execute children.

28. Children were the victims of mass killings in Latakia
governorate that were committed by a coalition of armed opposition
groups allegedly including Ahrar al-Sham, ISIS, Jabhat al-Nusra,
Jaish al-Muhajireen wal-Ansar and Suqour al-Izz during the
so-called Barouda offensive against Alawite villages on 4 August
2013. At least 18 children, including boys and girls under the age
of 10, were killed and an unknown number of children were maimed.
Most children were shot in their houses or while trying to flee
with family members. In some instances, civilians reported that
armed opposition groups tried to relocate civilians before
launching operations. In most incidents, however, FSA-affiliated
and other armed groups conducted military operations in densely
populated areas, leading to the displacement and civilian
casualties, including children. Armed opposition groups reportedly
used snipers, mortars, rockets and improvised explosive devices in
residential areas.

29. Armed opposition groups also engaged in the summary
execution of children. Lack of access, including for security
reasons, has prevented the United Nations from systematic
documentation. Trends are believed to be much higher than the
number of recorded cases. For instance, in 2011 in Damascus
governorate, FSA elements reportedly killed a 16-year-old boy, who
had allegedly been coerced to work with the Government when his
father was detained by Government forces. The United Nations also
received reports of children killed by Jabhat al-Nusra, including,
a 16-year-old boy who was shot dead in April 2013 in Al Hassakeh
governorate. Also in Al Hassakeh governorate, a 14-year-old boy was
reportedly shot dead by elements of Syrian Kurdish armed groups
associated with PYD during a demonstration of another Kurdish
faction.

Unsurprisingly, the first round of peace talks in Switzerland
between the Syrian government and some opposition representatives

did not amount to much
. As the war in Syria goes on and
interventionists continue to make the case for increased foreign
involvement in the war it is worth bearing the recent U.N. report
in mind. As awful as the Assad regime is, opposition groups are
also responsible for abuses.

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The GOP’s Suicide Pact on Immigration

By many accounts, the
Republican leadership (at least in the House, where Speaker John
Boehner bestrides the chamber like a leather-skinned Colossus), is
working to pull together some sort of “immigration reform” that
will doubtless go poorly. Already one wing of the GOP is clamoring
that “Amnesty=Suicide” and the other is…saying that newcomers are
welcome but only after we finish building a 10,000-foot-tall fence
that stretches along the coast from San Diego to Boston’s Logan
Airport.


In my latest Daily Beast col
, I suggest that, if the
GOP is actually serious about its limited-government rhetoric, it
should use the immigration issue as a way to talk about reducing
the size, scope, and spending of the federal government –
especially on welfare programs for the native-born folks who have
become increasingly dependent on such handouts since George W. Bush
increased spending on food stamps, disability claims, and unfunded
extensions of long-term unemployment benefits.


Snippets:

Republicans insist that the federal government is too
inefficient and incompetent to deliver the mail or to oversee
health care, but it’s nonetheless qualified to police thousands of
miles of borders and run employment checks on hundreds of millions
of workers? Come on guys, get your story straight.

The simple fact, one that Republicans should embrace, is that
governments don’t really control aggregate immigration flows any
more than they control aggregate consumer demand. Immigration is
the result of far larger forces than even totalitarian governments
can control, including economic opportunity in the destination
country and material conditions in the home country….

In late 2008 and early 2009 – a period in which spending
authority was shared by Presidents Bush and Obama – real federal
outlays shot up to around
$10,000 per capita
 and show no signs of coming down
anytime soon. Indeed, budget deals these days seem to be little
more than bi-partisan raids on proposed spending reductions such as
the sequester.

If Republicans are really the party of free trade and limited
government – and if they really believe in American exceptionalism
and the lure of the Shining City Upon a Hill – they’ll take this
opportunity to welcome immigrants while rolling back the welfare
state.


Read the whole thing.

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The GOP's Suicide Pact on Immigration

By many accounts, the
Republican leadership (at least in the House, where Speaker John
Boehner bestrides the chamber like a leather-skinned Colossus), is
working to pull together some sort of “immigration reform” that
will doubtless go poorly. Already one wing of the GOP is clamoring
that “Amnesty=Suicide” and the other is…saying that newcomers are
welcome but only after we finish building a 10,000-foot-tall fence
that stretches along the coast from San Diego to Boston’s Logan
Airport.


In my latest Daily Beast col
, I suggest that, if the
GOP is actually serious about its limited-government rhetoric, it
should use the immigration issue as a way to talk about reducing
the size, scope, and spending of the federal government –
especially on welfare programs for the native-born folks who have
become increasingly dependent on such handouts since George W. Bush
increased spending on food stamps, disability claims, and unfunded
extensions of long-term unemployment benefits.


Snippets:

Republicans insist that the federal government is too
inefficient and incompetent to deliver the mail or to oversee
health care, but it’s nonetheless qualified to police thousands of
miles of borders and run employment checks on hundreds of millions
of workers? Come on guys, get your story straight.

The simple fact, one that Republicans should embrace, is that
governments don’t really control aggregate immigration flows any
more than they control aggregate consumer demand. Immigration is
the result of far larger forces than even totalitarian governments
can control, including economic opportunity in the destination
country and material conditions in the home country….

In late 2008 and early 2009 – a period in which spending
authority was shared by Presidents Bush and Obama – real federal
outlays shot up to around
$10,000 per capita
 and show no signs of coming down
anytime soon. Indeed, budget deals these days seem to be little
more than bi-partisan raids on proposed spending reductions such as
the sequester.

If Republicans are really the party of free trade and limited
government – and if they really believe in American exceptionalism
and the lure of the Shining City Upon a Hill – they’ll take this
opportunity to welcome immigrants while rolling back the welfare
state.


Read the whole thing.

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A. Barton Hinkle Says Obama’s Progressive Mirage Has Faded

Progressive America is crestfallen. It
had hoped for better things from President Obama, and he has not
delivered. The dashing of those expectations also ought to serve as
a cautionary tale. The vast gulf between the imagined Obama
presidency and the actual Obama presidency should leave
progressives wondering what a future Democrat might do in the Oval
Office. A. Barton Hinkle asks: Do they really expect another
president to govern more liberally? To show more regard for the
Constitution, for civil liberties, for executive restraint? Do they
think some other Democrat could surpass Obama?

View this article.

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