The Insider: The Cost of Compromise

FMAP: Victory at a Price

The Senate voted on Thursday to provide additional federal assistance to state Medicaid programs (and additional support for teachers to avoid layoffs) and the House followed suit today, but the price was high. After several attempts to pass an FMAP extension on an emergency basis (meaning no tax increase or spending cut to offset the new spending) were blocked by a united Republican Senate caucus, the leadership decided to pay for the financial assistance to states by rolling back a temporary increase in food stamps (SNAP). The SNAP increase, part of the American Reinvestment and Recovery Acct (ARRA), was originally projected to phase out in 2014, however, the slow growth in food prices would have extended the increase until 2018. The FMAP legislation means that the increase will indeed end in 2014, creating a cliff that at that time will cause a drop in SNAP benefits.

Senate leaders (supported by the administration) faced with the specter of failure on the fiscal relief legislation and the resulting layoffs of teachers and other state workers plus the scaling back of Medicaid benefits, decided that avoiding the harm now was the lesser of two evils. With luck there will be a chance to restore the SNAP benefit before the cut actually goes into effect in 2014.

The really sorry thing is what the FMAP/ SNAP trade says about the balance of power in the US Senate today. As much as we decry the use of SNAP as one of the funding sources, it is a sad fact that a more progressive source would have been unable to clear the Senate. Unfortunately, things are only likely to get worse in the short run. Republicans, aided by conservative Democrats, will continue to block important legislation (such as FMAP, or an extension of unemployment benefits or the energy bill) and then benefit from it electorally because the problem isn’t solved and people vent their bad mood on the party in power (see example here). With the electoral winds at their back – projections are for gains in the House, Senate and governorships – what’s the incentive for Republicans to change? The prototype for this behavior was health reform under Clinton which the Republicans were able to sabotage and then ride to victory in 1994. Running the same play in 2010 is likely to create new obstacles to ACA implementation in 2011. With a more closely divided Senate ahead, we can expect more replays of the FMAP dynamic until at least 2013.

What does the MO vote really mean? Not much, but VA decision more troubling While ACA opponents are trumpeting the passage of Proposition C in Missouri, there really isn’t much ‘there’. The voter turnout was heavily weighted to GOP voters, making it more of a straw poll of Republican sentiment than a true test of public opinion. For example, in the Senate primary race 578,582 voted in the Republican primary while only 316,107 or 35 percent of the total voted in the Democratic primary – not too different from the 70-30 split on Prop C.

Further complicating the interpretation of Proposition C was the confusing wording of the multi-part question which addressed the mandate, the right to pay for health services and the ability to make changes to the rules for liquidating certain insurance companies. As a result, Proposition C is a much less accurate barometer of public opinion than the polling which is showing that public support for the ACA is growing (albeit slowly), opposition is declining and the “intensity gap is almost inside the margin of error.” However, the Missouri vote is likely to encourage continued ACA nullification efforts, which got something of a bigger boost from the Virginia court decision last week.

Essentially, the judge hearing the case ruled that, notwithstanding the supremacy clause of the Constitution, a state can pass a law that conflicts with federal statute and then sue to enforce it. To be sure, this is just a procedural decision and a number of legal experts believe the judge has erred and that the case will ultimately be resolved in favor of the ACA, but reading the judge’s reasoning can’t give supporters of the ACA great comfort; nor does the possibility of sending a case all the way to the current Supreme Court.

Be careful what you wish for If ACA saboteurs really got their way, what would it mean?  Two new reports shed light on that question. A new analysis from economist Jonathan Gruber estimates that implementing the ACA without the Individual Mandate would increase premiums by 27 percent while Medicare Trustees say that total repeal would shift the Medicare trust fund into a deficit a dozen years earlier than current predictions (2017 vs. 2029). But then again, if your goal is to destroy Medicare and you don’t care about expanding coverage, maybe that doesn’t matter. Is Howard Dean right about the Individual Mandate?

Criticism of the Individual Mandate does not only come from the right. Howard Dean recently was quoted as saying not only that the mandate would be repealed but that it wasn’t necessary. As evidence he cites his own state’s experience with providing near-universal coverage to children without a mandate. Actually Vermont, while offering good coverage for kids, is not unique. The state ranks 14 in the country with respect to the rate of children’s coverage according to Kaiser State Health facts, but even the state that ranks best – Massachusetts – lacks a mandate on kids coverage. The Massachusetts mandate applies only to adults. Does this prove Dean right? Not really.

Hypothetically a similar coverage result could be achieved without the Individual Mandate if Congress could be persuaded to make insurance subsidies sufficiently robust and accept a large migration of moderate-income workers from private to public coverage. However, the outcome of the Congressional debate over the ACA, when there were 60 Democratic Senators and a large majority in the House does not auger well for a large increase in publicly financed health insurance subsidies in the near future. Gruber’s analysis shows that only about 7 million people would gain coverage at current ACA subsidy rates without the Individual Mandate, as opposed to 32 million with the mandate.

The other alternative to the Individual Mandate often mentioned – late enrollment penalties – could work from the insurance industry’s point of view. Late enrollment penalties would protect against adverse selection by charging higher premiums to people who did not obtain coverage when it was available. It’s the method used to guard against adverse selection in Medicare Part D, but it is more likely to create insurmountable barriers to coverage for low-wage workers than it is to produce something approaching universal coverage.

— Michael Miller, policy director