ANNEX to Letter 138: Comments of the Congressional Budget Office report on the A.H.C.A.

"I set out on this ground which I suppose to be self evident, 'that the earth belongs in usufruct to the living'; that the dead have neither powers nor rights over it."  --President Jefferson, 1789

"Is it really so easy to determine that smacking someone in the face to determine where he has hidden the bomb that is about to blow up Los Angeles is prohibited in the Constitution?…It would be absurd to say you couldn’t do that. And once you acknowledge that, we’re into a different game." --Justice Antonin Scalia, 2008

BLUF (bottom-line, up-front): This essay is an addendum to the previous writing on the A.H.C.A. and draws also from an opinion written in 2012 when 20+ state A.G.s lost their case against the A.C.A.'s individual mandate penalty and the Medicaid expansion before the Supreme Court. A case for the A.C.A. being fixed also informs this essay.

The Congressional Budget Office (C.B.O.) has released its evaluation of the American Health Care Act (A.H.C.A.) and the numbers do not look pretty. The text portion of that report, hi-lited for your convenience follows below these introductory remarks. While the C.B.O. has good news with respect to budgetary concerns, considerations other than the beneficial budgetary impact appear to be grim:

• some twenty-four (24) million more uninsured under the A.H.C.A. over the next decade with the first 60% coming next year;
• a total of fifty-two (52) million uninsured in 2026, almost twice the level of that projected under the Affordable Care Act (A.C.A.);
• some twenty-one (21) million more ‘older’ Americans (i.e., age-range of 50-64, before Medicare) uninsured under the A.H.C.A. than under the A.C.A.
• a crippling multiple of five (5x) of premiums for older people versus younger people;
• reduced subsidies cutting financial support of the poor by as much as 75%, averaging 50% of those enjoyed under the A.C.A.;
• nine-to-fourteen (9-14) million people falling off Medicaid and twenty-seven (27) million fewer insured under individual plans; as well as,
• an initial shock in 2020, from twenty-eight (28) million uninsured now to forty-eight (48) million in three years due to the end of Medicaid expansion, with gradual increase to fifty-two (52) million uninsured.

The A.H.C.A. will trim $336 billion from future deficits. Nevertheless, the C.B.O. numbers gloomy as they sound, may obscure other factors not quite so negative.

1. President Trump’s Press Secretary explained in detail why the anti-ObamaCare partisans view the A.C.A. as a failure. 
2. Half or more of the newly uninsured will be younger people opting out of health insurance. 
3. The lower bound price for younger insureds would be reduced by 20-25% from current levels, while the upper-bound price for older people would increase by 20-25%; the increase in multiple from 3x to 5x sounds more dire.
4. Again, as Mr Spicer argues, the C.B.O.’s non-budgetary estimates – like those of any other well-informed and statistically adroit forecaster – tend to be wrong over time. 

While the numbers in the report are hard for me to follow, my sense is that what we are seeing is a clash of two polarizing political variables: class interests and comparative interpretations of the Constitution of the United States of America. The previous Letter #138 describes how the A.H.C.A. is really a plan to relieve economic pressures threatening to overwhelm the middle-class in the United States as opposed to the A.C.A. seeking to cover the poor.

On the constitutional side, also discussed in the underlying essay of last week, there are basically two strains of thought: one viewing health-care as a (human) right accorded to all Americans and the other viewing it as a highly desirable necessity but not a right. On the side of health-care being a right, such a sentiment was initially expressed by President Roosevelt over seventy-five years ago. 

It is safe to say that this view has been shared by most Democrats and most liberal Republicans since then. Now, Justice Scalia’s broccoli analogy in the Supreme Court case on the A.C.A. of five years ago no longer seems quite as silly as it did then. Paul Krugman was right in stating the analogy did not quite fit the economics of pooled risk; of course, he failed to recognize the assumptions underlying the two opposing arguments.

Adjusting the analogy, I prefer to think of health-care as a refrigerator. There is little doubt that refrigerated foods have been better preserved, preventing millions of cases of ptomaine poisoning or worse. So, having a refrigerator is critical to good health. Nevertheless, no one would argue that having a refrigerator should be deemed a human right. Another dimension of the rights argument remains how such a right comports with the Constitution. There are four basic schools of thought on constitutional interpretation:

• flexibility implicitly imposed by the obsolescence of much of the original text and intent of the Constitution, as per President Roosevelt (very liberal);
• limited discretion afforded by the ‘General Welfare’ clause, as per President Jefferson’s aphorism (liberal);
• originalist (intent) by looking to the Constitution's wording to permit a few new contemporary rights reasonably inferred under the ninth and tenth amendments as per Judge Gorsuch (conservative); as well as,
• strict constructionism by taking the cue from the literal wording of the Constitution as articulated most (in)famously by Justice Taney (very conservative).

The crux of the stand-off between the A.H.C.A. and the A.C.A. remains the coincidence of the Republican middle class voting base with conservative jurisprudence arrayed against a symmetrically opposed coincidence of the Democratic urban voting base and a progressive interpretation of what rights can be inferred. 

My position veers more toward the Republican view. First, the middle class needs to be supported for the country to get back on track. Additionally, my tendency is toward the originalist view. There are inferred rights. My criterion is subjective: ¿If the Constitution were written today, would the framers, well-versed in modern thinking, view health-care to be a right duly protected under the social contract?

No, they would not, I believe. At least not a human right but a limited one.

That does not mean the poor should be left without health-care. Indeed, the A.H.C.A. makes some effort to provide for this by Federal reinsurance to states under Patient and State Stability Funds. One problem I have with the premise of the A.C.A. is that Medicaid is expanded at the expense of much of the middle class.

As we have seen with food stamps, people receiving Medicaid will likely be getting better health-care than lower-waged working citizens. Additionally, a more persistent gap that is emerging is what level of health-care is embodied in such a right. The expectations of transplants, extraordinary measures, etc. may be foiled by the resources available under a national health-care system.

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https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/costestimate/americanhealthcareact_0.pdf 

CONGRESSIONAL BUDGET OFFICE

 COST ESTIMATE

March 13, 2017

American Health Care Act

Budget Reconciliation Recommendations of the House Committees on Ways and Means

and Energy and Commerce, March 9, 2017

SUMMARY

The Concurrent Resolution on the Budget for Fiscal Year 2017 directed the House

Committees on Ways and Means and Energy and Commerce to develop legislation to

reduce the deficit. The Congressional Budget Office and the staff of the Joint Committee

on Taxation (JCT) have produced an estimate of the budgetary effects of the American

Health Care Act, which combines the pieces of legislation approved by the two committees

pursuant to that resolution. In consultation with the budget committees, CBO used its

March 2016 baseline with adjustments for subsequently enacted legislation, which

underlies the resolution, as the benchmark to measure the cost of the legislation.

Effects on the Federal Budget CBO and JCT estimate that enacting the legislation would 
reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 
billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by 
$1.2 trillion over the period, and revenues would be reduced by $0.9 trillion.

The largest savings would come from reductions in outlays for Medicaid and from the

elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance.

The largest costs would come from repealing many of the changes the ACA made to the

Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate

for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual

fees imposed on health insurers—and from the establishment of a new tax credit for health

insurance.

Pay-as-you-go procedures apply because enacting the legislation would affect direct

spending and revenues. CBO and JCT estimate that enacting the legislation would not

increase net direct spending or on-budget deficits by more than $5 billion in any of the four

consecutive 10-year periods beginning in 2027.

Effects on Health Insurance Coverage

To estimate the budgetary effects, CBO and JCT projected how the legislation would

change the number of people who obtain federally subsidized health insurance through

Medicaid, the nongroup market, and the employment-based market, as well as many other

factors.

CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the

legislation than under current law. Most of that increase would stem from repealing the

penalties associated with the individual mandate. Some of those people would choose not

to have insurance because they chose to be covered by insurance under current law only to

avoid paying the penalties, and some people would forgo insurance in response to higher

premiums.

Later, following additional changes to subsidies for insurance purchased in the nongroup

market and to the Medicaid program, the increase in the number of uninsured people

relative to the number under current law would rise to 21 million in 2020 and then to

24 million in 2026. The reductions in insurance coverage between 2018 and 2026 would

stem in large part from changes in Medicaid enrollment—because some states would

discontinue their expansion of eligibility, some states that would have expanded eligibility

in the future would choose not to do so, and per-enrollee spending in the program would be

capped. In 2026, an estimated 52 million people would be uninsured, compared with

28 million who would lack insurance that year under current law.

Stability of the Health Insurance Market

Decisions about offering and purchasing health insurance depend on the stability of the

health insurance market—that is, on having insurers participating in most areas of the

country and on the likelihood of premiums’ not rising in an unsustainable spiral. The

market for insurance purchased individually (that is, nongroup coverage) would be

unstable, for example, if the people who wanted to buy coverage at any offered price would

have average health care expenditures so high that offering the insurance would be

unprofitable. In CBO and JCT’s assessment, however, the nongroup market would

probably be stable in most areas under either current law or the legislation.

Under current law, most subsidized enrollees purchasing health insurance coverage in the

nongroup market are largely insulated from increases in premiums because their

out-of-pocket payments for premiums are based on a percentage of their income; the

government pays the difference. The subsidies to purchase coverage combined with the

penalties paid by uninsured people stemming from the individual mandate are anticipated

to cause sufficient demand for insurance by people with low health care expenditures for

the market to be stable.

Under the legislation, in the agencies’ view, key factors bringing about market stability

include subsidies to purchase insurance, which would maintain sufficient demand for

insurance by people with low health care expenditures, and grants to states from the Patient and 
State Stability Fund, which would reduce the costs to insurers of people with high health care expenditures. 

Even though the new tax credits would be structured differently from the current subsidies and would generally be less generous for those receiving subsidies under current law, the other changes would, in the agencies’ view, lower average premiums enough to attract a sufficient number of relatively healthy people to stabilize the market.

Effects on Premiums

The legislation would tend to increase average premiums in the nongroup market prior to

2020 and lower average premiums thereafter, relative to projections under current law. In

2018 and 2019, according to CBO and JCT’s estimates, average premiums for single

policyholders in the nongroup market would be 15 percent to 20 percent higher than under

current law, mainly because the individual mandate penalties would be eliminated,

inducing fewer comparatively healthy people to sign up.

Starting in 2020, the increase in average premiums from repealing the individual mandate

penalties would be more than offset by the combination of several factors that would

decrease those premiums: grants to states from the Patient and State Stability Fund (which

CBO and JCT expect to largely be used by states to limit the costs to insurers of enrollees

with very high claims); the elimination of the requirement for insurers to offer plans

covering certain percentages of the cost of covered benefits; and a younger mix of

enrollees. By 2026, average premiums for single policyholders in the nongroup market

under the legislation would be roughly 10 percent lower than under current law, CBO and

JCT estimate.

Although average premiums would increase prior to 2020 and decrease starting in 2020,

CBO and JCT estimate that changes in premiums relative to those under current law would

differ significantly for people of different ages because of a change in age-rating rules.

Under the legislation, insurers would be allowed to generally charge five times more for

older enrollees than younger ones rather than three times more as under current law,

substantially reducing premiums for young adults and substantially raising premiums for

older people.

Uncertainty Surrounding the Estimates

The ways in which federal agencies, states, insurers, employers, individuals, doctors,

hospitals, and other affected parties would respond to the changes made by the legislation

are all difficult to predict, so the estimates in this report are uncertain. But CBO and JCT

have endeavored to develop estimates that are in the middle of the distribution of potential

outcomes.

Macroeconomic Effects

Because of the magnitude of its budgetary effects, this legislation is “major legislation,” as

defined in the rules of the House of Representatives.1 Hence, it triggers the requirement

that the cost estimate, to the greatest extent practicable, include the budgetary impact of its macroeconomic effects. However, because of the very short time available to prepare this cost estimate, quantifying and incorporating those macroeconomic effects have not been practicable.

1. Cl. 8 of Rule XIII of the Rules of the House of Representatives, H.R. Res. 5, 115th Congress (2017).

Intergovernmental and Private-Sector Mandates

JCT and CBO have reviewed the provisions of the legislation and determined that they

would impose no intergovernmental mandates as defined in the Unfunded Mandates

Reform Act (UMRA).

JCT and CBO have determined that the legislation would impose private-sector mandates

as defined in UMRA. On the basis of information from JCT, CBO estimates the aggregate

cost of the mandates would exceed the annual threshold established in UMRA for

private-sector mandates ($156 million in 2017, adjusted annually for inflation).

MAJOR PROVISIONS OF THE LEGISLATION

Budgetary effects related to health insurance coverage would stem primarily from the

following provisions:

• Eliminating penalties associated with the requirements that most people obtainhealth insurance coverage and that large employers offer their employees coveragethat meets specified standards.
• Reducing the federal matching rate for adults made eligible for Medicaid by theACA to equal the rate for other enrollees in the state, beginning in 2020.
• Capping the growth in per-enrollee payments for most Medicaid beneficiaries to no more than the medical care component of the consumer price index starting in 2020.
• Repealing current-law subsidies for health insurance coverage obtained through the nongroup market—which include refundable tax credits for premium assistance and subsidies to reduce cost-sharing payments—as well as the Basic Health Program, beginning in 2020.
• Creating a new refundable tax credit for health insurance coverage purchased through the nongroup market beginning in 2020.
• Appropriating funding for grants to states through the Patient and State Stability Fund beginning in 2018.
• Relaxing the current-law requirement that prevents insurers from charging older people premiums that are more than three times larger than the premiums charged to younger people in the nongroup and small-group markets. Unless a state sets a different limit, the legislation would allow insurers to charge older people five times more than younger ones, beginning in 2018.
• Removing the requirement, beginning in 2020, that insurers who offer plans in the nongroup and small-group markets generally must offer plans that cover at least 60 percent of the cost of covered benefits.
• Requiring insurers to apply a 30 percent surcharge on premiums for people who enroll in insurance in the nongroup or small-group markets if they have been uninsured for more than 63 days within the past year.

Other parts of the legislation would repeal or delay many of the changes the ACA made to

the Internal Revenue Code that were not directly related to the law’s insurance coverage

provisions. Those with the largest budgetary effects include:

1. Repealing the surtax on certain high-income taxpayers’ net investment income;
2. Repealing the increase in the Hospital Insurance payroll tax rate for certain high-income taxpayers;
3. Repealing the annual fee on health insurance providers; and
4. Delaying when the excise tax imposed on some health insurance plans with high premiums would go into effect.

In addition, the legislation would make several changes to other health-related programs

that would have smaller budgetary effects.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

CBO and JCT estimate that, on net, enacting the legislation would decrease federal deficits

by $337 billion over the 2017-2026 period (see Table 1). That change would result from a

$1.2 trillion decrease in direct spending, partially offset by an $883 billion reduction in

revenues.

BASIS OF ESTIMATE

For this estimate, CBO and JCT assume that the legislation will be enacted by May 2017.

Costs and savings are measured relative to CBO’s March 2016 baseline projections, with

adjustments for legislation that was enacted after that baseline was produced.

The largest budgetary effects would stem from provisions in the recommendations from

both committees that would affect insurance coverage. Those provisions, taken together,

would reduce projected deficits by $935 billion over the 2017-2026 period. 

Other provisions would increase deficits by $599 billion, mostly by reducing tax revenues. Deficits would be reduced by $337 billion over that period, CBO and JCT estimate.

(See Table 2 for the estimated budgetary effects of each major provision.)

Budgetary Effects of Health Insurance Coverage Provisions.

The $935 billion in estimated deficit reduction over the 2017-2026 period that would stem

from the insurance coverage provisions includes the following amounts (shown in

Table 3):

• A reduction of $880 billion in federal outlays for Medicaid;
• Savings of $673 billion, mostly stemming from the elimination of the ACA’s subsidies for nongroup health insurance—which include refundable tax credits for premium assistance and subsidies to reduce cost-sharing payments—in 2020;
• Savings of $70 billion mostly associated with shifts in the mix of taxable and nontaxable compensation resulting from net decreases in the number of people estimated to enroll in employment-based health insurance coverage; and
• Savings of $6 billion from the repeal of a tax credit for certain small employers thaprovide health insurance to their employees.

Those decreases would be partially offset by:

• A cost of $361 billion for the new tax credit for health insurance established by the legislation in 2020;
• A reduction in revenues of $210 billion from eliminating the penalties paid by uninsured people and employers;
• An increase in spending of $80 billion for the new Patient and State Stability Fund grant program; and
• A net increase in spending of $43 billion under the Medicare program stemming from changes in payments to hospitals that serve a disproportionate share of low-income patients.

Methodology. The legislation would change the pricing of nongroup insurance and the

eligibility for and the amount of subsidies to purchase that insurance. It would also lead to

changes in Medicaid eligibility and per capita spending. The legislation’s effects on health

insurance coverage would depend in part on how responsive individuals are to changes in

the prices, after subsidies, they would have to pay for nongroup insurance; on changes in

their eligibility for public coverage; and on their underlying desire for such insurance.

Effects on coverage would also stem from how responsive firms are to changes in those

post subsidy prices and in the attractiveness of other aspects of nongroup alternatives to

employment-based insurance.

To capture those complex interactions, CBO uses a microsimulation model to estimate

how rates of coverage and sources of insurance would change as a result of alterations in

eligibility and subsidies for—and thus the net cost of—various insurance options. Based on

survey data, that model incorporates a wide range of information about a representative

sample of individuals and families, including their income, employment, health status, and

health insurance coverage. The model also incorporates information from the research

literature about the responsiveness of individuals and employers to price changes and the

responsiveness of individuals to changes in eligibility for public coverage. 

CBO updates the model so that it incorporates information from the most recent administrative data on insurance. CBO and JCT use that model—in combination

with models of tax revenues, models of Medicaid spending and actions by states,

projections of trends in early retirees’ health insurance coverage, and other available

information—to inform their estimates of the numbers of people with certain types of

coverage and the associated federal budgetary costs.2

 2. For additional information, see Congressional Budget Office, “Methods for Analyzing Health Insurance Coverage” (accessed March 13, 2017),

www.cbo.gov/topics/health-care/methods-analyzing-health-insurance-coverage.  

Effects of Repealing Mandate Penalties. Eliminating the penalties associated with two

requirements, while keeping the requirements themselves in place, would affect insurance

coverage in various ways. Those two requirements are that most people obtain health

insurance coverage (also called the individual mandate) and that large employers offer

their employees health insurance coverage that meets specified standards (also called the

employer mandate). Eliminating their associated penalties would reduce federal revenues

starting in 2017, but CBO and JCT estimate that doing so would also substantially reduce

the number of people with health insurance coverage and, accordingly, would reduce the

costs incurred by the federal government in subsidizing some health insurance coverage.

The estimated savings stemming from fewer people enrolling in Medicaid, in health

insurance obtained through the nongroup market, and in employment-based health

insurance coverage would exceed the estimated loss of revenues from eliminating mandate

penalties.

CBO and JCT estimate that repealing the individual mandate penalties would also result in

higher health insurance premiums in the nongroup market after 2017.3 Insurers would still

be required to provide coverage to any applicant, would not be able to vary premiums to

reflect enrollees’ health status or to limit coverage of preexisting medical conditions, and

would be limited in how premiums could vary by age. Those features are most attractive to

applicants with relatively high expected costs for health care, so CBO and JCT expect that

repealing the individual mandate penalties would tend to reduce insurance coverage less

among older and less healthy people than among younger and healthier people. Thus, the

agencies estimate that repealing those penalties, taken by itself, would increase premiums.

3. CBO and JCT expect that insurers would not be able to change their 2017 premiums because those premiums have already been set.

Nevertheless, CBO and JCT anticipate that a significant number of relatively healthy

people would still purchase insurance in the nongroup market because of the availability of

government subsidies.

Major Changes to Medicaid. CBO estimates that several major provisions affecting

Medicaid would decrease direct spending by $880 billion over the 2017-2026 period. That

reduction would stem primarily from lower enrollment throughout the period, culminating

in 14 million fewer Medicaid enrollees by 2026, a reduction of about 17 percent relative to

the number under current law. Some of that decline would be among people who are

currently eligible for Medicaid benefits, and some would be among people who CBO

projects would be made eligible as a result of state actions in the future under current law

(that is, from additional states adopting the optional expansion of eligibility authorized by

the ACA). Some decline in spending and enrollment would begin immediately, but most of

the changes would begin in 2020, when the legislation would terminate the enhanced

federal matching rate for new enrollees under the ACA’s expansion of Medicaid and would

place a per capita-based cap on the federal government’s payments to states for medical

assistance provided through Medicaid. By 2026, Medicaid spending would be about

25 percent less than what CBO projects under current law.

Changes Before 2020. Under current law, the penalties associated with the individual

mandate apply to some Medicaid-eligible adults and children. (For example, the penalties

apply to single individuals with income above about 90 percent of the federal poverty

guidelines, also known as the federal poverty level, or FPL). CBO estimates that, without

those penalties, fewer people would enroll in Medicaid, including some who are not

subject to the penalties but might think they are. Some people might be uncertain about

what circumstances trigger the penalty and others might be uncertain about their annual

income. The estimated lower enrollment would result in less spending for the program.

Those effects on enrollment and spending would continue throughout the 2017-2026

period.

Termination of Enhanced Federal Matching Funds for New Enrollees From Expanding

Eligibility for Medicaid. Under current law, states are permitted, but not required, to

expand eligibility for Medicaid to adults under 65 whose income is equal to or less than

138 percent of the FPL (referred to here as “newly eligible”). The federal government pays

a larger share of the medical costs for those people than it pays for those who were

previously eligible. Beginning in 2020, the legislation would reduce the federal matching

rate for newly eligible adults from 90 percent of medical costs to the rate for other enrollees

in the state. (The federal matching rate for other enrollees ranges from 50 percent to

75 percent, depending on the state, with an average of about 57 percent.) The lower federal 
matching rate would apply only to those newly enrolled after December 31, 2019.

The 31 states and the District of Columbia that have already expanded Medicaid to the

newly eligible cover roughly half of that population nationwide. CBO projects that under

current law, additional states will expand their Medicaid programs and that, by 2026,

roughly 80 percent of newly eligible people will reside in states that have done so. Under

the legislation, largely because states would pay for a greater share of enrollees’ costs,

CBO expects that no additional states would expand eligibility, thereby reducing both

enrollment in and spending for Medicaid. According to CBO’s estimates, that effect would

be modest in the near term, but by 2026, on an average annual basis, 5 million fewer people would be enrolled in Medicaid than would have been enrolled under current law (see

Figure 1).

CBO also anticipates some states that have already expanded their Medicaid programs

would no longer offer that coverage, reducing the share of the newly eligible population

residing in a state with expanded eligibility to about 30 percent in 2026. That estimate

reflects different possible outcomes without any explicit prediction about which states

would make which choices. In considering the possible outcomes, CBO took into account

several factors: the extent of optional coverage provided to the newly eligible population

and other groups before the ACA’s enactment (as a measure of a state’s willingness to

provide coverage above statutory minimums), states’ ability to bear costs under the

legislation, and potential methods to mitigate those costs (such as changes to benefit

packages and payment rates). Some states might also begin to take action prior to 2020 in

anticipation of future changes that would result from the legislation to avoid abrupt

changes to eligibility and other program features. How individual states would ultimately

respond is highly uncertain.

Because the lower federal matching rate would apply only to those newly enrolled after

December 31, 2019 (or who experience a break in eligibility after that date), CBO

estimates that reductions in spending for the newly eligible would increase over several

years, as “grandfathered” enrollees would cycle off the program and be replaced by new

enrollees. On the basis of historical data (and taking into account the increased frequency

of eligibility redeterminations required by the legislation), CBO projects that fewer than

one-third of those enrolled as of December 31, 2019, would have maintained continuous

eligibility two years later. Under the legislation, the higher federal matching rate would

apply for fewer than 5 percent of newly eligible enrollees by the end of 2024, CBO

estimates.

Per Capita-Based Cap on Medicaid Payments for Medical Assistance. Under current law,

the federal government and state governments share in the financing and administration of

Medicaid. In general, states pay health care providers for services to enrollees, and the

federal government reimburses states for a percentage of their expenditures. All federal

reimbursement for medical services is open-ended, meaning that if a state spends more

because enrollment increases or costs per enrollee rise, additional federal payments are

automatically generated.

Under the legislation, beginning in 2020, the federal government would establish a limit on

the amount of reimbursement it provides to states. That limit would be set by calculating

the average per-enrollee cost of medical services for most enrollees who received full

Medicaid benefits in 2016 for each state. The Secretary of Health and Human Services

would then inflate the average per-enrollee costs for each state by the growth in the

consumer price index for medical care services (CPI-M). The final limit on federal

reimbursement for each state for 2020 and after would be the average cost per enrollee for

five specified groups of enrollees (the elderly, disabled people, children, newly eligible

adults, and all other adults), reflecting growth in the CPI-M from 2016 multiplied by the

number of enrollees in each category in that year. If a state spent more than the limit on

federal reimbursement, the federal government would provide no additional funding to

match that spending.

The limit on federal reimbursement would reduce outlays because (after the changes to the

Medicaid expansion population have been accounted for) Medicaid spending would grow

on a per-enrollee basis at a faster rate than the CPI-M, according to CBO’s projections: at

an average annual rate of 4.4 percent for Medicaid and 3.7 percent for the CPI-M over the

11 2017-2026 period. With less federal reimbursement for Medicaid, states would need to

decide whether to commit more of their own resources to finance the program at

current-law levels or whether to reduce spending by cutting payments to health care

providers and health plans, eliminating optional services, restricting eligibility for

enrollment, or (to the extent feasible) arriving at more efficient methods for delivering

services. CBO anticipates that states would adopt a mix of those approaches, which would

result in additional savings to the federal government. (Other provisions affecting

Medicaid are discussed below.)

Changes to Subsidies and Market Rules for Nongroup Health Insurance Before 2020.

Under the legislation, existing subsidies for health insurance coverage purchased in the

nongroup market would largely remain in effect until 2020—but the premium tax credits

would differ by the age of the individual in 2019. Aside from the changes in enrollment and

premiums as a result of eliminating the individual mandate penalties (mentioned earlier),

the other changes discussed in this section would have small effects on coverage and

federal subsidies in the nongroup market.

Nongroup Market Subsidies. Subsidies under current law fall into two categories: subsidies

to cover a portion of participants’ health insurance premiums (which take the form of

refundable tax credits) and subsidies to reduce their cost-sharing amounts (out-of-pocket

payments required under insurance policies). The first category of subsidies, also called

premium tax credits, is generally available to people with income between 100 percent and

400 percent of the FPL, with certain exceptions. The second category, also called

cost-sharing subsidies, is available to those who are eligible for premium tax credits,

generally have a household income between 100 percent and 250 percent of the FPL, and

enroll in an eligible plan.

Under current law, those subsidies can be obtained only by purchasing nongroup coverage

through a health insurance marketplace. Under the legislation, premium tax credits—but

not cost-sharing subsidies—would also be available for most plans purchased in the

nongroup market outside of marketplaces beginning in 2018. However, the tax credits for

those plans could not be advanced and could only be claimed on a person’s tax return. 

CBO and JCT estimate that roughly 2 million people who are expected to enroll in plans

purchased in the nongroup market outside of marketplaces in 2018 and 2019 under current

law would newly receive premium tax credits for that coverage under the legislation.

The premium tax credits would differ by the age of the individual for one year in 2019,

while cost-sharing subsidies would remain unchanged prior to 2020. For those with

household income exceeding 150 percent of the FPL, the legislation would generally

reduce the percentage of income that younger people had to pay toward their premiums and increase that percentage for older people.4 CBO and JCT expect that roughly 1 million 

For families, the age of the oldest taxpayer would be used to determine the age-adjusted percentage of income that must be paid toward the premiums. As under current law, the premium tax credits would cover the amount by more people would enroll in coverage obtained through the nongroup market as a result of the change in the structure of premium tax credits. That increase would be the net result of higher enrollment among younger people and lower enrollment among older people.

Patient and State Stability Fund Grants. Beginning in 2018 and ending after 2026, the

federal government would make a total of $100 billion in allotments to states that they

could use for a variety of purposes, including reducing premiums for insurance in the

nongroup market. CBO and JCT estimate that federal outlays for grants from the Patient

and State Stability Fund would total $80 billion over the 2018-2026 period.

By the agencies’ estimates, the grants would reduce premiums for insurance in the

nongroup market in many states. CBO and JCT expect that states would use those grants

mostly to reimburse insurers for some of the costs of enrollees with claims above a

threshold. For states that did not develop plans to spend the funds, the federal government

would make payments to insurers in the individual market who have enrollees with

relatively high claims. 

Before 2020, CBO expects, the Secretary of Health and Human Services would make payments to insurers on the behalf of most states because most would not have enough time to set up their own programs before insurers had to set premiums for 2018. As a result, CBO estimates that most states would rely on the federal default program

for one or more years until they had more time to establish their own programs.

Continuous Coverage Provisions. Insurers would be required to impose a penalty on

people who enrolled in insurance in the nongroup or small-group markets if they had been

uninsured for more than 63 days within the past year. When they purchased insurance in

the nongroup or small-group market, they would be subject to a surcharge equal to

30 percent of their monthly premium for up to 12 months. The requirement would apply to

people enrolling during a special enrollment period in 2018 and, beginning in 2019, to

people enrolling at any time during the year.

CBO and JCT expect that increasing the future price of insurance through the surcharge for

people who do not have continuous coverage would increase the number of people with

insurance in 2018 and reduce that number in 2019 and later years. By the agencies’

estimates, roughly 1 million people would be induced to purchase insurance in 2018 to

avoid possibly having to pay the surcharge in the future. In most years after 2018, however,

roughly 2 million fewer people would purchase insurance because they would either have

to pay the surcharge or provide documentation about previous health insurance coverage.

The people deterred from purchasing coverage would tend to be healthier than those who

would not be deterred and would be willing to pay the surcharge. The reference premium—that is, the premium for the second-lowest-cost “silver” plan that covers the eligible people in the household in the area in which they reside—exceeds that percentage of income. A silver plan covers about 70 percent of the costs of covered benefits.

Age Rating Rules. Beginning in 2018, the legislation would expand the limits on how much

insurers in the nongroup and small-group markets can vary premiums on the basis of age.

However, CBO and JCT expect that the provision could not be implemented until 2019

because there would be insufficient time for the federal government, states, and insurers to

incorporate the changes and then set premiums for 2018. Under current law, a 64-year-old

can generally be charged premiums that cost up to three times as much as those offered to a 21-year-old. Under the legislation, that allowable difference would shift to five times as

much unless a state chose otherwise. That change would tend to reduce premiums for

younger people and increase premiums for older people.

However, CBO and JCT estimate that the structure of the premium tax credits before 2020

would limit how changes in age rating rules affected the number of people who would

enroll in health insurance coverage in the nongroup market. People eligible for subsidies in

the nongroup market are now largely insulated from changes in premiums: A person

receiving a premium tax credit pays a certain percentage of his or her income toward the

reference premium, and the tax credit covers the difference between the premium and that

percentage of income. Consequently, despite the changes in premiums for younger and

older people, the person’s out-of-pocket payments would not be affected much. 

Therefore, CBO and JCT estimate an increase in numbers of people enrolled in coverage

through the nongroup market as a result of changes in age rating rules would be less than

500,000 in 2019 and would be the net result of higher enrollment among younger people

and lower enrollment among older people. The small increase would mostly stem from net

changes in enrollment among people who had income high enough to be ineligible for

subsidies and who would face substantial changes in out-of-pocket payments for

premiums.

Changes to Subsidies and Market Rules for Nongroup Health Insurance Beginning

in 2020. Beginning in 2020, the current premium tax credits and cost-sharing subsidies

would both be repealed. That same year, the legislation would create new refundable tax

credits for insurance purchased in the nongroup market. In addition to making the market

changes discussed thus far (eliminating mandate penalties, providing grants to states to

help stabilize the nongroup market, establishing a requirement for continuous coverage,

and changing the age rating rules), the legislation would relax the current requirements

about the share of benefits that must be covered by a health insurance plan.Many rules 
governing the nongroup market would remain in effect as under current law.

For example, insurers would be required to accept all applicants during specified

open-enrollment periods, could not vary people’s premiums on the basis of their health,

and could not restrict coverage of enrollees’ preexisting health conditions. Insurers would

also still be required to cover specified categories of health care services, and the amount of
costs for covered services that enrollees have to pay out of pocket would remain limited to
a specified threshold. Prohibitions on annual and lifetime maximum benefits would still

apply. Also, the risk adjustment program—which transfers funds from plans that attract a

relatively small proportion of high-risk enrollees (people with serious chronic conditions,

for example) to plans that attract a relatively large proportion of such people—would

remain in place.

Because the new tax credits are designed primarily to be paid in advance on behalf of

enrollees to insurers, procedures would need to be in place to enable the Internal Revenue

Service and the Department of Health and Human Services to verify that the credits were

being paid to eligible insurers who were offering qualified insurance as defined under

federal and state law on behalf of eligible enrollees. CBO and JCT’s estimates reflect an

assumption that adequate resources would be made available through future appropriations

to those executive branch agencies to ensure that such systems were put in place in a timely
manner. To the extent that they were not, enrollment and compliance could be negatively 
affected.

Changes to Actuarial Value Requirements. Actuarial value is the percentage of total costs

for covered benefits that the plan pays when covering a standard population. Under current

law, most plans in the nongroup and small-group markets must have an actuarial value that

is in one of four tiers: about 60 percent, 70 percent, 80 percent, or 90 percent. Beginning in

2020, the legislation would repeal those requirements, potentially allowing plans to have

an actuarial value below 60 percent. However, plans would still be required to cover 10

categories of health benefits that are defined as “essential” under current law, and the total

annual out-of-pocket costs for an enrollee would remain capped. In CBO and JCT’s

estimation, complying with those two requirements would significantly limit the ability of

insurers to design plans with an actuarial value much below 60 percent.

Nevertheless, CBO and JCT estimate that repealing the actuarial value requirements would

lower the actuarial value of plans in the nongroup market on average. The requirement that

insurers offer both a plan with an actuarial value of 70 percent and one with an actuarial

value of 80 percent in order to participate in the marketplace would no longer apply under

the legislation. As a result, an insurer could choose to sell only plans with lower actuarial

values. 

Many insurers would find that option attractive because they could offer a plan

priced closer to the amount of the premium tax credit so that a younger person would have

low out-of-pocket costs for premiums and would be more likely to enroll. Insurers might be

less likely to offer plans with high actuarial values out of a fear of attracting a greater

proportion of less healthy enrollees to those plans, although the availability of the Patient

and State Stability Fund grants in most states would reduce that risk. The continuation of

the risk adjustment program could also help limit insurers’ costs from high-risk enrollees.

Because of plans’ lower average actuarial values, CBO and JCT expect that individuals’

cost-sharing payments, including deductibles, in the nongroup market would tend to be

higher than those anticipated under current law. In addition, cost-sharing subsidies would

be repealed in 2020, significantly increasing out-of-pocket costs for nongroup insurance

for many lower-income enrollees. The higher costs would make the plans less attractive

than those available under current law to many potential enrollees, especially people who

are eligible for the largest subsidies under current law.

Changes in the Ways the Nongroup Market Would Function. Under the legislation, some of

the ways that the nongroup market functions would change for consumers. The current

actuarial value requirements help people compare different insurance plans, because all

plans in a tier cover the same share of costs, on average. CBO and JCT expect that, under

the legislation, plans would be harder to compare, making shopping for a plan on the basis

of price more difficult.

Another feature of the nongroup market under current law is that there is one central

website through the state or federal marketplace where people can shop for all the plans in

their area that are eligible for subsidies. Under the legislation, insurers participating in the

nongroup market would no longer have to offer plans through the marketplaces in order for

people to receive subsidies toward those plans; therefore, CBO and JCT estimate that

fewer would do so. With more plans that are eligible for subsidies offered directly from

insurers or directly through agents and brokers and not through the marketplaces’ central

websites, shopping for and comparing plans could be harder, depending on insurers’

decisions about how to market their plans.

Changes in Nongroup Market Subsidies. With the repeal in 2020 of the current premium

tax credits and the cost-sharing subsidies, different refundable tax credits for insurance

purchased in the nongroup market would become available.5 The new tax credits would

vary on the basis of age by a factor of 2 to 1: Someone age 60 or older would be eligible for
a tax credit of $4,000, while someone younger than age 30 would be eligible for a tax credit
of $2,000. People would generally be eligible for the full amount of the tax credit if their 
adjusted gross income was below $75,000 for a single tax filer and below $150,000 for

joint filers and if they were not eligible for certain other types of insurance coverage.

 5. People would also be able to use the new tax credits toward unsubsidized of continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

The credits would phase out for people with income above those thresholds. The tax credits

would be refundable if the size of the credit exceeded a person’s tax liability.6 They could

also be advanced to insurers on a monthly basis throughout the year on behalf of an

enrollee. Finally, tax credits could be used for most health insurance plans purchased

through a marketplace or directly from an insurer.

6. The tax credits and the income thresholds would both be indexed each year by the consumer price index for all urban
consumers plus 1 percentage point.

Under current law, the size of the premium tax credit depends on household income and the

reference premium in an enrollee’s rating area. The enrollee pays a certain percentage of

his or her income toward the reference premium, and the size of the subsidy varies by

geography and age for a given income level. In that way, the enrollee is insulated from

variations in premiums by geography and is also largely insulated from increases in the

reference premium. An enrollee would pay the difference between the reference premium

and the premium for the plan he or she chose, providing some incentive to choose

lower-priced insurance. Beginning in 2020, under the legislation, the size of a premium tax

credit would vary with age, rather than with income (except for people with income in the

phase-out range) or the amount of the premium. The enrollee would be responsible for any

premium above the credit amount. That structure would provide greater incentives for

enrollees to choose lower-priced insurance and would mean that people living in high-cost

areas would be responsible for a larger share of the premium.

Under the legislation, some people would be eligible for smaller subsidies than those under

current law, and others would be eligible for larger ones. As a result, by CBO and JCT’s

estimates, the composition of the population purchasing health insurance in the nongroup

market under the legislation would differ significantly from that under current law,

particularly by income and age.

For many lower-income people, the new tax credits under the legislation would tend to be

smaller than the premium tax credits under current law.7 In an illustrative example, CBO

and JCT estimate that a 21-year-old with income at 175 percent of the FPL in 2026 would

be eligible for a premium tax credit of about $3,400 under current law; the tax credit would

fall to about $2,450 under the legislation (see Table 4). In addition, because cost-sharing

subsidies would be eliminated under the legislation, lower-income people’s share of

medical services paid in the form of deductibles and other cost sharing would increase. 

 7. People with income below 100 percent of the FPL who are ineligible for Medicaid and meet other eligibility criteria
would become newly eligible for a premium tax credit under the legislation.

As a result, CBO and JCT estimate, fewer lower-income people would obtain coverage

through the nongroup market under the legislation than under current law.

Conversely, the tax credits under the legislation would tend to be larger than current-law

premium tax credits for many people with higher income—particularly for those with

income above 400 percent of the FPL but below the income cap for a full credit, which is

set by the legislation at $75,000 for a single tax filer and $150,000 for joint filers in 2020.

For example, CBO and JCT estimate that a 21-year-old with income at 450 percent of the

FPL in 2026 would be ineligible for a credit under current law but newly eligible for a tax

credit of about $2,450 under the legislation. Lower out-of-pocket payments toward

premiums would tend to increase enrollment in the nongroup market among higher-income

people. Enacting the legislation would also result in significant changes in the size of 
subsidies in the nongroup market according to people’s age. For example, CBO and JCT 
estimate that a21-year-old, 40-year-old, and 64-year-old with income at 175 percent of the 
FPL in 2026 would all pay roughly $1,700 toward their reference premium under current 
law, even though the reference premium for a 64-year-old is three times larger than that 
for a 21-year-old in most states. 

Under the legislation, premiums for older people could be five times larger than those for 
younger people in many states, but the size of the tax credits for older people would only be 
twice the size of the credits for younger people. Because of that difference in how much the 
tax credits would cover, CBO and JCT estimate that, under the legislation, a larger share of 
enrollees in the nongroup market would be younger people and a smaller share would be 
older people.

According to CBO and JCT’s estimates, total federal subsidies for nongroup health

insurance would be significantly smaller under the legislation than under current law for

two reasons. First, by the agencies’ projections, fewer people, on net, would obtain

coverage in the nongroup health insurance market under the legislation. Second, the

average subsidy per subsidized enrollee under the legislation would be significantly lower

than the average subsidy under current law. In 2020, CBO and JCT estimate, the average

subsidy under the legislation would be about 60 percent of the average subsidy under

current law. In addition, the average subsidy would grow more slowly under the legislation

than under current law. That difference results from the fact that subsidies under current

law tend to grow with insurance premiums, whereas subsidies under the legislation would

grow more slowly, with the consumer price index for all urban consumers plus

1 percentage point. By 2026, CBO and JCT estimate that the average subsidy under the

legislation would be about 50 percent of the average subsidy under current law.

Patient and State Stability Fund Grants. As a condition of the grants, beginning in 2020,

states would be required to provide matching funds, which would generally increase from

7 percent of the federal funds provided in 2020 to 50 percent of the federal funds provided

in 2026. The agencies expect that the grants’ effects on premiums after 2020 would be

limited by the share of states that took action and decided to pay the required matching

funds in order to receive federal money and by the extent to which states chose to use the

money for purposes that did not directly help to lower premiums in the nongroup market.

Nevertheless, CBO and JCT estimate that the grants would exert substantial downward

pressure on premiums in the nongroup market in 2020 and later years and would help

encourage participation in the market by insurers.

Effects of Changes in the Nongroup Market on Employers’ Decisions to Offer Coverage.

CBO and JCT estimate that, over time, fewer employers would offer health insurance

because the legislation would change their incentives to do so. First, the mandate penalties

would be eliminated. Second, the tax credits under the legislation, for which people would

be ineligible if they had any offer of employment-based insurance, would be available to

people with a broader range of incomes than the current tax credits are. That change could

make nongroup coverage more attractive to a larger share of employees. Consequently, in

CBO and JCT’s estimation, some employers would choose not to offer coverage and

instead increase other forms of compensation in the belief that nongroup insurance was a

close substitute for employment-based coverage for their employees.

However, two factors would partially offset employers’ incentives not to offer insurance.

First, the average subsidy for those who are eligible would be smaller under the legislation

than under current law and would grow more slowly than health care costs over time.

Second, CBO and JCT anticipate, nongroup insurance under the legislation would be less

attractive to many people with employment-based coverage than under current law

because nongroup insurance under the legislation would cover a smaller share of enrollees’

expenses, on average, and because shopping for and comparing plans would probably be

more difficult. In general, CBO and JCT expect that businesses that decided not to offer

insurance coverage under the legislation would have, on average, younger and

higher-income workforces than businesses that choose not to offer insurance under current

law.

CBO and JCT expect that employers would adapt slowly to the legislation. Some

employers would probably delay making decisions because of uncertainty about the

viability of and regulations for the nongroup market and about implementation of the new

law.

Market Stability. CBO and JCT anticipate that, under the legislation, the combination of

subsidies to purchase nongroup insurance and rules regulating the market would result in a

relatively stable nongroup market. That is, most areas of the country would have insurers

participating in the nongroup market, and the market would not be subject to an

unsustainable spiral of rising premiums. First and most important, a substantial number of

relatively healthy (mostly young) people would continue to purchase insurance in the

nongroup market because of the availability of government subsidies. 

Second, grants from the Patient and State Stability Fund would help stabilize premiums and reduce potential losses to insurers from enrollees with very large claims. Finally, in CBO and JCT’s judgment, the risk adjustment program would help protect insurers from losses arising from high-risk enrollees. The agencies expect that all of those factors would encourage insurers to continue to participate in the nongroup market.

However, significant changes in nongroup subsidies and market rules would occur each

year for the first three years following enactment, which might cause uncertainty for

insurers in setting premiums. As a result of the elimination of the individual mandate

penalties, CBO and JCT project that nongroup enrollment in 2018 would be smaller than

that in 2017 and that the average health status of enrollees would worsen. A small share of

that decline in enrollment would be offset by the onetime effect of the continuous coverage

provisions, which would somewhat increase enrollment in the nongroup market in 2018 as

people anticipated potential surcharges in 2019. Grants from the Patient and State Stability

Fund would begin to take effect in 2018 to help mitigate losses and encourage participation

by insurers.

The mix of enrollees in 2019 would differ from that in 2018, because the change to

age-rating rules would allow older adults to be charged five times as much as younger

adults in many states. In addition, there would be a one-year change to the premium tax

credits, which CBO and JCT expect would somewhat increase enrollment among younger

adults and decrease enrollment among older adults. Although the combined effect of those

two changes would reduce the average age and improve the average health of enrollees in

the nongroup market, it might be difficult for insurers to set premiums for 2019 using their

prior experience in the market.

In 2020, CBO estimates, grants to states from the Patient and State Stability Fund, once

fully implemented, would significantly reduce premiums in the nongroup market and

encourage participation by insurers. The grants would help to reduce the risk to insurers of

offering nongroup insurance. As a result, CBO expects that those grants would contribute

substantially to the stability of the nongroup market.

That effect would occur despite the fact that more major changes taking effect in that year

would make it difficult for insurers to predict the mix of enrollees on the basis of their

recent experience. The new age-based tax credits would be introduced in 2020 and

actuarial value requirements would be eliminated. In response, insurers would have the

flexibility to sell different types of plans than they do under current law. The nongroup

market is expected to be smaller in 2020 than in 2019 but then is expected to grow

somewhat over the 2020-2026 period.

Other Budgetary Effects of Health Insurance Coverage Provisions. Because the

insurance coverage provisions of the legislation would increase the number of uninsured

people and decrease the number of people with Medicaid coverage relative to the numbers

under current law, CBO estimates that Medicare spending would increase by $43 billion

over the 2018-2026 period.

Medicare makes additional “disproportionate share hospital” payments to facilities that

serve a higher percentage of uninsured patients. Those payments have two components: an

increase to the payment rate for each inpatient case and a lump-sum allocation of a pool of

funds based on each qualifying hospital’s share of the days of care provided to

beneficiaries of Supplemental Security Income and Medicaid.

Under the legislation, the decreased enrollment in Medicaid would slightly reduce the

amounts paid to hospitals, CBO estimates. However, the increase in the number of

uninsured people would substantially boost the amounts distributed on a lump-sum basis.

Net Effects on Health Insurance Coverage

CBO and JCT expect that under the legislation, the number of people without health

insurance coverage would increase but that the increase would be limited initially, because

insurers have already set their premiums for the current year and many people have already

made their enrollment decisions for the year. However, in 2017, the elimination of the

individual mandate penalties would result in about 4 million additional people becoming

uninsured (see Table 5).[E1] 

In 2018, by CBO and JCT’s estimates, about 14 million more people would be uninsured,

relative to the number under current law. That increase would consist of about 6 million

fewer people with coverage obtained in the nongroup market, roughly 5 million fewer

people with coverage under Medicaid, and about 2 million fewer people with

employment-based coverage. In 2019, the number of uninsured would grow to 16 million

people because of further reductions in Medicaid and nongroup coverage. 

Most reductions in coverage in 2018 and 2019 would stem from repealing the penalties

associated with the individual mandate. Some of those people would choose not to have

insurance because they choose to be covered by insurance under current law only to avoid

paying the penalties. And some people would forgo insurance in response to higher

premiums. CBO and JCT estimate that, in total, 41 million people under age 65 would be

uninsured in 2018 and 43 million people under age 65 would be uninsured in 2019.

In 2020, according to CBO and JCT’s estimates, as a result of the insurance coverage

provisions of the legislation, 21 million more nonelderly people in the United States would

be without health insurance than under current law. By 2026, that number would total

24 million, CBO and JCT estimate. Specifically:

1. Roughly 9 million fewer people would enroll in Medicaid in 2020; that figure would rise to 14 million in 2026, as states that expanded eligibility for Medicaid discontinued doing so, as states projected to expand Medicaid in the future chose not to do so, and as the cap on per-enrollee spending took effect.
2. Roughly 9 million fewer people, on net, would obtain coverage through the nongroup market in 2020; that number would fall to 2 million in 2026. The reduction in enrollment in the nongroup market would shrink over the 2020-2026 period because people would gain experience with the new structure of the tax credits and some employers would respond to those tax credits by declining to offer insurance to their employees.
3. Roughly 2 million fewer people, on net, would enroll in employment-based coverage in 2020, and that number would grow to roughly 7 million in 2026. Part of that net reduction in employment-based coverage would occur because fewer employees would take up the offer of such coverage in the absence of the individual mandate penalties. In addition, CBO and JCT expect that, over time, fewer employers would offer health insurance to their workers.

CBO and JCT estimate that 48 million people under age 65, or roughly 17 percent of the

nonelderly population, would be uninsured in 2020 if the legislation was enacted. That

figure would grow to 52 million, or roughly 19 percent of the nonelderly population, in

2026. (That figure is currently about 10 percent and is projected to remain at that level in

each year through 2026 under current law.) Although the agencies expect that the

legislation would increase the number of uninsured broadly, the increase would be

disproportionately larger among older people with lower income; in particular, people

between 50 and 64 years old with income of less than 200 percent of the FPL would make

up a larger share of the uninsured (see Figure 2).

Net Effects on Health Insurance Premiums

The legislation would tend to increase average premiums in the nongroup market prior to

2020 and lower average premiums thereafter, relative to the outcomes under current law.

(This discussion is focused on premiums before any applicable tax credits and before any

surcharges for not maintaining continuous coverage.)

In 2018 and 2019, according to CBO and JCT’s estimates, average premiums for single

policyholders in the nongroup market would be 15 percent to 20 percent higher than under

current law mainly because of the elimination of the individual mandate penalties.

Eliminating those penalties would markedly reduce enrollment in the nongroup market and

increase the share of enrollees who would be less healthy. CBO and JCT expect that grants

from the Patient and State Stability Fund would largely be used for reinsurance programs,

particularly in 2018 and 2019, when many states would rely on the federal default before

establishing their own programs and, as explained earlier, that those payments would help

lower premiums in the nongroup market. The agencies estimate that program would have a

relatively small effect on premiums in 2018 because there would not be much time

between enactment of the legislation and insurers’ deadlines for setting premiums for

2018. By 2019, however, in CBO and JCT’s judgment, the Patient and State Stability Fund

would have the effect of somewhat moderating the increases in average premiums in the

nongroup market resulting from the legislation.

Starting in 2020, the increase in average premiums from repealing the individual mandate

penalties would be more than offset by the combination of three main factors. First, the mix

of people enrolled in coverage obtained in the nongroup market is anticipated to be

younger, on average, than the mix under current law. Second, premiums, on average, are

estimated to fall because of the elimination of actuarial value requirements, which would

result in plans that cover a lower share of health care costs, on average. Third, reinsurance

programs supported by the Patient and State Stability Fund are estimated to reduce

premiums. If those funds were devoted to other purposes, then premium reductions would

be smaller. By 2026, average premiums for single policyholders in the nongroup market

under the legislation would be roughly 10 percent lower than the estimates under current

law.

The changes in premiums would vary for people of different ages. The change in age-rating

rules, effective in 2019, would directly change the premiums faced by different age groups,

substantially reducing premiums for young adults and raising premiums for older people.

By 2026, CBO and JCT project, premiums in the nongroup market would be 20 percent to

25 percent lower for a 21-year-old and 8 percent to 10 percent lower for a 40-year-old—but

20 percent to 25 percent higher for a 64-year-old.

Revenue Effects of Other Provisions

JCT estimates that the legislation would reduce revenues by $592 billion over the

2017-2026 period as a result of provisions that would repeal many of the revenue-related

provisions of the ACA (apart from provisions related to health insurance coverage

discussed above). Those with the most significant budgetary effects include an increase in

the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those

taxpayers’ net investment income, and annual fees imposed on health insurers.8

 8. JCT published 10 documents (JCX-7-17 through JCX-16-17) on March 7, 2017, relating to the legislation. For more information, see www.jct.gov/publications.html. 

Direct Spending Effects of Other Provisions

The legislation would also make changes to spending for other federal health care

programs. CBO and JCT estimate that those provisions would increase direct spending by

about $7 billion over the 2017-2026 period.

Prevention and Public Health Fund. The legislation would, beginning in fiscal year

2019, repeal the provision that established the Prevention and Public Health Fund and

rescind all unobligated balances. The Department of Health and Human Services awards

grants through the fund to public and private entities to carry out prevention, wellness, and

public health activities. Funding under current law is projected to be $1 billion in 2017 and

to rise to $2 billion in 2025 and each year thereafter. CBO estimates that eliminating that

funding would reduce direct spending by $9 billion over the 2017-2026 period.

Community Health Center Program. The legislation would increase the funds available

to the Community Health Center Program, which provides grant funds to health centers

that offer primary and preventive care to patients regardless of their ability to pay. Under

current law, the program will receive about $4 billion in fiscal year 2017. The legislation

would increase funding for the program by $422 million in fiscal year 2017. CBO

estimates that implementing the provision would increase direct spending by $422 million

over the 2017-2026 period.

Provision Affecting Planned Parenthood. For a one-year period following enactment,

the legislation would prevent federal funds from being made available to an entity

(including its affiliates, subsidiaries, successors, and clinics) if it is:

• A nonprofit organization described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) of the code;
• An essential community provider that is primarily engaged in providing family planning and reproductive health services and related medical care;
• An entity that provides abortions—except in instances in which the pregnancy is the result of an act of rape or incest or the woman’s life is in danger; and
• An entity that had expenditures under the Medicaid program that exceeded $350 million in fiscal year 2014.

CBO expects that, according to those criteria, only Planned Parenthood Federation of

America and its affiliates and clinics would be affected. Most federal funds received by

such entities come from payments for services provided to enrollees in states’ Medicaid

programs. CBO estimates that the prohibition would reduce direct spending by $178 
million in 2017 and by $234 million over the 2017-2026 period. Those savings would

be partially offset by increased spending for other Medicaid services, as discussed below.

To the extent that there would be reductions in access to care under the legislation, they

would affect services that help women avert pregnancies. The people most likely to

experience reduced access to care would probably reside in areas without other health care

clinics or medical practitioners who serve low-income populations. CBO projects that

about 15 percent of those people would lose access to care.

The government would incur some costs for Medicaid beneficiaries currently served by

affected entities because the costs of about 45 percent of all births are paid for by the

Medicaid program. CBO estimates that the additional births stemming from the reduced

access under the legislation would add to federal spending for Medicaid. In addition, some

of those children would themselves qualify for Medicaid and possibly for other federal

programs. 

By CBO’s estimates, in the one-year period in which federal funds for Planned Parenthood 
would be prohibited under the legislation, the number of births in the Medicaid program 
would increase by several thousand, increasing direct spending for Medicaid by $21 million
in 2017 and by $77 million over the 2017-2026 period. Overall, with those costs netted 
against the savings estimated above, implementing the provision would reduce direct 
spending by $156 million over the 2017-2026 period, CBO estimates. 

Repeal of Medicaid Provisions. Under current law, states can elect the Community First 
Choice option, allowing them to receive a 6 percentage-point increase in their federal 
matching rate for some services provided by home and community-based attendants to 
certain Medicaid recipients. The legislation would terminate the increase in the federal
matching funds beginning in calendar year 2020, which would decrease direct spending 
by about $12 billion over the next 10 years.

Repeal of Reductions to Allotments for Disproportionate Share Hospitals. Under

current law, Medicaid allotments to states for payments to hospitals that treat a

disproportionate share of uninsured and Medicaid patients are to be cut significantly in

each year from 2018 to 2025. The cuts are currently scheduled to be $2 billion in 2018 and

to increase each year until they reach $8 billion in 2024 and 2025. The legislation would

eliminate those cuts for states that have not expanded Medicaid under the ACA starting in

2018 and for the remaining states starting in 2020, boosting outlays by $31 billion over the

next 10 years.

Safety Net Funding for States That Did Not Expand Medicaid. The legislation would

provide $2 billion in funding in each year from 2018 to 2021 to states that did not expand

Medicaid eligibility under the ACA. Those states could use the funding, within limits, to

supplement payments to providers that treat Medicaid enrollees. Such payments to

providers would not be subject to the per capita caps also established by the proposed

legislation. Any states that chose to expand Medicaid coverage as of July 1 of each year

from 2017 through 2020 would lose access to the funding available under this provision in

the following year and thereafter. CBO estimates that this provision would increase direct

spending by $8 billion over the 2017-2026 period.

Reductions to States’ Medicaid Costs. The legislation would make a number of

additional changes to the Medicaid program, including these:

• Requiring states to treat lottery winnings and certain other income as income for purposes of determining eligibility;
• Decreasing the period when Medicaid benefits may be covered retroactively from up to three months before a recipient’s application to the first of the month in which a recipient makes an application;
• Eliminating federal payments to states for Medicaid services provided to applicants who did not provide satisfactory evidence of citizenship or nationality during a reasonable opportunity period; and
• Eliminating states’ option to increase the amount of allowable home equity from $500,000 to $750,000 for individuals applying for Medicaid coverage of long-term services and supports.

Together, CBO estimates, those changes would decrease direct spending by about

$7 billion over the 2017-2026 period.

Changes in Spending Subject to Appropriation

CBO has not completed an estimate of the potential impact of the legislation on

discretionary spending, which would be subject to future appropriation action.

UNCERTAINTY SURROUNDING THE ESTIMATES

CBO and JCT considered the potential responses of many parties that would be affected by

the legislation, including these:

• Federal agencies—which would need to implement major changes in the regulation of the health care system and administration of new subsidy structures and eligibility verification systems in a short time frame; 
• States—which would need to decide how to use Patient and State Stability Fund grants, whether to pass new laws affecting the nongroup market, how to respond to the reduction in the federal matching rate for certain Medicaid enrollees, how to respond to constraints from the cap on Medicaid payments, and how to provide information to the federal government about insurers and enrollees; Insurers—who would need to decide about the extent of their participation in the insurance market and what types of plans to sell in the face of different market rules and federal subsidies;
• Employers—who would need to decide whether to offer insurance given the different federal subsidies and insurance products available to their employees;
• Individuals—who would make decisions about health insurance in the context of different premiums, subsidies, and penalties than those under current law; and
• Doctors and hospitals—who would need to negotiate contracts with insurers in a new regulatory environment.

Each of those responses is difficult to predict. Moreover, the responses would depend upon

how the provisions in the legislation were implemented, such as whether advance

payments of the new tax credits were made reliably. And flaws in the determination of

eligibility, for instance, could keep subsidies from people who were eligible or provide

them to people who were not.

In addition, CBO and JCT’s projections under current law itself are inexact, which could

also affect the estimated effects. For example, enrollment in the marketplaces under

current law could be lower than is projected, which would tend to decrease the budgetary

savings of the legislation. Alternatively, the average subsidy per enrollee under current law

could be higher than is projected, which would tend to increase the budgetary savings of

the legislation.

CBO and JCT have endeavored to develop estimates that are in the middle of the

distribution of potential outcomes. One way to assess the range of uncertainty around the

estimated effects of the legislation is to compare previous projections with actual results.

For example, some aspects of CBO and JCT’s projections of health insurance coverage and

related spending made in July 2012 (after the Supreme Court issued a decision that

essentially made the expansion of the Medicaid program under the ACA an option for

states) can be compared with actual results for 2016. Projected spending on people made

eligible for Medicaid because of the ACA was about 60 percent of the actual amount. 

The number of people predicted in 2012 to purchase insurance through the marketplaces in

2016 was more than twice the actual number. The decline in the number of insured people

from 2012 to 2016 was projected to be 23 million, and the decline measured in the National

Health Interview Survey turned out to be 20 million. CBO and JCT have continued to learn

from experience with the ACA and have endeavored to use that experience to improve

their modeling.

That comparison of projections with actual results and the great uncertainties surrounding

the actions of the many parties that would be affected by the legislation suggest that

outcomes of the legislation could differ substantially from some of the estimates provided

here. 

Nevertheless, CBO and JCT are confident about the direction of certain effects of the

legislation. For example, spending on Medicaid would almost surely be lower than under

current law. The cost of the new tax credit would probably be lower than the cost of the

subsidies for coverage through marketplaces under current law. And the number of

uninsured people under the legislation would almost surely be greater than under current

law.

INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITS

CBO estimates that enacting the legislation would not increase net direct spending or

on-budget deficits by more than $5 billion in any of the four consecutive 10-year periods

beginning in 2027.

MANDATES ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

JCT and CBO reviewed the provisions of the legislation and determined that they would

impose no intergovernmental mandates as defined in the Unfunded Mandates Reform Act.

For large entitlement programs like Medicaid, UMRA defines an increase in the stringency

of conditions or a cap on federal funding as an intergovernmental mandate if the affected

governments lack authority to offset those costs while continuing to provide required

services. 

As discussed earlier in this estimate, the legislation would eliminate the enhanced

federal matching rate for some future enrollees, establish new per capita caps in the

Medicaid program, and make other changes that would affect Medicaid spending—some

of which would provide additional assistance to states.

On net, CBO estimates that states would see an overall decrease in federal assistance, as

reflected in estimates of federal savings in the Medicaid program. In response to the caps

and other changes, CBO anticipates that states could use existing flexibility allowed in the

Medicaid program and additional authorities provided by the legislation to cut payments to

health care providers and health plans, eliminate optional services, restrict eligibility for

enrollment, or (to the extent feasible) change the way services are delivered to save costs.

Because flexibility in the program would allow states to make such changes and still

provide statutorily required services, the per capita caps and other changes in Medicaid

would not impose intergovernmental mandates as defined in UMRA.

MANDATES ON THE PRIVATE SECTOR

JCT and CBO have determined that the legislation would impose private-sector mandates

as defined in UMRA. On the basis of information from JCT, CBO estimates that the

aggregate direct cost of the mandates imposed by the legislation would exceed the annual

threshold established in UMRA for private-sector mandates ($156 million in 2017,

adjusted annually for inflation).

The tax provisions of the legislation contain two mandates. Specifically, the legislation

would recapture excess advance payments of premium tax credits (so that the full amount

of excess advance payments is treated as an additional tax liability for the individual) and

repeal the small business (health insurance) tax credit. The nontax provisions of the 
legislation would impose a private-sector mandate as defined in UMRA on insurers that 
offer health insurance coverage in the individual or small-group market. 

The legislation would require those insurers to charge a penalty equal to 30 percent

of the monthly premium for a period of 12 months to individuals who enroll in insurance in

a given year after having allowed their health insurance to lapse for more than 63 days

during the previous year. CBO estimates that the costs of complying with the mandate

would be largely offset by the penalties insurers would collect.

ESTIMATE PREPARED BY:

Federal Spending

Kate Fritzsche, Sarah Masi, Daniel Hoople, Robert Stewart, Lisa Ramirez-Branum,

Andrea Noda, Allison Percy, Sean Lyons, Alexandra Minicozzi, Eamon Molloy, Ben

Hopkins, Susan Yeh Beyer, Jared Maeda, Christopher Zogby, Romain Parsad, Ezra Porter,

Lori Housman, Kevin McNellis, Jamease Kowalczyk, Noah Meyerson, T.J. McGrath,

Rebecca Verreau, Alissa Ardito, and the staff of the Joint Committee on Taxation

Federal Revenues

Staff of the Joint Committee on Taxation

Impact on State, Local, and Tribal Governments

Leo Lex, Zachary Byrum, and the staff of the Joint Committee on Taxation

Impact on the Private Sector

Amy Petz and the staff of the Joint Committee on Taxation

ESTIMATE REVIEWED AND EDITED BY:

Mark Hadley, Theresa Gullo, Jeffrey Kling, Robert Sunshine, David Weaver, John Skeen,

Kate Kelly, Jorge Salazar, and Darren Young

ESTIMATE APPROVED BY:

Holly Harvey

Deputy Assistant Director for Budget Analysis

Jessica Banthin

Deputy Assistant Director for Health, Retirement, and Long-Term Analysts

Chad Chirico

AHCA = American Health Care Act; FPL = federal poverty level.

---

 [E1]50-60% from people foregoing coverage.

Letter 138: The A.C.H.A. versus the A.C.A.: health care or stealth care?

“Politics is the art of the possible, the attainable — the art of the next best”

--Chancellor Otto von Bismarck, 1867

"We ask you, the citizens of this country, the responsible and thoughtful doctors, the hospital administrators, all those who face this challenge of educating our children, finding work for our older people, finding security for those who have retired, all who are committed to this great effort of moving this country forward: come and give us your help."

--President John Kennedy, 1962 (https://www.youtube.com/watch?v=14A1zxaHpD8)

BLUF: This essay picks up where two others ended: thoughts on health-care and its insurance and thoughts on reforming the Affordable Care Act . First is the G.O.P. take on the A.C.A. replacement as per the National Review. and the Democratic view of that law by Representative Mike Doyle (D-PA).

• http://www.nationalreview.com/article/445598/house-republican-obamacare-repeal-replace-bill-conservative-health-care-reform
• http://nedmcdletters.blogspot.com/2017/01/letter-135-letter-to-president-trump.html
• http://nedmcdletters.blogspot.com/2012/05/letter-56-thoughts-on-health-care.html
• https://www.c-span.org/video/?c4660230/democratic-view-proposed-health-care-law

Please note that the discussion below assumes that one has read the article by G.O.P. Representatives McCarthy (CA) and Black (TN); it is link with the third bullet-point above. This essay was drafted before I was able to read the C.B.O. report.

Introduction 

I find the whole subject of health-care to be overwhelming. The basic difficulty is that we are reforming a system of insurance -- based on corporate provided health-care coverage -- that was, at its origin, a make-shift compromise to avoid a large strike in WWII by increasing workers' wages in kind through the provision of health insurance and thus not busting through wage freezes. 

Overview of Policy Questions

The cerebral spit-balls that follow below are to be enjoyed, deployed, destroyed or simply ignored. They attend to the following issues (which I view as) confronting health-care:

1. manufactured under-supply of M.D.s to drive up compensation, particularly of specialists;
2. excessive expectations of what minimum health-care should be;
3. unnecessary costs of bureaucracy and regulatory paperwork;
4. redundant service intermediation and provision costs;
5. punitive monetary settlements for mal-practice suits;
6. for-profit medical care provided selectively;
7. outrageous pricing schemes of pharmaceuticals;
8. abuse of emergency and intensive care services; as well as,
9. high end-of-life costs in the final six-to-twelve months.

Discussion

Personally, we need to start from scratch to construct an easily understood and maintained system. There are basic questions we have to answer as a society.

1. Is health-care a right or a luxury?
2. Does health-care insurance cover morbidity risk only or does it extend to health maintenance and pharmaceuticals?
3. Should health-care insurance include end-of-life costs, particularly in the final year?
4. Should the U.S. system, as reformed, emulate those of other developed countries, especially in the emergence of mandatory licensing laws to bring down the costs of new drugs from monopolistically forbidding pricing levels?
5. Should health-care insurance impose behavioral constraints or penalties?

These are not easy questions and they have never been fully debated. Senator Sanders and President Obama deserve credit for trying and making progress. For me, at least, health-care insurance: 

• should be a limited right inured to the American people;
• should include $1,000 worth of annual maintenance through tax credits or vouchers to every American;
• should, in the case of specific hazards (e.g., potential contagion), be available to anyone inside the U.S., whether documented or not;
• should be single-payor only for catastrophic health re-insurance (i.e., a deductible of $10-15,000);
• should be left to the individual or family head to decide for the purchase of the intermediate layer with appropriate tax relief for affordability;
• should include home hospice or institutional hospice care for those with a prognosis of one year or less to live;
• should not exclude those with pre-existing conditions (i.e., payments for which are picked up in the catastrophic reinsurance);
• should impose certain penalties for those indulging in behaviors previously identified as high-morbidity (i.e., excessive drinking, drug use, smoking, unprotected sex, avoiding vaccinations, etc.);
• should exert the power of the Federal government to stop the run-away pricing of established drugs (e.g., generic drugs, cornered by companies, jumping 10-15x in price);
• should exert the power of the Federal government to accelerate supply of vitally needed new pharmaceuticals through compulsory licensing to meet volumes demanded at a sustainable profitability;
• should not conflict with public policies or rights previously identified and open to interpretation (e.g., prohibiting payments for abortions); as well as,
• should NOT include extraordinary measures to revive or prolong life, transplants and other very expensive procedures except for congenital defects or care for the young (i.e., under 21 years old) or precedent extraordinary events reasonably determined (i.e., man-made or natural catastrophes).

If we insist on a great big muscle-bound Federal plan, the A.C.A. is a good starting point, as seems to be evidenced by this G.O.P. 'repeal-&-replace'. Other policy measures should be concurrent, most notably tort reform (to eliminate the driver of high med-mal premiums); fining doctors for excessive practices (i.e., defensive medicine and over prescription of addictive medicines); fining patients for over-use of Emergency Care; simplification of paperwork; significantly increasing the number of doctors trained every year; as well as, the assurance of universal pre-natal care.

Letter 137: Playing 'Chicken' with lran

"As of today, we are officially putting Iran on notice...."

--LTG Flynn (Ret.), National Security Advisor, February 1, 2017

Those who follow the way
counsel against war
knowing the use of force
will simply create more
war and fill the land with thorns

--Lao-tsu, circa 550 B.C.

BLUF: The heated rhetoric about Iran is frightening. The Trump Administration does not yet know what Iran’s intentions are with these missile tests and possible nuclearization in the future as well as what Iran views as its security interests. 

• http://www.huffingtonpost.com/hossein-askari/uniformed-threats-against_b_14619770.html
• https://www.whitehouse.gov/the-press-office/2017/02/03/statement-national-security-advisor-michael-t-flynn-iran
• http://www.militarytimes.com/articles/mattis-us-has-no-plans-to-increase-mideast-forces 

Historical backdrop for me. Forty years ago, in college, l was studying the actions of Germany, following Bismarck’s deft leadership as Chancellor, in the run-up to the 'Great War'. In a book I read, the Berlin press, apparently at the behest of the government, often sounded the war drums to coerce concessions out of other countries. This policy or practice had a name like 'hair-trigger'. 

http://topppaper.com/the-role-of-germany-in-the-development-of-world/ 

That book’s author, I think, was arguing that the climate of fear made the ease and consequence of miscalculation far more dangerous, not to mention begging the rivals eventually to call the Kaiser's bluff. Ten years ago there were similar 'bleatings' of war drums, climaxed (at least on my visual radar) by a 'Time' magazine and other periodical covers with menacing portraits of President Ahmadinejad looking like Mephistopheles.  

Those covers recalled my hearing casual remarks that people made in Baghdad in the Summer of 2004, when the United States were in the upswing of a weapons procurement boom, "Better brush up on your Persian, dude -- it's Christmas in Teheran." The whole idea of invading Iran in 2004 was, to state it mildly, dissociated from reality and arguably evil. Operation Iraqi Freedom was already mired in difficulties. 

http://nedmcdletters.blogspot.com/2015/09/letter-113-do-we-say-iran-or-i-ran.html

Iraq had been by far the easiest of the three members of the Axis-of-Evil (plus Syria) to invade: half-starved population from sanctions; wrecked infrastructure; minimal air-defense; flat terrain for easy avenues of approach; military without spare parts, etc. Iran had a better economy, double the population; a far better-provisioned military; and, a mountainous terrain. In short, if Iraq was not our Syracuse, Iran would be.

The Folly of the Toupée Trigger. The most tragic aspect about this ill-advised and unecessary game of chicken -- sponsored by the Lord of the Lies and his Loose Bannon -- is that my conviction that, while Iran may detest Israël, more for being a Western Democracy throwing regional dictatorships (like the theocratic tyranny in Iran) into disrepute, she truly fears Pakistan. 

https://thewire.in/41862/the-rising-threat-against-shia-muslims-in-pakistan/

Recently, I was swatted down by a military expert here in Birmingham for asking about the Pakistani threat to Iran; the dismissive answer indicated more the tunnel-vision taken by those tied to the military and the military-industrial nexus, constrained by threat assessments that lock in false consenses. Nevertheless, as an outsider with some experience on the ground, I will stick to my thesis in that case. 

The brutal treatment of Shi´ites in Pakistan plus that failed state having 155 nuclear weapons are the real reasons for Iran going nuclear. Lastly, Iran has a cosmopolitan middle-class we failed to support in 2009. If we play our cards right, they will overthrow the religious tyrants. These people have historically been neutral, perhaps pre-disposed, toward Israël (obviously, our #1 priority).

Letter 136: When Facts can be Feckless

"All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome." --George Orwell

One aspect of fact-checking concerns me. I refer to this article about Senator Jefferson Beauregard Sessions lll apparently having little time for disabled children. In a time when the President, as the Lord of the Lies, is often compared to Messrs Hitler and Mussolini, this indirect allegation has serious implications of, via indirect references to, the eugenics policies of the Third Reich. The article has been fact-checked by ‘Snopes’ as being true

http://www.dailykos.com/story/2016/11/29/1605134/-Jeff-Sessions-Protections-for-disabled-kids-are-ruining-America-s-schools 

We all know that we are all under assault when it comes to the truth these days and that assault hurts everyone for obvious reasons. Nevertheless, fact-checking unintentionally misleads us when the context is not spelled out clearly. Senator Sessions is a very decent man and has served Alabama well; in many ways, he is a model of the emerging post-racial South. True, Senator Sessions has the attributes of the Southern gentleman. Yet he suspends race in his extension of his personal honor to others, especially when it comes to prosecution of racial crimes, committed by blacks or whites. He also has displayed the courage at times to call the public's attention to the short-comings of popular policies (e.g., criticizing some aspects of mainstreaming disabled children). ‘Snopes’ assigned a green-check for 'true' on a speech Senator Sessions gave years ago.

http://www.snopes.com/jeff-sessions-slammed-protections-for-disabled-students/  

The bare-bones truth – the words stated in isolation – appears to say one thing when the context plainly implies another. The Senator was obviously not referring to all disabled children who are being mainstreamed but to those who come from homes, usually broken and awash in drugs, where children receive no discipline and have no role models if they are lucky; or criminal role models, if they are not. Senator Sessions, I suspect, was not deeming these children as evil or somehow bad.

Like most of us, the Senator realizes these living cast-aways do not have and, barring some miracle, will not have a chance to assume their fully ordained statures in the eyes of God (or Justice, etc.). Senator Sessions, like most Republicans, believes that every just society should set out to facilitate such 'self-actualization' for as many of its citizens as possible. This societal ambition, this social contract, calls for hard choices and gutsy policies, not votes purchased by dependency.

Nevertheless, the damaging start in life of these untutored students is regrettably and undeniably disrupting class-rooms. This reality is what Senator Sessions intended to address: the dynamics of the class-room where two or three hurting children make learning well-nigh impossible for the great majority of their better behaved class-mates. He was not saying that this particular segment of 'disabled' children is wrong; its members are children, after all, who can not know better if they are not shown better.

The problem with 'Snopes' is that, while its opinion did clarify the context, eventually, those details came too late as many readers likely saw only the green-check, indulged their confirmation bias and moved on. That scan-to-pan bias trivializes the immense pain borne by millions of our children. They bear the crippling scars and daily burden of being under-privileged, under-nourished and under-bred. Had the Black Panthers in the 1960s flourished peaceably, these troubling issues, at least in urban ghettoes, could have been addressed.

As far as I can see, I strongly suspect that the Senator had a compassionate alternative in mind. Since, as I have read or heard somewhere, these unsocialized children typically number one, two or three to a class room, and are most often boys, why not segregate them into separate classrooms run by former Marine drill sergeants so they have a chance to mature and learn? These children are screaming for guidance and attention; they thirst for a male role model, at least as a part-time father figure.

In that manner, then, everyone has a better chance of getting what (s)he needs: children cursed by the accident of birth into a maelstrom of malevolence get the manly attention they need and the rest -- able-bodied and disabled alike -- get on with their studies. For those who will screech, holler, hoot and boot -- especially those educated in private schools or wealthy suburban public schools where these lost little ones never show up on the radar -- I advise your doing two things.

• Watch the confirmation hearings of Senator Sessions for Attorney General and then see if you can rightly look people in the eye and say that the Senator is somehow deficient or malevolent and then do one of the following.
• Read the novel, Lord of the Flies. OR
• Watch the 'Miri' episode of Star Trek (https://www.youtube.com/watch?v=KII_6yhkEL4).

Letter 135: a letter to President Trump

"You have to think anyway, so why not think big?"

-- President Donald Trump

"Oh, good grief..."

-- Charlie Brown, American philosopher

The Honorable Donald J. Trump

President

The United States of America

The White House

1600 Pennsylvania Avenue, N.W.

Washington, D.C. 20500

Friday, January 20, 2017

Dear President Trump,

First of all, I confess to being surprised not only by your nomination, but also your election. Accordingly, I congratulate you for both feats. Mr President, you led a repudiation of what many view as a corrupt establishment at the beck and call of Silicon Valley, Wall Street and the military-industrial complex. Republican counterparts of Senator / Secretary Clinton (e.g., Governors Kasich and Bush) stumbled badly and quickly in the primaries.

Mr President, you and the other ‘change’ candidates from four peripheral parties or movements obtained four million more votes than did the quintessential candidate of the establishment. Your clarion call of ‘Lock her up!’ was inappropriate at best and yet it engaged people across the Republic sufficiently for you to eke out a victory in the Electoral College. While your hard-earned victory was far from the mandate you claim, it serves as a wake-up call to people across our country.

Nevertheless, you are failing to be transparent, Mr President. You have failed to acknowledge the blatant manipulation of the Trump family charity to pay down personal debts. Mr President, you have yet to release your tax returns, at least to a bi-partisan group of Congressional leaders meeting in a confidential setting. Sir, you continue to defy not only the will and sense of the Congress but the tradition of Presidents freeing themselves from competing personal financial interests prone to corruption.

Specifically, Mr President, Article-1; Section-9; Clause-8 of the Constitution clarifies that, “No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.”

Such off-shore emoluments may include subsidized interest rates, waived fees and / or permissive loan terms from foreign banks, especially state-owned banks, on which you have built at least a significant part of your personal wealth. Such subsidized borrowing costs, increase the cash-flows generated by your projects. That incremental increase of cash flows from subsidized costs, Mr President, would arguably represent an emolument.

Mr President, you may argue that private banks or investors based overseas do not violate that clause designed to prevent corruption since they are non-governmental actors. Many, perhaps most, of these lenders are based in countries with authoritarian régimes. Under such régimes, companies that surpass certain asset levels – as your banks almost certainly do – are subject to the highly intrusive and influential scrutiny of their operations by these régimes. In a sense, such ‘private’ financiers are de facto state-managed entities.

Mr President, your insistence that you need not be bound by the uniform practice of governmental ethics, in place for at least a half-century, remains troubling. The preliminary evidence adduced against you may indicate the commission of an impeachable offense from Day-1. Mr President, this situation is not just another law-suit to contest but your personal contest of the rule-of-law. Please take a page out of your predecessor’s play-book and stand tall for integrity as the Spirit of the law and not as a matter of law.

Sir, as a fellow Republican, I request that you apologize publicly to President Obama for the calumny you have directed his way, starting with your utterly bogus accusation about his birth status. Additionally, I request that you apologize publicly to President Peña Nieto for your heated rhetoric against his country and the people he serves, especially as you look to be following President Obama’s policy of deporting jailed (likely criminal) illegal aliens.

The next stride toward reconciliation is to visit a leading Islamic Cultural center to assure the great majority of our Muslim compatriots, who practice and actively promote peaceful citizenship, that they, too, are afforded the protections of other Americans or resident aliens of good standing. As a private citizen, racism was a regrettable luxury; but you are the President, now. 

Lastly, Mr President, I would like to indicate my support for many of your trade and economic policies. Several of your foreign policy ideas are also refreshing. Please, Sir, consider taking the following actions.

• Instituting an investment tax credit will help spur basic manufacturing.
• Going slow on dismantling the Affordable Care Act may indicate that only a few changes are required:

1. amend the McCarran-Ferguson Act to exclude exemptions with respect to health insurance;
2. permit inter-state sales of health-care without repealing McCarran-Ferguson;
3. allow British, Canadian and AustraZealand carriers to compete;
4. limit punitive damages under law suits and cap pay-outs under mal-practice claims;
5. penalize doctors for practicing defensive medicine;
6. provide or subsidize end-of-life insurance;
7. federalize malpractice insurance; as well as,
8. eliminate tax breaks related to the provision of health insurance by corporations.

• Waiving all IRS penalties outstanding for early retirement fund withdrawals after 2007, when people's net worth plummeted, needed to care for elderly parents and / or sending children to college will benefit the middle class.
• Deferring tax cuts in favor of refunding penalty payments made on early retirement withdrawals between 2007 and 2012 will benefit the middle class.

Mr President, my fervent hope is that you succeed. Much of that will rest with you and the example you choose to set for the rest of us.

Thank you and best regards,

Ned
Edward J. McDonnell III, CFA PMP
Birmingham, Alabama.

Letter #134: a thank you letter to President Obama

"Blessed are ye, when men shall revile you, and persecute you, and shall say all manner of evil against you falsely, for my sake."

                                                                         -- Saint Matthew; Chapter 5; Verse 11

"The future rewards those who press on. I don't have time to feel sorry for myself. I don't have time to complain. I'm going to press on."

-- President Barack Obama

The Honorable Barack H. Obama

President

The United States of America

The White House

1600 Pennsylvania Avenue, N.W.

Washington, D.C. 20500

Friday, January 20, 2017

Dear President Obama,

Today, I write you as an American who is deeply ambivalent about some of the policies you have pursued and still who gives you a well-merited ‘two-thumbs-up’ rating. Why? The answer is simple, I am now old enough and have been around long enough to know that the majority of those ideas I deem innovative today will either be refuted in the short-to-medium term or change over the longer term.

Elements of your troubling foreign policy – in Syria and Ukraine --provide apt examples of why my ambivalence has not faded. For years, Mr President, I have come to fear that your behavior appears to be one of appeasement in the face of direct assaults on democracies – whether in place now or inchoate – in Ukraine and Eastern Europe as well as one of turning a blind eye toward appalling carnages, such as those in in Syria and México. 

Mr President, I truly do not believe you are weak or prone to appeasement when I remember to recall the following factors. 

1. The interventionist ideas I support, as opposed to yours, are really nothing more than best-case scenarios. 
2. Mr President, I supported the invasion of Iraq, a war of aggression that failed to follow its evident best-case script; you tried another path for obvious reasons.
3. You probably did not favor interceding in Libya but deferred to your Secretary of State and your top National Security Council expert on multi-lateral initiatives.
4. When the Libya initiative collapsed under the weight of mission creep, you harboured an understandable skepticism of the policy prima donnas and chose to follow your less hawkish instincts. 
5. Though tearing up the Buda Pest memorandum and failing to intervene decisively and early in Ukraine appears to be an act similar to the Munich accord of 1938, the American people clearly did not support risking war over Crimea.

In Syria, the intervention many of us viewed as worth the risk may well have landed us in another military quagmire through mission creep with thousands of sorties and boots on the ground to push it along. Nonetheless, Mr President you have taken action – a fact that many of your gainsayers (e.g., me) fail to note -- in Iraq and Syria, while simultaneously ejecting a Shi´ite strongman in Baghdad.

Additionally, Mr President, you have also displayed the diplomacy, founded on humility, to defer to Russia’s leadership in removing the chemical weapon stockpiles of President Assad, the dictator of Syria. There are other policies that I could criticize, Mr President. That is not the point of this letter. My mission here is to tell you why I give you two-thumbs-up. Policy has little to do with my assessment as admitted earlier.

The fine example you set each day, Mr President, has made you an incontestably decent leader, one that makes me proud of my country. And, for that, Sir, I thank you. Mr President, I sincerely hope your successor understands this reality of modern leadership by example. There are so many trait-based actions of yours that I admire so deeply that I can merely cite a few with enthusiasm:

• the first significant attempt at reform of a dysfunctional health-care distribution and provisioning system;
• your humility in calling on the rest of us not to rush to reaction on instances of police violence or shootings of police and children;
• working in soup kitchens and veterans’ homes on holidays;
• your compassion in pardoning Bradley / Chelsea Manning, a young person driven almost to suicide by twenty-three months of solitary confinement before facing a military tribunal for charges already confessed;
• engaging us in meaningful discourse on the trade-off between liberty and security, thus implicitly showing us respect as citizens;
• providing a consistently conciliatory and reasoned view amid bitter partisan debate;
• your gracious demeanor toward President George W. and Mrs Bush;
• taking decisive, if measured, steps toward helping those who are most vulnerable such as LGBTs, Muslims, undocumented Mexican immigrants who came to the U.S. as children, etc.; as well as,
• so very much more, Mr President.

While your record is mixed, I fear that you will never be fully appreciated as a great man, which you most assurèdly are. History tends to hang the greatness of Presidents on their performance during crises – often wars or economic cataclysms. As far as I can see, you have not displayed such high-profile leadership. What matters here is why you haven’t.

Mr President, many reasonable people will point toward your work to revive the American economy as proof-positive of your leadership in a crisis management mode. Unfortunately, I can not agree with that assessment. Again, I do not want to pursue that thread. Far more important, my political party, the Republican Party, dominated Congress throughout much of your tenure.

lnstead of answering your repeated and conciliatory overtures for compromise, these Republicans did everything they could to undermine your opportunity for greatness. Mr President, I do not understand how these political rivals can put their private – often Tea Party – interests so far ahead of the public good that they conspire to deprive you of your opportunity to lead us – all of us – forward toward a brighter day.

What my thoughts really boil down to, Mr President, is my awe in your teaching us how to behave with civility and restraint in the face of vituperation, much of it racist or implicitly anti-Muslim (based on your name sounding like a Muslim name). Frankly, Sir, your greatness lies in what you did not do:

• abuse your powers to harass Republican politicians, particularly those of the Tea Party;
• lash out at the increasingly palpable racism directed at you – and other minority officials in your Administration;
• throw Mexicans and LGBTs under the proverbial bus; as well as,
• compromise your integrity at the expense of the FBI Director during the campaign.

All that is to say, Mr President: you provided 318 million people with adult supervision. My fondest hope remains that future historians will detect these subtleties of your greatness. In closing, Sir, I salute your service to our country as well as that of the elegant and lovely First Lady.

Thank you and best regards,

Ned
Edward J. McDonnell III, CFA PMP
Birmingham, Alabama.