Obamacare Medicaid Expansion: States Should Be Realistic, Not Optimistic

Months since the Supreme Court ruling that made the Obamacare Medicaid expansion optional, the state costs associated with expansion still remain highly uncertain—making expansion a dicey course for states and their budgets.

Indeed, states should not lose sight of the fact that the original Medicaid expansion was coercive for a reason. As Nina Owcharenko, director of Heritage’s Center for Health Policy Studies, points out, “The fact that the authors of Obamacare felt the need to threaten states with total defunding tells you that they knew many states would resist expanding their programs—even with 100 percent federal funding.”

States are still weighing their options. Many of them have commissioned studies to project the state costs of expanding. However, all cost estimates reflect the assumptions used to construct them, and using different assumptions can result in estimates varying wildly between (and sometimes within) states.

For instance, Florida Governor Rick Scott (R) released a study that projected that an Obamacare Medicaid expansion would cost his state $26 billion over 10 years. A different Florida study made alternative assumptions, concluding it would cost Florida about $3 billion over 10 years. The major difference between the competing studies is that Scott’s does not assume that the federal government’s enhanced match rate will continue as described in the law.

Scott is right to distrust the federal government. In the Administration’s 2013 budget, the President proposed using a “blended” reimbursement rate for Medicaid. A blended rate could cost states considerably more than the funding levels promised in Obamacare. According to Heritage’s Center for Data Analysis calculation, under the Obamacare rates it would cost the 50 states a total of almost $42 billion from 2014 to 2022, while under one version of a blended rate it would cost states about $120 billion over the same period.

Though White House officials recently said that the Administration no longer supports a blended match rate, states have no guarantee that the federal government—either under this President and Congress or future ones—will maintain Obamacare’s extra Medicaid funding. States simply can’t afford additional Medicaid spending, as it is already unsustainable and crowding out other state budget priorities such as education and transportation.

While 18 states have announced that they plan to expand Medicaid, immense uncertainty remains even in those states. When New Mexico Governor Susana Martinez (R) announced that her state would expand, she used the same breath to cast doubt on the federal government’s commitment to full funding:

I want all of us to remember, Medicaid expansion is a federal government promise. Unfortunately, we know that out-of-control federal spending can create uncertainty for these kinds of programs. If the federal government breaks its promise and begins to cut their reimbursement rate, we will be forced to scale back this expansion.

“Such skepticism is warranted,” Owcharenko says. “Washington has rung up a $16 trillion debt and is running more than $1 trillion in the red annually, even without any of the costs associated with the health-care law. Where will it get the money to make good on this promise? And will future administrations honor this promise, no matter what?”

If New Mexico’s faith in the federal government proves to be the wrong bet, Martinez’s pledge to roll back an existing entitlement would be quite tricky, and it would undoubtedly face opposition from this Administration.

The bottom line is that this is a highly uncertain environment, and states need to be very cautious before putting their taxpayers and other budget priorities at risk.

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Low-Income Black Youth Are More Likely To Consume Calories From Sugary Drinks

Black youth are nearly twice as likely as their white counterparts to take in large quantities of their daily calories from sugary drinks, according to a new study examining American beverage consumption. Low-income children of all racial backgrounds also tend to drink almost twice as many sugary beverages as wealthier Americans do.

Considering the fact that sugar-filled drinks have been conclusively linked to an increased risk for obesity, the study’s results reveal some of the racial and economic disparities within the nation’s obesity epidemic. “Some groups may be more at risk for soda, others may be more at risk for fruit drinks, all of which … have the same sugar base that contributes to obesity and disease,” one of the study’s co-authors, health policy researcher Lisa Powell, explained.

This particular study didn’t try to figure out why that’s the case, although Powell did suggest to Reuters that “cultural norms” and cost could both be factors. But other studies have examined the links between race, class, and nutrition — and research has confirmed that access to healthy food is divided along racial and socioeconomic lines. Even aside from cost barriers, lower-income Americans tend to live in neighborhoods that lack healthy, high-quality food in nearby grocery stores, and they often struggle to access the transportation they need to go grocery shopping. The fast food industry also contributes to nutrition disparities by targeting its marketing to low-income communities.

It’s not clear whether the soda industry is also disproportionately targeting low-income or minority groups, but it wouldn’t be the first beverage sector to try. Alcohol advertising has been proven to particularly target black youth, even despite the fact that African-American teens tend to drink less alcohol than youths from other racial groups.

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Biden tells US Conference of Mayors that it is time to act on gun control

Vice President Biden’s address to nearly 300 of the country’s mayors on Thursday couldn’t have come at a better time for the administration’s push to rally public support for its proposals on reducing gun violence.

Biden, headlining the winter meeting of the U.S. Conference of Mayors (USCM) at the Capital Hilton in Washington, D.C., spoke of the Newtown, Conn., massacre as the clarion call for the administration’s proposals.

“Newtown ... affected the public psyche in a way I’ve never seen before,” Biden said. “The image of first-graders not just shot but riddled with bullets ... we have an obligation to respond intelligently to that crisis.”

Biden, who headed a task force that presented its recommendations to President Obama this week, said gun violence had become so regular in the country that small acts of violence didn’t shock the public anymore, a “coarsening” that he called “defining deviancy down.”

“We can no longer afford to define deviancy down,” he said. “We can’t wait any longer to take action. The time has come.”

The White House has support from many of the nation's big city mayors, including New York City Mayor Michael Bloomberg (I), and USCM President and Philadelphia Mayor Michael Nutter (D), both of whom have been vocal proponents of firearms restrictions.

Nutter opened the USCM meeting, and the room quieted as he recounted the high-profile mass shootings of the past decade, beginning with Columbine and moving on through Virginia Tech, Tucson and Aurora.

“But then Dec. 14,” Nutter said. “A tragedy in Newtown that even after all the others we still cannot imagine ... a terrible unforgivable moment in American history. We cannot get those lives back ... we can and we must act to help protect the lives of those in the future.

"This has nothing to do with taking guns away from those who lawfully own them," he said. "We respect the Second Amendment ... but the right to own a firearm should not interfere with my right to live.”

That line stirred the room to loud applause.

In the immediate aftermath of Newtown, the USCM sent an open letter to Obama and Biden urging immediate action on gun reform.

On Wednesday, Obama and Biden, flanked by children they said wrote to the White House about gun safety, unveiled 23 executive actions the president signed into law. Those measures include efforts to improve existing background checks and gun safety, and even encourage doctors to ask patients about guns in their homes.

Obama also pressed lawmakers to quickly implement universal background checks on all firearm purchasers and restore the federal ban on military-style assault weapons and a limit on the size of ammunition magazines.

“Clearly the President listened to our call,” the USCM said in a statement. “We applaud him for issuing executive actions to reduce gun violence. And we applaud him for calling for critically needed legislation and urge Congress 'to do the right thing' and institute universal background checks, a ban on assault weapons and high capacity magazines, and strengthening penalties for gun trafficking.”

Biden’s speech was the latest salvo in a high-stakes fight, as the White House looks to publicly pressure Congress to act on Obama’s demand for new gun-ownership restrictions.

Obama has sought to rally public support in past battles over taxes and spending, and is leveraging his high approval rating and recent opinion polls that show public support for tighter gun restrictions in an effort to pressure Congress to take action.

On Thursday, Obama wrote an op-ed for the Connecticut Post — based in Bridgeport, just 20 miles from Newtown — urging lawmakers to “act soon” on his recommendations.

Also on Thursday, the White House sent a letter signed by Biden to its public email list looking to rally support for the president’s proposals.

The email directs supporters to the White House’s new multimedia website on preventing gun violence. The site heading reads “Now is the time to do something,” and features videos of Obama speaking about gun reform and pictures of him visiting young victims in the hospital.

Congressional Republicans and the nation’s pro-gun-rights groups, most notably the National Rifle Association (NRA), have said they will oppose Obama’s actions and proposals on guns, accusing him of seeking to gut the Second Amendment with policies that will do little to make the public safer.

Biden on Thursday said the administration’s proposed reforms would comply with the Second Amendment, while acknowledging it was a difficult federal issue to tackle because of different gun cultures in different states. The vice president said his home state of Delaware had a much bigger gun culture than most realized, primarily for duck hunting.

Gun-rights activists say criminals won’t abide by the new laws Congress imposes, so the laws will only affect law-abiding gun owners. They also argue that the legislation Obama is trying to get from Congress has been proven ineffective in the past.

The NRA has vowed “the fight of the century” in opposing Obama’s proposed initiatives.

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ObamaCare's Health-Insurance Sticker Shock

Health-insurance premiums have been rising—and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare.

The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it.

Central to ObamaCare are requirements that health insurers (1) accept everyone who applies (guaranteed issue), (2) cannot charge more based on serious medical conditions (modified community rating), and (3) include numerous coverage mandates that force insurance to pay for many often uncovered medical conditions.

Guaranteed issue incentivizes people to forgo buying a policy until they get sick and need coverage (and then drop the policy after they get well). While ObamaCare imposes a financial penalty—or is it a tax?—to discourage people from gaming the system, it is too low to be a real disincentive. The result will be insurance pools that are smaller and sicker, and therefore more expensive.

How do we know these requirements will have such a negative impact on premiums? Eight states—New Jersey, New York, Maine, New Hampshire, Washington, Kentucky, Vermont and Massachusetts—enacted guaranteed issue and community rating in the mid-1990s and wrecked their individual (i.e., non-group) health-insurance markets. Premiums increased so much that Kentucky largely repealed its law in 2000 and some of the other states eventually modified their community-rating provisions.

States won't experience equal increases in their premiums under ObamaCare. Ironically, citizens in states that have acted responsibly over the years by adhering to standard actuarial principles and limiting the (often politically motivated) mandates will see the biggest increases, because their premiums have typically been the lowest.

Many actuaries, such as those in the international consulting firm Oliver Wyman, are now predicting an average increase of roughly 50% in premiums for some in the individual market for the same coverage. But that is an average. Large employer groups will be less affected, at least initially, because the law grandfathers in employers that self-insure. Small employers will likely see a significant increase, though not as large as the individual market, which will be the hardest hit.

We compared the average premiums in states that already have ObamaCare-like provisions in their laws and found that consumers in New Jersey, New York and Vermont already pay well over twice what citizens in many other states pay. Consumers in Maine and Massachusetts aren't far behind. Those states will likely see a small increase.

By contrast, Arizona, Arkansas, Georgia, Idaho, Iowa, Kentucky, Missouri, Ohio, Oklahoma, Tennessee, Utah, Wyoming and Virginia will likely see the largest increases—somewhere between 65% and 100%. Another 18 states, including Texas and Michigan, could see their rates rise between 35% and 65%.

While ObamaCare won't take full effect until 2014, health-insurance premiums in the individual market are already rising, and not just because of routine increases in medical costs. Insurers are adjusting premiums now in anticipation of the guaranteed-issue and community-rating mandates starting next year. There are newly imposed mandates, such as the coverage for children up to age 26, and what qualifies as coverage is much more comprehensive and expensive. Consolidation in the hospital system has been accelerated by ObamaCare and its push for Accountable Care Organizations. This means insurers must negotiate in a less competitive hospital market.

Although President Obama repeatedly claimed that health-insurance premiums for a family would be $2,500 lower by the end of his first term, they are actually about $3,000 higher—a spread of about $5,500 per family.

Health insurers have been understandably reluctant to discuss the coming price hikes that are driven by the Affordable Care Act. Mark Bertolini, CEO of Aetna, the country's third-largest health insurer, broke the silence on Dec. 12. "We're going to see some markets go up by as much as 100%," he told the company's annual investor conference in New York City.

Insurers know that the Obama administration will denounce the premium increases as the result of greedy health insurers, greedy doctors, greedy somebody. The Department of Health and Human Services will likely begin to threaten, arm-twist or investigate health insurers in an effort to force them into keeping their premiums more in line with Democratic promises—just as HHS bureaucrats have already started doing when insurers want premium increases larger than 10%.

And that may work for a while. It certainly has in Massachusetts, where politicians, including then-Gov. Mitt Romney, made all the same cost-lowering promises about the state's 2006 prequel to ObamaCare that have yet to come true.

But unlike the federal government, health insurers can't run perpetual deficits. Something will have to give, which will likely open the door to making health insurance a public utility completely regulated by the government, or the left's real goal: a single-payer system.

Mr. Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Mr. Litow is a retired actuary and past chairman of the Social Insurance Public Finance Section of the Society of Actuaries.

A version of this article appeared January 14, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: ObamaCare's Health-Insurance Sticker Shock.

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What The Consumer Protection Bureau’s New Mortgage Rules Will And Won’t Do

The Consumer Financial Protection Bureau rolled out new rules today to clean up the mortgage servicing industry, which has been at the root of several scandals, including the use of the now-infamous “robo-signers.” The new rules will provide important protections for homeowners, no longer leaving them subject to the most pernicious mortgage servicing practices. Here’s what the rules will do:

– End dual tracking. This practice involves banks starting foreclosure proceedings on a homeowner at the same time that the homeowner is being evaluated for a mortgage modification. The end result is many homeowners lose their homes when they think they are receiving a modification. Under the rule, “Servicers cannot start a foreclosure proceeding if a borrower has already submitted a complete application for a loan modification or other alternative to foreclosure, and that application is still pending review.”

– Force balance transparency. The new rules call for clearer monthly mortgage statements and more advance warnings of changes like interest rate hikes. Servicers must also “promptly” credit payments that homeowners make.

– Limit “forced place” insurance. “Forced place” insurance is the insurance that lenders purchase on behalf of borrowers if they think there has been a lapse in coverage. The policies are often far more expensive than standard home insurance, and servicers receive a cut of the payments. Abuse of forced place insurance became a big industry during and after the buildup of the housing bubble: “From 2006 to 2011, direct earned premiums for lender-placed insurance more than tripled, to $3.1 billion from $954 million.” As the New York Times noted, “the cost [of forced place insurance] more or less ensures foreclosure for a household on the brink; it can also hurt a borrower’s chances for a loan modification.” Under the new rules, servicers must warn borrowers that a forced place purchase will occur and “If servicers buy the insurance but receive evidence that it was not needed, they must terminate it within fifteen days and refund the premiums.”

However, the new rules do not create a single point of contact for borrowers (who often get the runaround at banks by being passed off between different bank employees). The California Homeowner’s Bill of Rights includes a mandatory point of contact, as does a new bill Minnesota Democrats are trying to enact. The rules will not be implemented for another year, leading one housing advocate to say that the CFPB is just “providing mortgage servicers advance notice to do their dirty work.”

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Meet The NRA-Backed Senate Democrats Who Oppose Obama’s Gun Violence Prevention Plan

On Wednesday, President Obama unveiled a comprehensive plan to reform American gun laws and take action against the 32,000 firearm-inflicted deaths per year in the United States. His proposals ranged from stricter, universal background checks to more funding for police officers to expanding access to mental health care.

Yet a group of Senate Democrats, all of them highly rated by the National Rifle Association, are refusing to say if they support the President’s reform package. Below is a list of the Senators in question, how they’re rated by the NRA, and what they’ve said about gun law reform:

1. Max Baucus, Montana (NRA Rating: A+). Baucus appeared to oppose any federal action on gun law reform, saying in a statement that “Before passing new laws, we need a thoughtful debate that respects responsible, law-abiding gun owners in Montana instead of a one-size-fits all directives from Washington.”

2. Heidi Heitkamp, North Dakota (NRA Rating: A). In a local television appearance before President Obama’s announcement, Heitkamp accused the White House of having ulterior motives besides preventing mass killing, claiming “There isn’t any amount of gun regulation or gun executive orders that will solve the problem of identifying people who could potentially do this and making sure they get the help and their families get the help so they don’ t do this. I’ve said it all along that this is wrong headed…I think it is an agenda driven by something other than school shootings.”

3. Tim Johnson, South Dakota (NRA Rating: A). Like Baucus, Johnson argued against federal solutions: “We in South Dakota have far fewer problems with guns than they do in New York or New Jersey and it makes common sense to not have one size fits all.”

4. Joe Donnelly, Indiana (NRA Rating: A). Donnelly simply said that “I am a strong supporter of the Second Amendment,” pointed to his NRA endorsement, and rejected the assault weapons ban plan of Obama’s proposal.

5. Mark Begich, Alaska (NRA Rating: A). Begich cited his support for mental health legislation, but demurred on gun restrictions, saying “there is no quick fix when it comes to keeping our families and communities safe. We must make smart investments to increase our safety while ensuring Americans’ Second Amendment rights are protected.”

6. Joe Manchin, West Virginia (NRA Rating: A). Manchin blamed a “culture of mass violence” rather than the spread of deadly weapons, wishing the president had created a “national commission [to] build the consensus we need for real action backed not only by gun control advocates, mental health experts and entertainment industry executives but also by law-abiding gun owners who fully understand the history and heritage of firearms in America.”

7. Jon Tester, Montana (NRA Rating: A-). Tester refused to take a position, saying “As Congress considers ways to address gun violence, we must look at all aspects of this issue. Our priority must be keeping all Americans–especially our kids–safe. I will look closely at all proposals on the table, but we must use common sense and respect our Constitution.”

8. Harry Reid, Nevada (NRA Rating: B). Reid, like Tester, wouldn’t say one way or another: “I thank the President’s task force for its thoughtful recommendations. I am committed to ensuring that the Senate will consider legislation that addresses gun violence and other aspects of violence in our society early this year. The tragedy at Sandy Hook was just the latest sad reminder that we are not doing enough to protect our citizens – especially our children – from gun violence and a culture of violence, and all options should be on the table moving forward.”

Fortunately, however, several Democratic Senators with high ratings have realized the gun lobby’s power is vastly overstated. Mark Warner of Virginia, who has a flat A rating, said several of the Obama proposals had “bipartisan support” and that “President Obama has laid out a comprehensive, far-reaching proposal to address the issues of gun violence and public safety. The Sandy Hook shootings compel all of us to think anew about these issues, and I believe the status quo is not acceptable.” Bob Casey (PA) and Martin Heinrich (NM), who are rated B+, supported some of the strong gun regulations in the Obama package.

An earlier version of this post attributed a statement from Rep. Don Young (R-AK) to Sen. Mark Begich (D-AK). The post has been updated to accurately reflect Sen. Begich’s remarks. We regret the error.

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Twitter has 100 percent participation by new Senate

By Alicia M. Cohn - 01/17/13 04:16 PM ET

All 100 members of the 113th Senate now have a presence on Twitter, counting both unofficial and official accounts.

Sen. Roy Blunt (R-Mo.) announced in a tweet Thursday that every GOP Senator is now on Twitter thanks to the addition of a long-standing holdout, Sen. Jim Risch (R-Idaho), who joined Thursday as @SenatorRisch with a tweet opposing “increased gun control.”

Excited to welcome my friend & colleague @senatorrisch to #Twitter today. Every GOP Senator has a presence on Twitter.

— Senator Roy Blunt (@RoyBlunt) January 17, 2013

Blunt’s count includes accounts that are both official and unofficial (personal accounts that senators continue to use in office unaffiliated to their official Senate pages or campaign sites).

Counting that way, 100 percent of the Senate is now using Twitter.

At least three freshman Democratic senators — Sens. Tammy Baldwin (Wis.), Martin Heinrich (N.M.) and Heidi Heitkamp (N.D.) — have yet to set up a new Twitter account to suit their new office, but still have a campaign presence with varying degrees of activity.

Blunt also welcomed several new Republican senators to Twitter in a second tweet on Thursday.

RT @senate_gops Newest members of the Senate Republican conference: @sentedcruz @senatorfischer @senatortimscott @jeffflake. Follow & RT

— Senator Roy Blunt (@RoyBlunt) January 17, 2013

The House and Senate leadership have stepped up to promote the accounts of new members. Creating official Twitter accounts for use by their congressional office has become one of the many necessary steps new members take during their first few weeks after taking office.

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Santarus rises on drug approval and 2013 outlook

NEW YORK -- Shares of Santarus Inc. climbed Tuesday after the company received marketing approval for a new drug and issued a strong sales outlook for 2013.

THE SPARK: The company said Monday that the Food and Drug Administration approved its drug Uceris, which is intended to put symptoms of ulcerative colitis, an inflammatory bowel disease, into remission. Santarus plans to launch the drug in March.

THE BIG PICTURE: The company said it should meet or surpass its previous guidance in 2012, and its revenue outlook for 2013 was better than analysts had expected.

The San Diego company had forecast net income of $12 million to $14 million and $210 million in revenue for 2012. FactSet says analysts had projected net income of $14.2 million, or 20 cents per share, and $209.3 million in revenue.

In 2013 Santarus expects net income of $50 million to $54 million and revenue of $320 million to $325 million. Analysts had expected income of $54 million, or 76 cents per share, and $301.3 million in revenue on average.

Santarus also makes the acid reflux drug Zegerid. It is not currently marketing Zegerid, but is getting ready to resume sales because of a favorable court ruling regarding the patents on the drug.

THE ANALYSIS: Santarus should have a good year in 2013, said Roth Capital Markets analyst Scott Henry, who has a "Buy" rating on the company's shares. He said Uceris was a key drug for the company, and was optimistic about Santarus bringing Zegerid back to market and filing for marketing approval of a new drug.

SHARE ACTION: Santarus stock rose $1.26, or 11 percent, to $12.54 in late afternoon trading. The shares are up more than 80 percent since the end of August and have nearly tripled in value of the last 12 months.

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Will Hawaii Be The Next State To Legalize Marijuana?

In the wake of laws in Washington and Colorado to legalize small amounts of marijuana and regulate it like alcohol, a new poll shows that 57 percent of Hawaiians favor a similar law. This is a 20 percent jump from the last time a poll was conducted in 2005. A whopping 69 percent think jail time for marijuana is inappropriate, and 78 percent support a medical marijuana dispensary system to bolster the state’s medical marijuana law. Arrests for mere possession of marijuana have increased 50 percent since 2004, and disproportionately affect people of native Hawaiian descent.

An accompanying study on the budgetary implications of passing such a law found that decriminalizing marijuana would save state and county governments $5 million per year, and that legalizing and regulating the industry would save another $5 million, in addition to generating $4 million to $20 million in new revenue. Of course, Hawaii would probably not be alone in taking up a measure to legalize marijuana. Oregon and California have already held referenda on the question, and drug policy advocates are eyeing a number of other states where political will has strengthened since November, several of which have already decriminalized possession.

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