A sign Trump may not be deadset on destroying Obamacare (at least not yet)

The Trump administration is thinking about letting insurers on the Obamacare exchanges charge older people more and younger people less -- the move would require a very twisted reading of the Affordable Care Act. According to the Huffington Post, “Today, premiums for the old can be only three times as high as premiums for the young, which is what the Affordable Care Act stipulates. According to sources privy to HHS discussions with insurers, officials would argue that since 3.49 'rounds down' to three, the change would still comply with the statute.”

Nicholas Bagley argues this move would be illegal, which it probably is -- but it could actually increase the number of people using the exchanges next year. Given the makeup of the ACA exchange population and the convoluted way affordability tax credits (APTC) are applied, this move could have a modest net gain in exchange enrollment. Using data from the Kaiser Family Foundation Health Insurance Marketplace Calculator makes it easier to understand why.

Subsidies under Obamacare are designed so that you pay no more than a set percentage of your income for the second cheapest silver plan, as long as you make less than 400 percent of the federal poverty level (roughly $47,000). For example, as a person making $46,000 a year, you will get as large of a tax credit as necessary so that you are spending only 9.69% of your income ($371 per month) on premiums to get a silver plan. Whether your premiums are technically $400 a month or $3,000 a month has little impact on how much you pay.  Since average silver plan premiums for adults 50 and above are well over $371 per month, all older people who currently qualify for tax credits on the exchanges are effectively protected from any premium increase that would arise from this Trump policy change. It would cost the government more -- not these consumers. 

This new "age band" of 3.49-to-1 would matter to older people on the exchanges who are making over 400% of FPL because they get no subsidies. However, almost no one making over 400% FPL actually uses the exchanges. According to CMS, last year just 2% of people who bought coverage on the exchanges made over 400% of FPL. On net, this means relatively few older people using the exchanges would be impacted significantly. (Note: There are many who do buy individual coverage off the exchanges who could be affected, but this group is not well studied. In general, the higher an individual's income, the more likely they are to have employer-provided insurance.)

On the other hand, this change in the age band would reduce premiums for younger people using the exchange -- and the change could impact a large number of them. Since premiums for younger people are already lower, they are less likely to qualify for subsidies. For example, an average 25 year-old making only $36,000 would receive no tax credits. In addition, since actuarially speaking, young people use about one-fifth as much health care as older people, this change could make insurance seem like a better deal, causing more young people to sign up next year.

A Rand analysis from two years ago projected that a much larger increase in the age band (making it 5-to-1) would on net increase the number of people using the exchange -- more young people would get insurance, and there'd be only a relatively small drop in coverage among older wealthier individuals.

Democrats initially chose the 3-to-1 age band as a compromise, back when they envisioned the ACA exchanges being a much larger, more popular, and transformative policy. They envisioned the exchanges as a tool that would become popular with people of all income levels and businesses. The exchanges, though, haven’t turned out to be nearly as popular as once predicted, and the program is now primarily for people of limited means. With that in mind, increasing “premiums” on those on the exchange who aren’t paying the full price anyway and lowering premiums for those who are doesn’t seem like a terrible move.

The actual math is a very wonky point of debate. However, it's worth noting that the Trump administration is considering policy changes that might actually end up growing the exchange population, improving the risk pool modestly, and/or reducing the chance that insurers will drop out of the exchanges next year. Based on earlier actions, there was legitimate concern the Trump team was going to try to completely sabotage the exchanges from the inside. Now the picture is more complex. Perhaps it is a sign the Trump team is starting to realize the political quagmire health care policy can become.

Eliminating the filibuster would be a gift to red state Democratic senators

Democrats are planning on filibustering Neil Gorsuch's nomination to the Supreme Court, but there are some Democrats from states won by Trump who fear this move will result in Senate Republicans getting rid of the filibuster entirely. This concern is misplaced, since if Republicans actually do use the nuclear option, it would be a real political gift to these endangered Democrats.

Currently, Senate Democrats' ability to block the GOP agenda is akin to Schrodinger's cat: It both exists and doesn't exist, and we won't know which it is until Democrats actually try to use it.

From a political perspective, trying to maintain this illusion of possible power is worse than being exposed as having no power at all. The base will get very angry at Democratic senators who don't take part in a filibuster, even if these Democratic senators are convinced it won't work. Under this current dynamic, voters will put some of the blame on red state Democrats for everything that does or doesn't happen in the Senate, even if these senators actually don't have any real power.

On the other hand, if the filibuster is eliminated, Senate Democrats are freed from blame or responsibility. They can clearly and easily say everything is the Republicans' fault. They can honestly tell their base they did everything they could. This is the reason you don't see any liberal base pressure being put on House Democrats, because it is known they can't do anything.

Because of the way Merrick Garland was treated, Senate Democrats have the best moral and political case for a filibuster they will ever have. If they do filibuster Gorsuch and it works, they score a big win. If Republicans eliminate the filibuster, they at least free themselves from blame. Not filibustering, though, is the worst of all possible outcomes. It achieves nothing and makes them responsible.

Can anyone beat the gatekeeper?

Google Maps now lets you request Uber or Lyft directly via their app. Since people are likely to first look up an address via Google Maps, this makes it more convenient to order a car via Google Maps than through either company’s own app. It takes fewer steps on the phone, and in the app game, that is very significant.

At the moment, this isn’t a problem for Uber or Lyft because Google doesn’t offer rideshare services, but Google’s parent company is investing heavily in self-driving cars, so it is likely at some point they will. That raises the question: why would anyone bother using Uber or Lyft after Google's AI-powered car fleet comes online? To beat Google, which will be the more convenient option for customers, they are going to either need to offer significantly cheaper services or significantly better services. Given how much money Uber has already burned through, I don’t think they could ever beat Google in a straight up price war if Google wanted that. Since people also seem to only care about getting from point A to B  as quickly as possible, I don’t see how either company really competes on service.

This dynamic highlights what I think could be the biggest economic issue that will only grow as we rely more and more on technology, which is that of beating the gatekeepers. People spend a huge amount of their time and money online, but almost all of that is directed through a very small number of companies. Almost all phone/tablet operating systems are run by Google, Amazon, or Apple. Almost all links people click on are via Facebook or a limited number of other social media.

To succeed, digital companies are going to either need to be involved in a business these companies don’t want to bother with or do a dramatically better job, since they will almost always be the less convenient choice. For now, ride sharing is something the gatekeepers don’t want to bother with, but it seems like way too lucrative a market once self-driving cars are good enough. 

What Paternalistic Liberalism looks like

I recently wrote that progressives need a simple, non-paternalistic economic plan. However, conversations continue about putting even more economic restrictions on certain people, such as SNAP recipients.

From the New York Times:

Dr. Ludwig said other government programs had common-sense restrictions. The Special Supplemental Nutrition Program for Women, Infants and Children, better known as WIC, and the national school lunch program have strict nutrition standards. Medicare pays for necessary medical procedures but does not reimburse for ones it considers harmful, ineffective or unnecessary. SNAP, Dr. Ludwig said, should be structured similarly.

“No one is suggesting poor people can’t choose what they want to eat,” he said. “But we’re saying let’s not use government benefits to pay for foods that are demonstrably going to undermine public health.”

This moving in us the wrong direction. Instead of simplifying things to maximize benefits while reducing overhead, this is a recipe for bureaucracy, inefficiency and confusion. You would need to create a whole apparatus for determining what foods are and are not acceptable, as well as a way to explain what is on the list to all SNAP recipients. This would, no doubt, cause confusion and moments of embarrassment.

Progressives should be about giving people freedom and economic security: The freedom to love who they want, the freedom to pursue an education, and the freedom to leave a job that abuses them.

If liberalism becomes mainly about using government programs to force "unsophisticated" people to behave in certain ways, it will become a losing ideology.  

Why basing a “universal program” on means testing is a terrible idea

If you want the government to provide an universal service, there are two very compelling reasons for avoiding complex means-testing. First, it can create resentment, which undermines political support for the program. Substantial income-adjusted benefits can easily be seen as pitting the poor and lower-middle class against the middle class and working professionals. This perception is nearly impossible to avoid, since any means-testing program that will actually save money must exclude some people who consider themselves middle class.

More critically, any system based on complex means-testing will be very hard for regular people to understand. It may also be impossible for government officials to implement correctly and efficiently. As a case in point, a new study in Health Affairs shows how the complex means-testing subsidies in Obamacare have created a dramatic policy failure. The researchers, the report says, “estimate that 31 percent of individual-market enrollees in California who were likely eligible for financial assistance purchased plans that were not silver tier or that were not sold on the state’s exchange and thus missed opportunities to receive premium or cost-sharing assistance or both.”

This study was only looking at California, which makes this figure even more damning. Since California has been under total Democratic control, the state government has worked aggressively to try to make the Affordable Care Act work as intended.

California has arguably engaged in the country's most robust implementation and community outreach efforts in support of the law. Last year, CoveredCA had a budget of $335 million (over $121 million just for marketing/outreach) and employed 1,399 people. The budget required adding a 4% assessment onto the cost of every plan purchased through CoveredCA, simply to fund this government middleman/income verification program. To put this massive administrative budget into perspective, the total insurance overhead for Canada’s single payer system is roughly 1.8%.

Yet even among this highly targeted population, a huge proportion of those who actively sought out coverage were not served as intended. While the number is shockingly high, it is also not surprising to me. Anecdotally, I know people who tried to buy individual coverage in California and were told dramatically different things about their eligibility when they tried to use the program.

Welfare programs aren't popular, but universal programs are

As liberals look for a new economic message, they should keep this in mind: it is important to understand the big political difference between welfare and universal programs. Means-tested welfare is unpopular in this country, but universal programs that help everyone are very popular. This simple political reality needs to be at the core of any big, sweeping progressive economic proposal. 

Tim Duy wrote a very insightful piece in response to Trump's popularity with working class whites in the Rust Belt, which concludes with this depressing prediction:

The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don’t think we have it yet. And here is the hardest part: My sense is that Democrats will respond by offering a bigger safety net. But people don’t want a welfare check. They want a job. And this is what Trump, wrongly or rightly, offers.

I fear Tim is right about the huge mistake Democrats will likely make, but he is wrong about what people really want. People in need want immediate help, but they also want dignity, security, and a path to improvement. Means-tested "welfare" as it is thought of in this country provides only the first -- immediate help. Good jobs is one way to provide all four, but so are universal programs -- such as universal basic income, universal education, and universal health care.

Means-tested welfare is often accidentally or purposely designed to strip people of their dignity by making them beg for support, prove they are truly helpless, or piss into a cup to prove they are worthy. The complex, overlapping series of programs, each with different requirements, doesn't provide a true sense of security or a path forward. Attempts to move to a better city for employment or start a business could result in a loss of welfare that would become difficult to obtain again. The CBO found low income people face a massive effective marginal tax rate because for every dollar they earn, they risk losing a significant amount of government benefits.

Compare means-tested welfare with our universal programs that are provided to everyone. Medicare and Social Security are both wildly popular. So is Alaska's Permanent Fund Dividend, which gives everyone living in the state a check regardless of income. If everyone gets the same thing, there is true security and no issue of dignity.

I suspect part of the reason Obamacare has been so unpopular is that it is a means-tested welfare program instead of a universal program. In fact, Gallup found that by far the most popular way forward with health care is to replace Obamacare with single payer system. It is significantly more popular than repealing or leaving the law in place.

The fact that our welfare programs are often called a "safety net" is ironic. Anyone who has fallen into an actual safety net should know how difficult it is to climb out of and how it is impossible to get from the safety net back to the tightrope. The best thing Democrats could do is renounce the idea of means testing. If we believe something is essential, we should make it universal.  

We are facing a new world where technological automation is going eliminate jobs at an alarming rate. We are going to need a plan. One path forward is to create jobs by mandating inefficiency. The other is to embrace the increase in productivity and use it to provide everyone a basic income, education and health care.

A New, Non-Paternalistic Progressivism: Freedom from want, ignorance and illness

The left wing in America is facing a three-fold economic crisis: a crisis of competency, a crisis of perception and a crisis of automation. I believe the way forward is a progressive economic agenda actively stripped of the paternalism that dominates and needlessly complicates many social safety net programs.

This progressive agenda should be based on three simple goals: Freedom from want, freedom from ignorance, and freedom from illness. It's a platform that can be achieved simply and directly with three programs: universal basic income, universal public education, and universal health care.

The crisis of competency

The left in this country rallies around the vague concepts of "helping people in need" and equal rights for all. Yet when it comes to how to "help people in need," the left has become an ideological and practical mess. A big reason why is a combination of paternalism, moralism, and a corrupt belief that the only way to build political support for new programs is to funnel the money through private corporations who can skim millions off the top.

We "help people in need" with hundreds of different programs at a federal, state, and local level that create wasteful bureaucracies full of cracks. We have programs to help people buy food if they meet certain criteria. We have a program to help people if they can’t work for certain reasons. We have programs to help low income people pay for phones. We have programs to directly help some people pay for housing under certain conditions. We have a program to help low income people buy heating oil. We also have numerous local programs to indirectly help some poor people obtain housing by forcing affordable units in new developments, or forcing people to charge artificially low rents. We have programs to subsidize transit for certain people in certain cities. The list goes on.

So much money, time, and opportunity is wasted on such a complicated system because we often don’t trust poor people to know what they really need, and we are so concerned about only the deserving getting specific types of help. I think it is time, though, for us to have more faith in people.

The crisis of automation

Since others have written extensively about this I will not go into it in detail, but we are heading for a potentially massive employment crisis because of technology. Computer processing power has been growing exponentially. It effectively means the growth in computing that took 70 years will be doubled in just about two years. Technology will likely replace employment faster than people can prepare for new jobs. The best example of this is driving. Truck driving is the number one job in most states, and within one to two decades these jobs could be made obsolete. This massive displacement is going to need an equally massive solution.

The crisis of perception

Finally, the sheer complexity of all our numerous, overlapping programs to help people has allowed elements on the right to create a perception crisis for liberals. They stoke anger among working class people and poor people, arguing that all the benefits of our system are going to “others.” These “others” are often depicted as urban minorities and immigrants. Many of these rightwing messages are based on distortions and pure misinformation, but the design of some of our programs create a small kernel of truth for these distortions to crystalize around. For example, the design of Obamacare means a rather small group of young, healthy, middle class workers is being asked to indirectly subsidize a significant portion of the coverage expansion. Additionally, the way some programs are designed to provide equal outcomes means that poor people in more expensive urban areas can end up getting more government assistance than those in cheaper rural areas, strangely punishing those for living in more affordable areas.

Winning this argument takes aggressive counter-messaging by progressives, but it is a task that would be made dramatically easier if our programs were greatly simplified and made universal. Instead of a hundred programs to help a hundred differently defined groups, we had one program to help everyone. We need to only look at the difference in popularity between Obamacare and Medicare. It takes about two minutes to explain Medicare and how it will affect any person. Obamacare could take hours to explain.

The solution: Freedom from want, freedom from ignorance, and freedom from illness

Replacing nearly all of our safety net programs with a universal basic income would free people from want and worry. A modest, guaranteed income would let everyone meet their basic needs and give them the freedom to choose how. It's a system that would let the market decide how best to use resources to help people. Basic universal income will deal with the crisis that will be caused by automation, and it is a relatively simple concept for progressives to explain.

There are, though, a few instances where counting on the market or personal agency to make the best decisions for people won’t work. This requires two big additions to universal income. The first is education. People need to be educated to make sound decisions. Guaranteed basic education (including college) addresses this and helps prepare more people for a society where automation means there will be less need for low-skilled workers.

The second is health care. It is so essential, but the imbalance of information -- and the simple fact that there is no price people won’t agree to pay in a crisis to try to save the life of their loved ones -- means there will always be a market failure. Looking around the First World, there are numerous ways to provide universal health care for a fraction of what we currently spend. I would be happy with almost any of these systems but for simplicity would prefer something like Medicare for all. The important thing is that, like universal income, it be truly universal -- no means testing, and no weird regionally-based, sliding scale cost-sharing subsidies that would basically penalize poor people for working harder.

This is what left needs: an economic policy with broad appeal that can easily be explained and is easy to implement. It takes only nine words to explain the purpose and nine words to explain the programs.