Rubio and the Risk Corridors

by Yuval Levin

In the last couple of days, I’ve been approached by four separate reporters looking into whether it’s true that Marco Rubio is responsible for the provision (inserted into last year’s annual spending bill and now again into this year’s) that requires the risk-corridor program in Obamacare to be budget neutral. I was witness to some of what went into the provision, though only as an outsider, so all I can offer is what I saw. Avik Roy wrote about this a few days ago, and my bottom line is basically the same as his: Yes, it’s true, Rubio was the reason it happened. But these reporters aren’t exactly wrong to be wondering about it, because the way Rubio’s role has been described in some places does strike me as not quite right.  

The provision in question merely called the administration’s bluff after their insistent assertions that the risk corridors would be budget neutral and so would not require a taxpayer-funded bailout of insurers suffering losses under Obamacare. All it did was require the program to be budget neutral in fact. But as a result, it has proven quite important in forcing insurers to confront the economic realities of the exchanges. 

The fact that Rubio was largely responsible for it was first prominently asserted in the mainstream press in this New York Times story last week. The story began with this paragraph, which has contributed to the confusion:

A little-noticed health care provision that Senator Marco Rubio of Florida slipped into a giant spending law last year has tangled up the Obama administration, sent tremors through health insurance markets and rattled confidence in the durability of President Obama’s signature health law

As written, this is not correct. Rubio did not slip the provision into last year’s giant spending law. Like this year’s giant spending law, last year’s omnibus bill was the result of a leadership-driven process that drew on substantive expertise from the relevant committee staffs but did not much involve most members of either house. Rubio does not appear to have had any role in its drafting. The risk-corridor provision, like most similar policy riders in the bill, was produced by key committee staffers, in this case (because of the unique expertise of two or three specific individuals) Republican staffers on the Senate Budget Committee and the House Energy and Commerce Committee. 

Moreover, the provision took the shape it ultimately did because congressional Republicans had by then already successfully pushed back against the administration’s original inclination to just ignore the limits of the law in funding the risk corridors. 

At the very outset of the debates over Obamacare’s risk corridors, CMS (which is the agency responsible for carrying out the risk-corridor program) suggested that it had a kind of standing, permanent authority to fund the risk corridor payments because those payments were modeled on a risk-corridor arrangement in Medicare’s prescription drug program, which was a standing entitlement. Some defenders of the risk-corridors in the Obamacare exchanges have continued to lean on this analogy to the prescription drug program in defending against the charge that the Obamacare risk corridors are an insurer slush fund or bailout. I think it’s a very strange argument, since it advances something like the opposite of the point its champions have in mind. 

Medicare is a federal entitlement program while the exchanges are supposed to be regulated private markets. According to the defenders of Obamacare’s risk corridors, providing this kind of protection to insurers acting as agents of the federal government in implementing an entitlement program designed to pay for care for the highest-risk population in America is the same as providing it to insurers selling coverage in a private market that is expected to achieve a balanced risk pool. People who say that are basically suggesting that they think of Obamacare as a government takeover of the individual insurance market on the model of a comprehensive entitlement. Is that really what they want to suggest? The two programs also tend to pull our health-care system in opposite directions: The structure of Medicare’s prescription-drug program, by involving private insurers, is meant to make Medicare more market oriented than it has been; the structure of Obamacare’s exchanges, by very strictly regulating the insurance product and its terms of sale, is meant to make the under-65 insurance sector less market oriented than it has been. The comparison between Obamacare and Medicare Part D makes for an argument against Obamacare’s risk corridors, not in defense of them. 

Ultimately, this wasn’t a comparison even CMS was comfortable pressing. So when it came time to put its justifications in writing, CMS claimed it had the authority to fund risk corridor payments above the amounts contributed by profitable insurers only by moving money around among its various immense budget accounts. The administration continued to insist that incoming and outgoing payments would end up being equal. But “in the unlikely event of a shortfall for the 2015 program year,” CMS asserted in a 2014 regulation, “HHS will use other sources of funding for the risk corridors payments, subject to the availability of appropriations.” 

This didn’t escape the notice of some key congressional staffers charged with overseeing CMS, and at their request, the Government Accountability Office asked CMS in the summer of 2014 to explain its theory of how funds not collected from insurers but rather from taxpayers could be used to cover insurers’ losses. In September of that year, the GAO reported back to the Senate Budget Committee and the House Energy and Commerce Committee that, while CMS had the authority to make risk-corridor payments using funds collected from the insurers, its authority to move money around could plausibly extend only to one specific budget account (the CMS Program Management account) and even in that case only if Congress specifically permits it. 

That GAO letter laid out the boundaries of the administration’s own claims of authority, which, once CMS’s lawyers had to specifically justify them, turned out to be much narrower than they had originally suggested. The letter therefore functioned as a kind of outline for these committee staffers, telling them exactly how to prevent CMS from moving money around to make payments to insurers without congressional appropriations. It is the reason why the provision in last year’s omnibus bill read as follows:

SEC. 227. None of the funds made available by this Act from the Federal Hospital Insurance Trust Fund or the Federal Supplemental Medical Insurance Trust Fund, or transferred from other accounts funded by this Act to the ‘‘Centers for Medicare and Medicaid Services—Program Management’’ account, may be used for payments under section 1342(b)(1) of Public Law 111–148 (relating to risk corridors).

All this did was require that the program in fact be budget neutral, as the administration always insisted it would be. As it has so far turned out, of course, the economics of the exchanges have led to far greater losses than profits for the insurers, and if not for this provision CMS might well have already turned over several billion dollars of taxpayer money to the insurers without an appropriation from Congress. And in the absence of such a bailout, a number of insurers have begun to reconsider their participation in the exchange system—and some of the co-op insurers that exist only in the exchanges have gone out of business.

So what, you might ask, does Marco Rubio have to do with this complicated story? The answer, it seems to me, is that none of it would have happened if Rubio had not made the risk-corridor insurer bailout an issue, starting in 2013. Before that, a few health wonks on the right had raised red flags about the issue, but it wasn’t until Rubio and his staff grasped its significance, insistently drew attention to it, and produced a bill to avert an insurer bailout that the issue became prominent among the priorities of Obamacare’s opponents. Rubio was without question the first and most significant congressional voice on this subject, and if he hadn’t done the work he did, the risk-corridor neutralization provision would not have been in last year’s (or this year’s) budget bill. 

In this sense, Rubio and his supporters are certainly right to say that he has done more than pretty much anyone to actually push back against Obamacare, and to force the system to confront the implications of its command and control economics. But the lesson some of those supporters draw from that fact isn’t quite the one I’d draw: Ironically, although some Rubio supporters are using the issue to contrast his actually getting things done with Ted Cruz just making noise about things, Rubio got something done on this issue entirely by making noise about it. He was effective because he chose the right target, and because he made noise in an effort to champion a specific, concrete, practical step in response. For that, Rubio surely does deserve credit. There is no question in my mind that Obamacare’s insurer bailout would not have been stopped if not for him.  

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