Wonkbook: Some very good news for Obamacare

May 24, 2013

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(AP Photo/Pablo Martinez Monsivais)
(AP Photo/Pablo Martinez Monsivais)

Obamacare got some very good news on Thursday.

In 2009, the Congressional Budget Office predicted that a medium-level "silver" plan -- which covers 70 percent of a beneficiary's expected health costs -- on the California health exchange would cost $5,200 annually. More recently, a report from the consulting firm Milliman predicted it would carry a $450 monthly premium. Yesterday, we got the real numbers. And they're lower than anyone thought.

As always, Sarah Kliff has the details. The California exchange will have 13 insurance options, and the heavy competition appears to be driving down prices. The most affordable silver-level plan is charging $276-a-month. The second-most affordable plan is charging $294. And all this is before subsidies. Someone making twice the poverty line, say, will only pay $104-a-month.

Sparer plans are even cheaper. A young person buying the cheapest "bronze"-level plan will pay $172 -- and that, again, is before any subsidies.

California is a particularly important test for Obamacare. It's not just the largest state in the nation. It's also one of the states most committed to implementing Obamacare effectively. Under Gov. Arnold Schwarzenegger -- remember how that really happened? -- California was the first state to begin building its insurance exchanges. The state's outreach efforts are unparalleled. Its insurance regulators are working hard to bring in good plans and make sure they're playing fair. If California can't make the law work, perhaps no one can. But if California can make the law work, it shows that others can, too.

And perhaps others will. We're beginning to see competition drive down proposed rates in some exchanges around the country. Remember Maryland, where CareFirst grabbed headlines with a shocking 25 percent proposed increase in rates? More plans have streamed in with lower bids. Kaiser Permanente, for instance, is only increasing its rates next year by 4.3 percent -- a modest increase that will make CareFirst's proposal almost impossible to sustain. My guess is when the exchange actually opens in October, CareFirst will have dropped its price substantially. If they don't, then Kaiser and others will grab all the market share.

The way this competition can drive down rates is already evident in Oregon. There, one insurer came in with monthly premium costs in the $169 range, while other insurers asked to charge more than $400. But then, seeing  what their competitors were charging, two insurers came back to the state's regulators and asked if they could refile at lower rates. Otherwise, they wouldn't be competitive in the exchange. The Obama administration was ecstatic to see this: It's exactly what they're hoping will happen across the country.

Of course, California and Oregon are managing Obamacare particularly well. But the state-by-state nature of the Affordable Care Act creates really unusual political dynamics around how the law is perceived in its first year.

Imagine it's the end of 2014. California now boasts a working, near-universal health-care system. Nothing perfect, but clearly a a success after the first year of implementation. Texas, meanwhile, is a bit of a mess. They didn't allow the Medicaid expansion so the state's poorest residents got nothing. They didn't help with the exchanges, or the outreach, so there aren't many choices, and premiums aren't as low one might hope.

Viewed in isolation, Texas's problems would be deadly for the law. But viewed next to California, they might mainly be a problem for the political class in Texas, which has failed to implement a clearly workable law.

Wonkbook's Number of the Day: 115,000. That's how many federal employees will be furloughed today due to sequestration. Three major agencies -- the IRS, the EPA, and HUD -- are closing their doors. 

Wonkbook's Quotation of the Day: "Don’t ask me how, because if I knew, I would certainly tell you, but the House is going to — the House is going to work its will," said House Speaker John Boehner on immigration reform legislation.

Wonkblog's Graphs of the Day: EPI's interactive unemployment maps.

Wonkbook's Top 5 Stories: 1) is immigration reform fragile?; 2) Lerner out; 3) lobbyists and the fin-reg cookie jar; 4) 'nuclear option' rising; and 5) sequester shuts down three big agencies.

1) Top story: House of [Green] Cards

Does immigration reform have a chance in the House? "With the Senate gearing up for an early June floor debate on immigration legislation, the House’s bipartisan group has struggled to wrap up its legislation, mostly because the two parties trying to figure out how to ensure that undocumented immigrants don’t take advantage of government health care subsidies...Sources familiar with the meeting say progress was made on the health care disagreement. Language will be inserted into the bill that explicitly says that undocumented immigrants can receive subsidized emergency care." Jake Sherman and Seung Min Kim in Politico.

Guess who really, really loves immigration reform? Conservative economists. "In a letter being released Thursday, more than 110 economists urged Hill leadership to enact comprehensive immigration reform, portraying it as a necessity to improve the country’s fiscal outlook...The effort was spearheaded by the American Action Forum. Signers include the organization’s president, former Congressional Budget Office director Douglas Holtz-Eakin; Glenn Hubbard, chairman of the White House Council of Economic Advisers under George W. Bush; former Reagan economist Arthur Laffer; and Edward Prescott, who won the Nobel Prize in economics in 2004." Seung Min Kim in Politico.

A bump in the road to reform. "The eight House lawmakers were forced to backtrack from the "agreement in principle" reached last Thursday after House Democratic leaders objected to a provision dealing with health-care coverage for illegal immigrants living in the U.S., according to aides from both parties. The group continued to meet this week, and its members remained hopeful they would be able to strike a deal that passes muster among all involved. But the week's turmoil angered some members of the bipartisan group and leaves the House further behind the Senate in crafting legislation." Kristina Peterson in The Wall Street Journal.

@markknoller: Boehner says the House will have a "solid" Immigration Bill it can take to conference with the Senate.

Republicans are sending a warning there. "GOP leaders said in a statement that the House “will not simply take up and accept the bill that is emerging in the Senate if it passes. … The House will work its will and produce its own legislation.”...The speaker said he hoped to have a House bill by Aug. 1, before the six-week summer recess, and the conference would begin in the fall, said the person, who spoke on condition of anonymity to disclose private discussions." David Nakamura in The Washington Post.

@ryanavent: So all hail the deficit cutting, growth supporting, public sector shrinking, stock-price boosting, immigrant deporting...

Boehner lacks confidence. "House Speaker John Boehner (R-Ohio) promised Thursday that the House would pass its own version of immigration reform. Just don’t ask him how...“Don’t ask me how, because if I knew, I would certainly tell you, but the House is going to — the House is going to work its will,” he said. “And I’m confident that we’ll have a solid work product that we can go to conference with the Senate.”" Rachel Weiner in The Washington Post.

Music recommendations interlude: Repose en paix, Georges. Georges Moustaki, "Le temps de vivre." 

Top op-eds

SOLTAS: Abolish corporate taxation. "[Apple's] recommendation [for a streamlined tax] might seem radical. It isn't. Apple might be a visionary in consumer electronics and software, but not when it comes to taxes. The best way to reform corporate taxation isn't to cut the rate but abolish it. A wide consensus of economists and tax experts finds it to be bad policy. Nobody, so far as I could find, thought that corporate taxes were a smart or efficient way for governments to raise revenue. Economic theory provides no strong argument for special taxation of corporate income, at whatever rate." Evan Soltas in Bloomberg.

REINHARDT: How we compensate doctors. "[T]he median compensation of doctors varies considerably among medical specialties in any given year. There is also a wide dispersion of compensation figures about the median for any given specialty, as is shown in Table 1. These data came from the previously cited American Medical Group Association survey." Uwe E. Reinhardt in The New York Times.

KRUGMAN: Japan, economic model. "In a sense, the really remarkable thing about “Abenomics” — the sharp turn toward monetary and fiscal stimulus adopted by the government of Prime Minster Shinzo Abe — is that nobody else in the advanced world is trying anything similar. In fact, the Western world seems overtaken by economic defeatism." Paul Krugman in The New York Times.

ROGOFF: Europe's lost Keynesians. "There is no magic Keynesian bullet for the eurozone’s woes. But the spectacularly muddle-headed argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the “anti-austerity” masses apparently believe that there are easy cyclical solutions to tough structural problems. The eurozone’s difficulties, I have long argued, stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union." Kenneth Rogoff in Project Syndicate

ROBINSON: A mission on climate change. "President Obama should spend his remaining years in office making the United States part of the solution to climate change, not part of the problem...Obama can direct government agencies, including the military, to use more renewable energy. He can direct the EPA to regulate emissions of methane, an even more powerful greenhouse gas. He can continue to fund research into solar energy, despite criticism from Congress." Eugene Robinson in The Washington Post.

WADHWA: Canada, home of maple syrup...and immigrant innovators? "Senators should be aware of a critical fact, as they debate immigration reform: If we don’t want foreign-born talent in the United States, other countries are more than happy to take the talent, and the innovation potential that goes with it, off of our hands. “I’m here to send the message that Canada’s open for business—we welcome the entrepreneurs that America is turning away” said Canadian Citizenship, Immigration and Multiculturalism Minister Jason Kenney at Stanford Law School this week." Vivek Wadhwa in The Washington Post.

Mother Earth interlude: Our strange oceans.

2) Lerner out

Lerner out. "Lois Lerner, the Internal Revenue Service’s director of exempt organizations, has been placed on administrative leave, according to a source in the agency’s Cincinnati office...Lerner on Thursday afternoon sent an e-mail to employees in the exempt-organizations division she oversees stating, “Due to the events of recent days, I am on administrative leave starting today. An announcement will be made shortly informing you who will be acting while I am on administrative leave. I know all of you will continue to support EO’s mission during these difficult times.” She concluded, “I thank you for all your hard work and dedication,” adding, “The work you do is important.”" Eliana Johnson in National Review Online.

...Here's her replacement. "Ken Corbin, who was deputy director of a larger unit of the IRS, will be taking Lerner’s place, according to internal communications..."Ken is a proven leader during challenging times. He has strong management experience inside the IRS handling a wide range of processing issues and compliance topics as well as taxpayer service areas. Combined with his track record of leading large work groups, these skills make him an ideal choice to help lead the Exempt Organizations area through this difficult period."" Josh Hicks in The Washington Post.

FAQ: What you need to know about Obama's war on leakersTimothy B. Lee in The Washington Post.

Issa may call Lerner back. "House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) is inclined to recall Internal Revenue Service official Lois G. Lerner to testify before his panel, but will await recommendations from committee lawyers, the nonpartisan House Counsel, other outside legal experts and committee Democrats before making a final decision, he said Thursday" Juliet Eilperin and Ed O'Keefe in The Washington Post.

Well, there goes the whole day interlude: All of the best Tumblrs.

3) Lobbyists and the fin-reg cookie jar

Lobbyists dig into fin-reg. "Bank lobbyists are not leaving it to lawmakers to draft legislation that softens financial regulations. Instead, the lobbyists are helping to write it themselves. One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation." Eric Lipton and Ben Protess in The New York Times.

New home sales hit record. "The Commerce Department reported Thursday that the median price of a new home hit $271,600 in April, while the average new-home price reached $330,800, both record highs. The price gain for new homes comes amid a spring selling season—typically the most crucial time of year for builders, as families rush to buy new homes before the next school year—that has plodded along at a steady pace. Thursday's new-home sales report showed that builders were on pace in April to sell 454,000 homes this year, up 2.3% from March and up 29% compared to the same month last year." Robbie Whelan in The Wall Street Journal.

Jobless claims fall to 340,000. "Initial jobless claims, a proxy for layoffs, decreased by 23,000 to a seasonally adjusted 340,000 in the week ended May 18, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires had forecast 345,000 new applications for last week. With the drop, a broader measure of layoffs returned to near five-year lows. The four-week moving average of claims, which smooths week-to-week volatility, decreased by 500 to 339,500 from the previous week's revised 340,000." Jonathan House and Josh Mitchell in The Wall Street Journal.

In bid for clarity, Fed brings opacity. "The Federal Reserve is having some trouble explaining itself...That straightforward message, however, has been muddled by a number of other signals sent by the Fed and Mr. Bernanke himself in recent weeks: A policy statement in early May suggested the Fed's next move could be either up or down; minutes released Wednesday of the Fed's most recent policy meeting ended May 1 said some might want to reduce the program as early as June; Mr. Bernanke's prepared congressional testimony Wednesday also implied he was reluctant to move at all." Jon Hilsenrath in The Wall Street Journal.

Yikes, the Japanese stock market cratered overnight. "The Japanese market tanked in epic fashion in Thursday’s trading session, with the Nikkei index falling 7.3 percent. The yen appreciated 1.7 percent against the dollar. Here’s the one-month stock chart of the Nikkei...Here’s the thing, though. There wasn’t really any news overnight that would justify a swing of that magnitude. Analysts are blaming the drop on some weak Chinese economic data and hints from Fed Chairman Ben Bernanke on Wednesday that someday, eventually, the Fed will taper its own monetary easing. There is no way on earth, though, that those kinds of tidbits would justify the kind of moves that were evident in the Japanese market." Neil Irwin in The Washington Post.

Obama picks candidates for SEC. "Kara M. Stein, a legal counsel and senior policy adviser to Sen. Jack Reed (D-R.I.), would fill a Democratic slot left open by commissioner Elisse B. Walter. Walter can serve until the end of the year or until a replacement is confirmed. Michael S. Piwowar, a chief economist for the Senate banking committee since 2009, would replace commissioner Troy A. Paredes, whose term ends in June. Piwowar spent a four years at the SEC earlier in his career, as an economist and visiting scholar." Dina ElBoghdady in The Washington Post.

The corrosive effect of Apple's tax avoidance. "The shameful thing about Apple Inc.’s ability to structure its business to avoid United States taxes was not that it did it. In fact, as Apple executives tried to point out at the Senate hearing at which their tax strategies were detailed, they could have chosen to pay much less in American taxes than they did. The shameful thing is that we have a tax system that seems to allow multinational companies to choose what they want to pay." Floyd Norris in The New York Times.

...But is there a way to do it better? "[A] number of states have come up with a simple way to calculate what firms owe them in taxes: If a company sells its product or services in a given state, it pays a tax proportionate to the sales in that state...Here’s how it would work. Let’s say a company earns 20 percent of its sales in California. The company would pay 20 percent of its worldwide sales to California at the state’s corporate tax rate. No need to worry about where the firm has offices or where its employees work — and no chance of the firms shifting their income to other states using elaborate, hard-to-trace methods." Jia Lynn Yang in The Washington Post.

There is no great stagnation interlude: Every parking garage in America needs these lights. Paging Tyler Cowen... 

4) Seriously, the 'nuclear option' threat is rising

Srinivasan confirmed. "The Senate unanimously confirmed Sri Srinivasan on Thursday to serve on the U.S. Court of Appeals for the District of Columbia Circuit, one of the nation’s most influential courts. The 97 to zero vote in favor of Srinivasan, the principal deputy solicitor general, marks the first time since 2006 that the Senate has confirmed a nominee to the D.C. Circuit. President Obama has been hoping to shift the conservative tilt of the court, which is poised to rule on several key elements of his second-term agenda in the months ahead. Srinivasan is the first federal appeals court judge of South Asian descent, and he is a likely front-runner for a Supreme Court nomination if a vacancy arises during Obama’s term." Juliet Eilperin in The Washington Post.

But the DEFCON level for the 'nuclear option' keeps rising. "Democratic leaders say the Gang of 14 agreement on judicial nominees that, for years, kept the "nuclear option" from being used to change Senate rules is dead. Senate Democrats are still angry over the Republican blockade of Caitlin Halligan, whom President Obama nominated in September of 2010 to serve on the D.C. Circuit Court of Appeals. She withdrew her nomination in March." Alexander Bolton in The Hill.

...McConnell: 51 votes will 'blow the Senate up.' "The Republican leader blasted Senate Majority Leader Harry Reid (D-Nev.) for considering the "nuclear option" — changing Senate rules through a majority vote — to prevent a filibuster of Obama's judicial and Cabinet nominees. “He’s been trying to get 51 votes on his side to blow the Senate up,” McConnell said. “What I fear is that the majority leader is working toward breaking his word to the Senate and the American people and blowing up this institution. … He wants to have no debate — ‘Do what I say and do it now.’”" Ramsey Cox in The Hill.

...And no, Sen. Grassley, this is not 'packing the court.' "Sen. Chuck Grassley (R-Iowa) used a hearing on Srinivasan’s nomination to accuse the Obama administration of trying to “pack” the D.C. Circuit. And then repeated the accusation another five times. The only problem, as his colleague Sheldon Whitehouse (D-R.I.) gently pointed out, was that the term does not mean what Grassley thought it meant." Dylan Matthews in The Washington Post.

Obama nominates former campaign aide to head OPM. "President Obama has nominated Katherine Archuleta, a top official in his 2012 campaign, to head the Office of Personnel Management. Archuleta, the second Hispanic nominee for a political appointment during Obama’s second term, served as national political director on his reelection team and helped organize the blockbuster Democratic National Convention in Denver during his 2008 run...As head of OPM, Archuleta would be tasked with implementing the agency’s Pathways program, an initiative that then-Director John Berry launched last summer to speed up the federal hiring process and attract top talent to the public sector." Josh Hicks in The Washington Post.

Irreligious interlude: Where are the atheists?

5) Sequester shuts down major 3 agencies

3 big federal agencies will be closed today due to sequestration. "Three of the largest federal agencies will close to the public on Friday, the first time since the government shutdowns of the 1990s that large corners of the government have ceased operations on a weekday. The mass furlough of 115,000 employees at the Internal Revenue Service, Environmental Protection Agency, Department of Housing and Urban Development and the small Office of Management and Budget — 5 percent of the federal workforce — is happening because of the budget cuts known as sequestration." Lisa Rein in The Washington Post.

Senate GOP fights over budgeting. "Senate Republicans are warring over the budget, creating rifts between the old and new guards, the mainstream and the tea party and Sens. John McCain and Ted Cruz. Republicans typically are a well-oiled message machine, keeping their dirty laundry behind closed doors as they hammer Democrats on issues ranging from taxes to health care...With Cruz as the ringleader, a handful of Senate conservatives are refusing to consent to budget negotiations with the House, instead engaging in open combat with more senior Republicans like McCain who are perplexed at their hardball tactics. The fight has given Cruz a new platform as he tries to claim the mantle of conservative provocateur, but it has left the Texas Republican increasingly alienated from many of his colleagues." Manu Raju and Ginger Gibson in Politico.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Read: Obama's speech on the war on terror.

How community colleges are falling behindDylan Matthews.

Poverty is growing twice as fast in the suburbs as in the citiesBrad Plumer.

7 thrilling facts on carbon taxation from the CBOBrad Plumer.

Meet Farzad Mostashari, the bow-tie bureaucrat convincing doctors to go digitalSarah Kliff.

Yikes! The Japanese stock market cratered overnightNeil Irwin.

California Obamacare premiums: No ‘rate shock’ hereSarah Kliff.

Everything you need to know about Obama’s war on leakers in one FAQTimothy B. Lee.

Let’s get rid of corporate taxes altogetherEzra Klein.

Have U.S. states figured out a way to avoid a global race to the bottom on taxesJia Lynn Yang.

Sorry, Chuck Grassley. Obama isn’t ‘packing the court.’ Dylan Matthews.

Jon Gruber on one reason to keep taxing corporate incomeEzra Klein.

Et Cetera

The story of the guy who has worked 61 years for the Bureau of Labor StatisticsJoe Davidson in The Washington Post.

Hatch-Rubio bill would revise health-savings account rulesElise Viebeck in The Hill.

...And more on California's announcements on health careJonathan Cohn in The New Republic.

Generic ballot tilts towards Democrats, poll saysRachel Weiner in The Washington Post.

Boy Scouts open membership to gay youths but keep ban on adult leadersMichelle Boorstein in The Washington Post.

Obama, Christie to tour Jersey shore to monitor post-Sandy recoveryPhilip Rucker in The Washington Post.

House approves student-lending billNick Anderson in The Washington Post.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

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