Wonkbook: The first crack in the individual mandate

December 20, 2013

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

(Photo by Andrew Harrer/Bloomberg)
(Photo by Andrew Harrer/Bloomberg)

Wonkbook's Number of the Day: 368,644. That's the number of people the U.S. deported in fiscal year 2013. It's down 10 percent from last fiscal year. 82 percent of those deported from the interior had been convicted of a crime.

Wonkbook's Graph of the Day: Views on Obamacare have been stable for years.

Wonkbook's Top 5 Stories: (1) People with canceled plans are exempt from Obamacare's insurance mandate; (2) the NSA reform panel's suggestions; (3) Yellen vote scheduled (4) finishing the fiscal business; and (5) now it's 17 states for gay marriage.

1. Top story: The first crack in the individual mandate

The Obama administration just delayed the individual mandate for people whose plans have been canceled. "The individual mandate includes a "hardship exemption." ...According to HHS, the exemption covers people who "experienced financial or domestic circumstances, including an unexpected natural or human-caused event, such that he or she had a significant, unexpected increase in essential expenses that prevented him or her from obtaining coverage under a qualified health plan."...Today, the administration agreed with a group of senators, led by Mark Warner of Virginia, who argued that having your insurance plan canceled counted as "an unexpected natural or human-caused event." For these people, in other words, Obamacare itself is the hardship." Ezra Klein in The Washington Post.

Primary source: The Sebelius letter.

...They're also allowing them to buy catastrophic health plans. "Health and Human Services Secretary Kathleen Sebelius told a group of six senators in a letter viewed by The Wall Street Journal that people whose policies had been canceled because of new requirements under the health law would be allowed to purchase 'catastrophic' plans. Those plans had previously been restricted to people under the age of 30 or individuals who qualified for a set of specific hardship exemptions." Louise Radnofsky in The Wall Street Journal.

Could this lead to adverse selection? "Another health insurance official, who spoke on the condition of anonymity because he lacked authorization to discuss the matter publicly, pointed out that the hardship exemption also gives one group the ability to buy coverage whenever they want, rather than during annual open-enrollment periods. As a result, he said, more people might not buy insurance unless they get sick." Amy Goldstein in The Washington Post.

Wonkbook real talk. This puts the administration on some very difficult-to-defend ground. Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it's wrong. But it's hard to argue that it's right for the currently uninsured but wrong for people whose plans were canceled.

Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people who plans were canceled more deserving of help than people who couldn't afford a plan in the first place?

93 percent of hospital executives think Obamacare will make health care better. "Fully 65 percent indicated that by 2020, they believe the healthcare system as a whole will be somewhat or significantly better than it is today. And when they were asked about their own institutions, the optimism was even more dramatic. Fully 93 percent predicted that the quality of care provided by their own health system would improve...On cost control there was similar optimism: 91 percent forecasted improvements on metrics of cost within their own health system by 2020. The vast majority, 85 percent, expected their organization to have reduced its per patient operating costs by the end of the decade. Overall, the average operating cost reduction expected was 11.7 percent." Ezra Klein in The Washington Post.

Think your state has Obamacare problems? They’re nothing compared to Guam. "[T]he territory is at the center of the oddest health reform disaster you've never heard of."...Because of a quirk in the Affordable Care Act's drafting, the Northern Mariana Islands and the four other American territories are subject to some parts of the law but not others. This has messed up the individual market in the Northern Mariana Islands so badly that the one plan selling policies there told the territory's top insurance commissioner it would not sell new plans for 2014. In other words: Beginning Jan. 1, regulators expect it will be literally impossible for an individual to buy a new policy in the Northern Mariana Islands, and difficult in other territories. Sarah Kliff in The Washington Post.

...And in Massachusetts, Obamacare has crashed into Romneycare. "Massachusetts created a Romneycare-inspired template for President Barack Obama’s health reform effort. Now, as the Bay State is struggling to upgrade for the Obamacare era, its enrollment system is buckling under technical glitches like those that hobbled HealthCare.gov. State officials are increasingly concerned that thousands of Massachusetts residents seeking coverage are lost in a wilderness of misfiled applications and cybermalfunctions. Now, they’re moving ahead with a labor-intensive backup plan aimed at making sure that no one loses coverage when Obamacare starts in January." Kyle Cheney in Politico.

@esoltas: Obamacare is like O'Hare: lots of delays, but you get there eventually.

Scott Walker's bet on Medicaid. "If Wisconsin Gov. Scott Walker ever runs for president, expect him to talk about his "third way" for Medicaid—a plan that rejects part of President Barack Obama's health law while extending coverage to more poor in the state...The governor's plan is to change the Medicaid rules for most adults to cover only those earning at the poverty level or below, currently $11,490 annually for a single person. That would free up funds to end the enrollment freeze and add about 82,000 adults. But an estimated 77,000 people, mostly adults, would lose their Medicaid coverage received under existing rules. At the same time, Mr. Walker would turn down federal money offered to states that make Medicaid available for people earning up to 133% of the poverty level." Mark Peters and Louise Radnofsky in The Wall Street Journal.

@reihan: Schweitzer's willingness to attack Obamacare from the left, and to champion Medicare buy-in (or perhaps Medicare-for-all), is huge.

The uninsured don’t like Obamacare. But seniors didn’t like Medicare Part D — and signed up anyway. "[I]t seems logical that the uninsured won't sign up for a program they don't like...Past experience with these kinds of programs suggests people say they won't sign up until the penalty looms and they do." Ezra Klein in The Washington Post.

@JimPethokoukis: Obamacare is turning into a bit of chess game, except the board is made of flowing water and the pieces are made of smoke

Is last-minute enrollment proving a hard sell? "Insurers pressing for last-minute enrollees under the health-care law say they are running into a worrisome trend: Customers who were put off by the insurance marketplaces' early troubles are proving hard sells. Many people thwarted by the technical problems of HealthCare.gov are reluctant to try again, citing frustration with the federal site, web-security concerns and the pressure of the holidays, several insurers say." Timothy W. Martin and Christopher Weaver in The Wall Street Journal.

A quarter of head and neck surgeons think Obamacare has death panels. "The 647 responses that came back were ... depressing. Twenty-seven percent of respondents thought that the health-care law includes a "government panel [that] makes end-of-life care decisions for Medicare."...The researchers also sorted the responses by doctors' opinions on the Affordable Care Act. They found that those who oppose the health-care law were more likely to believe that these panels exist. Forty-one percent of those who "strongly oppose the law" thought the panels existed, compared to 13 percent of those who are strong supporters." Sarah Kliff in The Washington Post.

@jonlovett: A few more harmless Obamacare ads followed by weird outrage in conservative media and everyone will be reminded to sign up.

Conservatives freak out over ‘pajama boy.’ "He’s “a metrosexual hipster in a plaid onesie” scowled National Review’s Charles Cooke, a “vaguely androgynous, student-glasses-wearing, Williamsburg hipster.” He’s also “carefully ambi-racial.” Pajama boy can’t even fight, Cooke’s colleague, Jim Geraghty, surmises. “My money is on the guy from Big Bang Theory once they throw down in a slap fight,” writes Geraghty, a grown man calling someone else a child as he imagines a fight between two fictional characters." Adam Serwer in MSNBC.

KRAUTHAMMER: Mess of the year. "[I]t’s not just individuals seeing their medical care turned upside down. The insurance providers, the backbone of the system, are being utterly transformed. They are rapidly becoming mere extensions of the federal government...On what authority does a Cabinet secretary tell private companies to pay for services not in their plans and cover people not on their rolls? Does anyone even ask? The bill itself is simply taken as a kind of blanket authorization for HHS to run, regulate, and control the whole insurance system." Charles Krauthammer in National Review Online.

COHN: Chill out about Obamacare, dudes. "[T]he question right now really isn’t how the participation of young people compares to their proportion of the population. It’s how their participation compares to insurance company expectations. Most likely insurers assumed young people might be a little more reluctant to sign up—and their rates reflect that. They won’t have to raise them (beyond the usual increases) unless their guesses were wrong." Jonathan Cohn in The New Republic.

Music recommendations interlude: Beach House, "Lazuli," 2012.

Top opinion

CLARKE, MORELL, STONE, SUNSTEIN, AND SWIRE: Protecting citizens, and their privacy. "The government should end its domestic program for storing bulk telephone metadata. The current program creates potential risks to public trust, personal privacy and civil liberty. In some cases, the government will have a national security justification for access to such metadata, which should be held instead either by private providers or by a private third party, and which should be available only after an appropriate order by a court. Americans deserve strong safeguards against intrusions into their personal domain. Public officials should not have access to otherwise private information (such as bank records, credit card records, phone records and Internet data) from third parties (such as banks, credit card companies, telephone companies and Internet providers) without a court order." Richard A. Clarke, Michael J. Morell, Geoffrey R. Stone, Cass R. Sunstein and Peter P. Swire in The New York Times.

KLEIN: More jobs are the antidote to inequality. "A slack labor market robs lower-skilled workers of their power because employers can easily replace them. Baker and Bernstein estimate that for families in the 20th percentile of income, “for each percentage point that the unemployment rate was closer to full employment, incomes grew 2.2 percent.”...That’s why “full employment” is such an important concept right now. Inequality can be attacked in ways that do very little for average workers. By contrast, full employment gives average workers the power to demand a better deal from their employers and thus reduces inequality by giving the working class an overdue raise." Ezra Klein in Bloomberg.

BRIGGS AND TABARROK: Fewer guns, fewer suicides. "[W]e studied the relationship between guns and suicide in the U.S. from 2000 to 2009. Using five measures of gun ownership and controlling for other factors associated with suicide, such as mental illness, we consistently found that each 1 percentage-point increase in household gun ownership rates leads to between 0.5 and 0.9 percent more suicides...Are the people not killing themselves with guns simply committing suicide by other means? Some are—but not all. While reduced household gun ownership did lead to more suicides by other means, suicides went down overall. That’s because contrary to the “folk wisdom” that people who want to commit suicide will always find a way to get the job done, suicides are not inevitable. Suicides are often impulsive decisions, and guns require less forethought than other means of suicide—and they’re also deadlier." Justin Briggs and Alex Tabarrok in Slate.

EICHENGREEN: Taper in a teapot. "The value of this week’s decision is mainly symbolic. It is a way for the Fed to signal to its detractors that it hears their criticisms of its unconventional monetary policies, and that it shares their desire to return to business as usual. The decision beats back some of the criticism to which the Fed is subject, and diminishes prospective threats to its independence. But, at the same time, the central bank has also signalled that it is not prepared to return to normal monetary policy until a normal economy has returned." Barry Eichengreen in The Financial Times.

SUNSTEIN: Behind a new principle for national security. "It turns out that the Precautionary Principle is incoherent, even paralyzing, because it forbids the very steps that it requires. Precautions are mandated by the principle, but precautions create risks, and so they simultaneously offend the principle...The problem is that multiple risks are involved. Surveillance creates risks to public trust, personal privacy and individual liberty. If government holds a great deal of information, there is at least a risk of abuse -- if not now or soon, potentially in the future. And if government is engaged in extensive surveillance, there is a risk of a chilling effect on free discussion, on journalists and on journalists’ sources." Cass R. Sunstein in Bloomberg.

YOUNGMAN: Take this town and shove it. "If you write about American politics for a living, stop right there. Get back to work, and don’t read another damn word. Sign out of Twitter, say “thanks but no thanks” to a dayside cable hit, get off your ass, go outside and listen to folks beyond the same 200 know-it-alls in Washington and New York who share your affinity for snark, views on Game of Thrones and predictions for next year’s Senate race in a state only a handful of you have ever set foot in." Sam Youngman in Politico.

CROOK: Populism isn't that popular. "Restrained populism serves a valid purpose: It simplifies complex issues for voters’ consideration, and puts the populist on the side of the majority...The true populist, in contrast, simplifies without mercy, and pledges to govern the same way. Strident populism deals in caricature, and most voters know it...You can’t have lively democratic politics without a dash of populism. But crass populism -- the kind that blames the 1 percent for poverty or sees the federal government as an enemy -- isn’t what most voters want. They’re smarter than that." Clive Crook in Bloomberg.

KRUGMAN: Osborne and the stooges. "Britain’s recent growth doesn’t change the reality that almost six years have passed since the nation entered recession, and real G.D.P. is still below its previous peak. Taking the long view, that’s still a story of dismal failure — as I said, a track record worse than Britain’s performance in the Great Depression...[I]s this a vindication of his austerity policies? Only if you accept Three Stooges logic, in which it makes sense to keep banging your head against a wall because it feels good when you stop." Paul Krugman in The New York Times.

Watch interlude: Harley the goldfish.

2. NSA reform talk makes it to the White House

Obama is weighing limits on the NSA. "The advisory group is not the only one weighing and shaping Mr. Obama’s choices. His top counterterrorism aide, Lisa Monaco, is briefing him regularly about an interagency review that deals with many of the same issues as the outside advisory group...The administration expects to accept “a good number” of the advisory group recommendations, the official said, and will “perhaps reject others.”...Mr. Obama has already said that bulk collection of telephone records should continue. The unresolved question is whether he agrees with the advisory committee that the records should remain in private hands — either the telecommunications companies or a private consortium — and that individual court authorizations should be required for every use of metadata." David E. Sanger in The New York Times.

Verizon to publish reports on government requests for customer data. "Verizon, the nation’s biggest wireless provider, has been under immense pressure from shareholders and privacy groups after revelations that the National Security Agency obtained mountains of private information from the company and other telecom firms. Privacy advocates have long complained that the telecom industry is far more cooperative with government surveillance efforts than technology firms such as Google and Twitter. The company will become the first in the telecom industry to provide details on government demands for data." Cecilia Kang in The Washington Post.

With NSA reform, Obama's legacy is in the balance. "At the heart of the report by a White House advisory group is a challenge to Mr. Obama’s conception of his presidency. A candidate who promised to reverse what he saw as excesses in the war against terrorists wound up preserving and even amplifying many of the policies he inherited. With his last election behind him, he is being challenged to decide if that is still the right approach." Peter Baker in The New York Times.

How to deal with metadata. "Under current arrangements, the NSA can search the [metadata] banks on its own. The internal requirements for doing so are much stiffer than they used to be. Not long ago, a clever analyst could dip into the data and check up on his girlfriend; there are a few cases in which someone actually did this. Now, according to one insider, any probes require two high levels of review and the approval of the agency’s general counsel. But of course, this isn’t enough. First, who's going to believe that? Second, just as those compliance standards were put in place internally, they can be repealed internally" Fred Kaplan in Slate.

Good questions interlude: How did ancient Greek music sound?

3. Yellen vote scheduled

Senate to vote on Yellen for Fed chair in January. "The Senate will vote on the nomination of Janet Yellen to be the next chairman of the Federal Reserve in January. Majority Leader Harry Reid announced Thursday night that Republicans and Democrats had worked out an agreement on votes for several of President Barack Obama’s nominees, including Yellen. The Senate plans a test vote to move ahead on Yellen’s nomination on Friday and will then vote Jan. 6 on her confirmation." Associated Press.

Fed's portfolio tops $4 trillion for the first time. "The Fed's portfolio—including Treasurys, mortgage-backed securities, loans, coins, buildings and other assets—totaled slightly more than $4 trillion as of Dec. 18, up from less than $900 billion before the crisis. A major propellant of this increase has been the Fed's three rounds of bond-buying programs since the 2008 financial crisis. The current program is aimed at holding down long-term interest rates to encourage more spending, investing and hiring. The unprecedented size of the balance sheet has earned the Fed—and in turn U.S. taxpayers—some hefty profits in recent years. But it also carries risks including the possibility of unleashing inflation or creating asset bubbles." Victoria McGrane in The Wall Street Journal.

U.S. existing home sales down 4.3 percent in October. "Sales of previously owned homes slipped in November to the lowest level in almost a year, the latest evidence of higher mortgage rates holding back potential buyers. Existing-home sales decreased 4.3% from the prior month to a seasonally adjusted annual rate of 4.9 million, the National Association of Realtors said Thursday. Home sales fell by 1.2% from a year earlier, the first time in 29 months the year-over-year figure declined...Because it typically takes one or two months for a buyer to close on a home, November's sales figures reflect offers made in September and October." Jeffrey Sparshott in The Wall Street Journal.

Econ longread: Linda Taylor, Ronald Reagan's "welfare queen," was realJosh Levin in Slate.

Econ list: The 10 best business decisions of 2013Matthew Yglesias in Slate.

Jobless claims are at their highest level since March. "The number of people filing for initial unemployment benefits rose for the second consecutive week, a potentially concerning sign for a labor market that had been strengthening. Initial claims for jobless benefits, a measure of layoffs, increased by 10,000 to a seasonally adjusted 379,000 in the week ended Dec. 14, the Labor Department said Thursday. That is the highest level since March and well above the 345,000 new claims economists surveyed by Dow Jones had forecast." Eric Morath in The Wall Street Journal.

Why are CEOs paid so much? "CEOs are paid more because they're paid differently—with stock and stock options. The trend of paying executives with stock, which surged during the late 1980s and 1990s, has murky origins, but clear consequences: It has made the CEOs of America's biggest companies unfathomably rich, as you can see in the graph below. Theoretically, paying executives with stock aligns their compensation with their performance. Practically, it means they stand to make absurd sums of money when stocks rise." Derek Thompson in The Atlantic.

Your average economist is not the Grinch. "A few years ago Joel Waldfogel wrote “Scroogeonomics: Why You Shouldn’t Buy Presents for the Holidays,” an economic manifesto about the wastefulness of gift-giving. The Initiative on Global Markets at the University of Chicago’s Booth School of Business recently queried its panel of 46 economic experts on the subject, and the responses were surprisingly less Grinch-like." Catherine Rampell in The New York Times.

A+ interlude: Answers that are totally wrong but so worth it.

4. Fiscal business near year-end deadline 

Pentagon bill nears passage in Senate. "The Senate stood poised on Thursday to pass a $625.1 billion Pentagon policy bill, one of the few accomplishments of this Congress before its holiday break. The expected late-night vote was another reminder of the partisan discord that has plagued lawmakers for much of the year." Ashley Parker in The New York Times.

Lew warned Congress again that breaching the debt ceiling is a bad idea. "With its new budget deal, Congress has avoided one threat of another government shutdown. But unless Congress acts, the threat of a breach of the debt ceiling looms early next year, the Treasury Department warned in a letter to congressional leaders on Thursday. Treasury Secretary Jacob J. Lew said that the government might run out of cash to pay the country’s bills by late February or early March." Annie Lowrey in The New York Times.

Senate GOP to skip town. "Senate Republicans will let their rank-and-file members leave town for the Christmas break, leaving Democrats to vote around the clock to confirm the latest batch of President Obama’s nominees. Republicans, angered over last month’s gutting of the filibuster, decided at a meeting Thursday afternoon that they will not yield back any time on the Defense authorization bill or expedite consideration of any of Obama’s nominees." Alexander Bolton in The Hill.

Ron Wyden, Senate Finance Committee chairman? "News that Senate Finance Committee Chairman Max Baucus will be nominated as ambassador to China spells the end to his long-shot efforts to overhaul the tax code and puts the focus on Ron Wyden, a lawmaker with plenty of his own ideas about tax and health care policy. Wyden, the panel’s third-ranking Democrat, is expected to take over the gavel, and his ascension could speed renewal of a group of expiring tax breaks worth about $50 billion. The Oregonian also has controversial views on health care policy — including working with House Budget Committee Chairman Paul Ryan on a Medicare overhaul." Brian Faler and Rachael Bade in Politico.

The way Congress funds clean energy is a mess. Max Baucus thinks there’s a better idea. "Baucus, who chairs the Senate Finance Committee, put out a plan to dump all 42 existing tax incentives for specific energy sources. Instead, he would create two broad tax credits that would boost clean energy without picking specific technologies or explicitly taking sides between, say, nuclear energy and wind power." Brad Plumer in The Washington Post.

Economics interlude: If Wonkbook wrote you a Christmas card, it would probably read something like these.

5. That makes it 17 states

New Mexico Supreme Court legalizes gay marriage. ""We hold that the State of New Mexico is constitutionally required to allow same-gender couples to marry and must extend to them the rights, protections, and responsibilities that derive from civil marriage under New Mexico law," Justice Edward L. Chavez wrote in the decision.Many counties in New Mexico had already been issuing marriage licenses to gay couples, setting up the state Supreme Court to decide whether it was legal or not. The state didn't explicitly ban or allow same-sex marriage, leaving the issue in limbo." Aaron Blake in The Washington Post.

Map: Where gay marriage is the law, and where it's notNiraj Chokshi in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Want to make kids eat fruits and veggies? Just pay themLydia DePillis.

John Podesta’s plan to bypass Congress on climate changeBrad Plumer.

Tech’s biggest problem is one it doesn’t know how to solveLydia DePillis.

The individual mandate no longer applies to people whose plans were canceledEzra Klein.

Why did Whole Foods drop ChobaniLydia DePillis.

The way Congress funds clean energy is a mess. Max Baucus thinks there’s a better ideaBrad Plumer.

93 percent of hospital executives think Obamacare will make health care betterEzra Klein.

The uninsured don’t like Obamacare. But seniors didn’t like Medicare Part D — and signed up anywayEzra Klein.

A quarter of head and neck surgeons think Obamacare has death panelsSarah Kliff.

Think your state has Obamacare problems? They’re nothing compared to GuamSarah Kliff.

Et Cetera

U.S. deportations went down 10 percent in 2013Laura Meckler in The Wall Street Journal.

Obama commutes sentences of 8 inmates with crack cocaine convictions, citing 2010 lawDavid Nakamura in The Washington Post.

Obama advisers who had planned their exit are postponingJackie Calmes in The New York Times.

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

Wonkbook is produced with help from Michelle Williams.

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Ezra Klein · December 19, 2013