Will Taxpayers Be Mugged by Sacramento?

TaxesGovernor Brown has just released his spending proposal for 2017-18 and taxpayers should not be blamed if they feel like they are walking down a dark alley in a high-crime neighborhood.

While the governor’s proposed budget has been described as austere, it still represents a spending boost of 5 percent, a rate of increase only slightly smaller than last year’s 6 percent. Because the state is in the process of rewarding its employees with generous pay increases and covering an expanding requirement to fund their pensions — pensions that are currently subsidized by six percent of the general fund budget — more spending does not represent an increase in the quantity or quality of services for average Californians.

The Brown budget contains no major program increases except for transportation. But the kicker is that this would be contingent on higher taxes on gasoline and car registration. So, while state workers will be kept snug and comfortable, if commuters want those pot holes repaired, they must pay extra.

However, the governor’s budget should not be regarded as anything more than a place holder, as the ability to fund it is threatened from all directions. The new administration in Washington, as well as a majority of both houses of Congress, have made it clear that Obamacare is on the verge of elimination. There can be little doubt that federal funding for California’s massive expansion of Medicaid is in jeopardy. Because, to paraphrase Ronald Reagan, a government program is the nearest thing to eternal life we’ll ever see on this earth, no one will be surprised when Sacramento looks to average taxpayers to make up the nearly $16 billion-dollar difference.

Then there is uncertain tax revenue. The extension of the nation’s highest income tax rates renders California highly vulnerable to economic fluctuations. Although growth had been tepid, we have experienced 90 months of economic expansion and financial experts warn us to be prepared for the next downturn.

As if these threats were not enough, Brown will have to contend with elements in his own party who believe in the axiom of former Senate leader, David Roberti, “When you’ve got it, spend it,” to which they would add the corollary, “If you don’t have it, spend it anyway.”

Chairman of the Assembly Budget Committee, Phil Ting, has already made it clear that he does not want to budget assuming the worst, that the Legislature must continue “investing in California,” a budgetary approach akin to Admiral David Farragut’s at the battle of Mobile Bay, “Damn the torpedoes, full speed ahead.” While Farragut was successful, is it appropriate to put California taxpayers at dire risk through imprudent spending?

In May, the governor will issue a revised budget, no doubt with major changes, in advance of the June 15 deadline for final passage. If revenue is down, taxpayers may be treated to the spectacle of a cage match between those committed to spending, backed by their special interest allies, and those who advocate a slightly more cautious approach.

In Sacramento, fiscal sanity is relative. Ironically, our eccentric governor who thinks nothing of lavishing nearly $100 billion on a bullet train, may be the dwindling middle class’s best hope to fend off major increases to their already staggering tax burden.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article was originally published by HJTA.org

House GOP leader asks Jerry Brown: How would you replace Obamacare?

As reported by the Sacramento Bee:

House Majority Leader Kevin McCarthy has written to Gov. Jerry Brown and the leaders of other states soliciting their input for replacing Obamacare.

Dismantling President Barack Obama’s signature health care legislation has been central to debate in Washington since voters in November handed Republicans control of the White House and Congress.

“As Obamacare continues to saddle patients with less choice, higher costs, and mountains of mandates, it is clear that major health care reforms must be made to strengthen and improve health care for all Americans,” McCarthy wrote in the letter last month, which was signed by five other House Republicans, including Ways and Means Chairman Kevin Brady of Texas.

“Lawmakers, governors, and state insurance commissioners have a tremendous opportunity to achieve our shared goal of enacting health care reforms that lower costs, improve quality, empower states and individuals, and bring our health care system into the 21st century,” they added. …

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As U.S. Moves Right, Will California’s Outlier Status Accelerate Exodus?

californiaAfter recovering from the shock of the presidential race, California pundits began absorbing what all this actually means. There is broad agreement that the rightward movement by the rest of America has only increased the political divide between the nation as a whole and California.

This divide has widened so significantly that Governor Brown joked about building a wall around the state to protect it from nasty conservatives. And a handful of ultra-progressives, distressed at the thought of a Trump presidency, are planning an initiative they hope will lead to California seceding from the United States. (Newsflash for backers of this “Calexit” effort: That a state can’t secede from the Union was resolved in 1865 when General Lee surrendered to General Grant at Appomattox).

Putting the jokes and unrealistic fantasies aside, there are real world implications for the increasing chasm. First, if it were evident prior to the election that California has “go it alone” policies on climate change, it is even clearer now. Sure, Washington will continue to pay lip service to greenhouse gas reductions, but broad, draconian laws and regulations perceived to be damaging to the economy will be shelved.

Second, the High Speed Rail project might have just graduated from being a mere pipedream to a true fantasy. Already Congress had shut the spigot of federal money and the project has been on life support using cap and trade revenue which doesn’t generate a fraction of what it needs for the train to become viable.

Third, perhaps the biggest hit to California will come in the area of health care. While other states have resisted full implementation, California has been held up as Obamacare’s shining example of “success.” But a Republican Congress is likely to repeal major parts of the law, including the funding for Medicaid expansion and elimination of the federal tax credits that lower premiums for most California enrollees.

This enormous gap between right America and left California will result in the state no longer being able to rely on the federal government to finance its left-of-center policies. And that’s bad news for taxpayers.

Without federal support and California’s majority party wanting no slowdown in their agenda, the pressure to raise taxes will grow even stronger. So even though California will have the highest income tax rates in the nation until 2030 – thanks to Prop. 55 – and the highest state sales tax, expect the alligators of the left to be searching for their next meal. No doubt, they will put Prop. 13 on the menu.

The non-stop pursuit of an even higher tax burden has already resulted in millions leaving California. The growing fissure between the rest of nation and the state’s pursuit of destructive progressive policies is giving millions more Californians an excuse to bail out.

It’s not just the hard data from the IRS and the Census Bureau that confirms this. We all know people who have made the choice to escape California’s hostile tax and regulatory environment. A neighbor of mine just left to visit the multi-acre parcel he bought in Texas. When he retires in four years, he will build a home on the property. He is currently an attorney with the state.

A close family relative and her husband left the Bay Area for Oregon in large part for tax reasons. This is especially ironic given that they are both liberals who, as California residents, voted for every tax increase on the state and local ballot.

Another close relative who was visiting her mother on the Gulf Coast of Florida tells of miles and miles of white sand beaches with homes on the ocean that can be purchased for what a 1,200 square-foot condo would cost in San Francisco. Derided as the “Redneck Riviera,” the Gulf Coast is now a favorite of former Californians in large part because there is no income tax.

Can California change course? As long as those interests which rely on government largess own the Legislature, the prognosis is not good. With trillions in public debt of all kinds, an unresponsive and arrogant administrative state and high cost of living, California is bound to see the exodus that has already started to accelerate quickly.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published by HJTA.org

Obamacare Sinking Under Weight of Math

Healthcare costsThe Affordable Care Act is collapsing, and President Obama blames Republicans.

Writing in the Journal of the American Medical Association, the president accused Republicans of undermining the health care law’s implementation. “It has come at a cost for the country,” Obama wrote, “most notably for the estimated 4 million Americans left uninsured because they live in GOP-led states that have yet to expand Medicaid.”

But expanding Medicaid also has come at a cost.

Medi-Cal, as Medicaid is called in California, has enrolled almost 5 million people since January 2014, when the Affordable Care Act expanded eligibility for the safety-net program. In 2010, 7.4 million Californians were covered by Medi-Cal. Today it’s more than 13 million, about one-third of the state population.

Covered California, the health care exchange where federally subsidized policies can be purchased from private insurers, has enrolled just 1.4 million people since it went online in the fall of 2013.

Is the dramatic expansion of Medi-Cal a success story?

Not if you run a hospital. California pays Medi-Cal providers less than it costs to provide the care to patients. The more people they treat, the more money they lose.

In 2009, hospitals in California were losing a total of about $2 billion annually on the care they provided to Medi-Cal patients. Today it’s about $8 billion.

The federal government provides matching funds for state Medicaid programs. To help California bring home every available federal dollar, the hospitals came up with the idea of paying a fee to the state, which would be put into the Medi-Cal program to help it qualify for matching funds. Then the state would have more money and could pay the hospitals for providing care to Medi-Cal patients.

It may sound like a game of three-card monte, but the California Hospital Association says the program has helped hospitals lose only $5 billion on Medi-Cal patients instead of $8 billion.

The hospital fee program was written into state law in 2009 and renewed three more times, most recently in 2013. It was well-supported but still bumpy: The state took a $1 billion annual cut of the hospital fees to pay for children’s health programs, and occasionally some of the hospital fees were diverted to other budget priorities.

So the hospitals are asking the voters of California to lock the hospital fee program into the law permanently. It will be on the Nov. 8 statewide ballot as Proposition 52, the Medi-Cal Funding and Accountability Act.

The measure has the endorsement of …

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Everybody Getting Sick of Obamacare

MedizinTo keep a comedy plot moving, things have to go terribly wrong, somebody has to hide the truth, and it all has to come crashing down at the end in something like a spectacular pie fight.

The whipped cream is about to hit the Affordable Care Act.

Covered California just announced that the average cost of premiums for policies sold on the state health insurance exchange will be 13.2 percent higher next year. In 14 other states, premiums for widely sold silver plans will rise an average of 11 percent.

The worse news is why: Health care costs are higher, two temporary programs to reduce risk for insurers are ending, and people signing up have been sicker than expected.

That’s the opposite of what was intended. The Affordable Care Act was supposed to reduce health care costs, outgrow its need for insurer subsidies, and get young and healthy people into the risk pool with its mandate to buy health insurance.

The individual market may have reached the dreaded death spiral — the point where insurance is so costly that only people who are sick will buy it, driving rates even higher.

There’s evidence of this in the latest numbers from the law’s “risk corridor” program, which is supposed to collect money from insurers with healthier customers (lower costs), and give that money to insurers with sicker customers (higher costs). For 2014, the program collected $362 million but owes $2.87 billion. For now, insurers will receive only 12.6 percent of the money they expected.

This has added to financial problems at the nonprofit member-run health plans known as co-ops. In 2014 there were 23 co-ops around the country. Today there are 11 — seven that lost money in 2015 and four that just announced they’re going out of business.

Five health plans have filed lawsuits over underpayments from the risk corridor program, which is set to end this year along with a second program that provides reinsurance. A third program for risk adjustment is permanent, although a Maryland health plan is challenging it in the courts.

Meanwhile, a federal judge ruled in May that the Obama administration is illegally giving money to insurance companies to pay for a cost-sharing reduction program that subsidizes the deductibles and co-payments of low-income people who buy silver policies on the exchanges.

In mid-2013, the administration removed the cost-sharing reduction program from its 2014 budget request and decided to pay for it with money that Congress appropriated for another purpose.

Congress has been trying for over a year to …

Click here to read the full story at the L.A. Daily News

“Honeymoon” Period is Over For Government Run Health Care

The announcement yesterday by Covered California that the statewide premium increase for Obamacare will be 13.2%, up from approximately four percent in each of the last two years, signals that the “honeymoon” period is over for government run health care in California and elsewhere.

The State of California and its taxpayers needs to brace itself for another major threat to its long-term fiscal sustainability because things could get ugly pretty quickly depending on many variables that determine California’s extraordinary level of government run health care spending.

The precise impact of the fiscal hit posed by the premium increases is difficult to pinpoint at this early stage, but there is no question that the state’s exposure to significant increases in Obamacare-driven health care expenditures will increase dramatically over the next few years.

Total costs for Obamacare in California are staggering, which means that any tweak to the program by the federal government could immediately expose the state to billions, or even tens of billions of dollars in increased costs unless corrective action is taken.

This fact is particularly troubling given the extremely poor track record of the California Democrat Legislature in being proactive on fiscal issues such as the state budget and the pension issue.

For example, Republican Presidential nominee Donald Trump says he plans to completely repeal Obamacare, which would blow a hole in California’s budget of tens of billions of dollars, unless coverage is dropped for millions of Medi-Cal recipients.

A few sets of summary figures paint a good picture the state’s total exposure in the event that federal government shifts more responsibility for the financing of Obamacare to the states, or decides to pull back all together.

According to the state’s approved 2016-17 budget, total state spending for Health and Human Services totaled $54 billion for 2016-17, which even now surpasses K-12 Education as the biggest category of state spending, which received $51.5 billion in 2016-17.

California State spending for Health and Human Services, primarily Medi-Cal, has increased by 46% since 2011-12, jumping from only $37 billion in 2011-12 to the $54 billion for 2016-17 noted above.

But if you add federal spending to the equation, the California Department of Health Care Services received a total $93 billion in 2016-17, nearly double the $47 billion received in 2011-12, according to the California Department of Finance.

The state’s Medi-Cal caseload has exploded in the past few years, increasing from 8 million in 2012-13 to a projected 14 million in 2016-17, covering over a third of the state’s population, according to the Governor’s May Revise.

For 2016-17 the state’s share of the Medi-Cal expansion under Obamacare is $16.2 billion ($819.5 million General Fund).  But this only assumes a 5% share of the cost for the State of California.  By 2020-21, the state share will double to 10%, while the federal government is supposed to continue to pick up 90% of the costs.

I don’t believe it’s reasonable to assume that these formulas will stay so one-sided for long, particularly in light of increased premium pressures as well as fiscal pressures on the federal budget.

Absent changes to current federal and state law, my preliminary analysis suggests that the state’s annual cost increases related to Obamacare could easily reach into the billions of dollars per year in the very near future, and significantly higher if the federal government decides to further shift its costs to the states, which is inevitable.

Future double-digit annual premium increases will only serve to exacerbate state costs and encourage more cost shifting by the federal government.

It is important to note that health care premium inflation is not something that will subside anytime soon, and the trend is only likely to increase for the foreseeable future.

The low-premium increases over the last two years of 4%, was a complete anomaly based on the historical 20-year averages.

Public agencies in California commonly assume an average of 10% annual increases in employer health care premiums.  According to the California Health Care Foundation, individual premium increases rose by 15% in 2014, 9% in 2013, 8.2% in 2012, and 10% in 2011—roughly an average of 8.75% per year.

“The key drivers of health care premium increases are advances in medical technology and subsequent increases in utilization, excel price inflation for medical services, cost-shifting, the high cost of regulatory compliance, and patient lifestyles (e.g. physical inactivity and increases in obesity),” according to a study by the Wellpoint Institute of Health Care Knowledge.

To sum up, the federal government’s future commitment to Obamacare financing is shaky at best, and any major changes could spell financial catastrophe for the State of California unless bold political leadership is exercised in Sacramento—something that has been in extremely short supply on the Democratic side of the aisle in Sacramento for quite some time.

David Kersten is executive director of the Kersten Institute for Governance and Public Policy (www.kersteninsitute.org) . He is an expert on fiscal issues and teaches a masters’ course on public budgeting for the University of San Francisco. 

Covered CA projects large hike in 2017 health premiums

As reported by the Sacramento Bee:

Covered California announced projected average rate increases of 13.2 percent for health insurance bought next year through the state-run system, as consumers were urged to “shop around” to avoid large premium hikes.

Covered California executive director Peter Lee said there are multiple reasons for the increase: hikes in specialty drug costs, an expected loss of federal aid to insurance companies and “sicker people” enrolling in two of the state’s biggest providers during the off-season special enrollment period.

Lee said the premium hikes are not due to health insurer profits. “We kicked the tires hard. … This isn’t about health plans making big buckets of money. It’s about rising costs of health care.”

Rate hikes for Covered California policies in the last two years came to about 4 percent, putting the three-year average at 7 percent. Lee noted that 90 percent of Californians will still be eligible for federal subsidies to help cover their Covered California premium costs.

Lee noted that the average increase varies widely by …

Covered California Is No Model for Obamacare Reform

covered caWith the recent announcement of UnitedHealth Care’s abandoning Covered California and most other Obamacare exchanges around the country, its beneficiaries will have fewer plans to choose from in 2017. We can expect this shrinking number of health plans to take advantage of market power to increase premiums. Obamacare’s supporters believe the solution is to give state-based exchanges the power to act as “active purchasers” limiting consumers’ choices like Covered California does today.

Under Obamacare, consolidation is widespread. Hospital mergers increased 44 percent from 2010 to 2014. As for physicians, Marcus Welby, MD is an artifact of history. In 2014, 39 percent of physicians worked in practices with at least eleven physicians, versus fewer than one quarter three decades ago. The five largest national health insurers are merging into three, assuming the federal Department of Justice approves the consolidations.

Admitting Obamacare is leading to shrinking choices, its supporters now argue less competition among health plans is just fine, as long as the exchanges are granted even more power over the plans insurers offer.

California is one of only four states where the Obamacare exchange, called Covered California, has the statutory authority to act as an “active purchaser.” Covered California defines just one benefit design in each “metal” tier. It dictates, for example, a primary-care visit has a $45 co-pay for those with Silver plans; or that a family deductible is $4,500. According to Peter Lee, Executive Director of Covered California, consumers do not really value being able to choose plans with different deductibles or copays. “What’s the difference between them? Tweaks on co-insurance and insurance babble that most consumers don’t understand.”

In order to cut out this “babble”, Covered California only accepted 12 of 32 insurers which initially showed interest in participating in 2014. Some rating regions have more insurers competing than others. Obamacare’s supporters were relieved when Professor Richard Scheffler of the University of California, Berkeley, and colleagues published research concluding rating regions with fewer insurers (such as Santa Clara County) had lower premium hikes in 2015 than those (such as San Francisco) with more. The authors credited Covered California’s active purchasing power for this counter-intuitive result.

Examining Silver plans, the researchers concluded the average statewide premium for a 40-year old increased 3.3 percent in 2015; and a 10 percent decrease in insurer competition in a rating region was associated with a reduction in the premium hike to 3.0 percent. In New York, where the exchange is not an active purchaser, the relationship went in the direction one would expect in a normal market.

The average statewide premium increased 2.1 percent; and a 10 percent decrease in competition in a rating region was associated with an increase in the expected growth rate to 3.0 percent.

Explaining California’s counter-intuitive result, Professor Scheffler and colleagues suggest health plans in rating regions where there are fewer competitors can negotiate excessively profitable contracts with hospitals and doctors; and this gives them more room to yield when negotiating rate hikes with Covered California. Another way to put it might be that uncompetitive insurance markets allow insurers to gouge providers, then Covered California gouges back from insurers.

A policy to give that power to other states’ exchanges ignores the bigger picture. Comparing two states’ Obamacare exchanges is like comparing the taste of two rotten lemons. Health plans in exchanges in both California and New York are “highly concentrated” as defined by the Department of Justice and Federal Trade Commission. In other words, they would be closely investigated for antitrust violations if they operated in a normal market.

Nevertheless, the average premium hike in California in 2015 was 3.3 percent and in New York it was only 2.1 percent.  By 2015, we already had one full year of Obamacare behind us. Everything turned upside down a year earlier. According to the Manhattan Institute, a 40-year old man’s premium went up by 33 percent in California in 2014, versus declining 45 percent in New York.

And there is the problem of network adequacy. Professor Simon F. Haeder of the University of Wisconsin – Madison, and colleagues, found hospital networks were smaller in insurers’ Covered California plans than in their commercial plans in two-thirds of cases. Networks in their Covered California plans were 17 percent smaller (measured by hospital beds) than in commercial plans. Insurers are not limiting premium hikes by yielding excess profits to Covered California, but by reducing access to hospitals and doctors.

Rather than giving other state exchanges Covered California’s power to limit consumers’ choice of health plans with narrow networks, other states should be demanding more freedom from Obamacare’s federal regulations and passing that freedom on to consumers.

enior fellow at the Pacific Research Institute and a Senior Fellow at the National Center for Policy Analysis.

This piece was originally published by Fox and Hounds Daily

Bill Would Allow Illegal Immigrants Access to Obamacare in CA

covered caState Democrats forged ahead with legislation designed to fill out Covered California’s enrollment ranks with unlawful and undocumented immigrants.

Following the state Senate, the Assembly has “passed a measure that would remove a critical barrier to Covered California and allow all Californians to access the state health insurance marketplace, regardless of immigration status,” as State of Reform noted. The legislation, introduced as Senate Bill 10 by state Sen. Ricardo Lara, D-Bell Gardens, “would authorize the state to apply for a federal waiver that would allow undocumented immigrants to buy unsubsidized health coverage through Covered California.”

“Currently, undocumented immigrants are barred from using the state marketplace under the Affordable Care Act even when using their own money and instead must go directly to a broker or health plan to purchase health insurance. During its April board meeting, a Covered California staff report gave the green light to pursue this waiver from the federal government, and is now awaiting direction from the Legislature and governor.”

Republican rollover

Despite massive Republican resistance to the implementation of Obamacare, with a “repeal and replace” approach adopted by elected officials at the state and federal level, California’s GOP quietly folded in the face of the expansion plan. SB10 sailed through both houses of the Legislature with bipartisan support, as the San Jose Mercury News recalled.

Prior to the vote, key Republicans tried to keep a low profile. Leaders “in both legislative chambers declined to comment on whether the bill has enough support to pass,” according to CALmatters. “But a Republican strategist said the California GOP might be more likely to support the measure than its national counterpart, to avoid ceding the state’s Latino vote to the Democrats.”

The ins and outs of the complex Affordable Care Act have lent some circumstantial evidence to the notion that, despite President Obama’s claims to the contrary, at least some enrollment by the undocumented was envisioned or prepared for. An ACA provision “called the ‘innovation waiver’ allows states like California to change portions of the law as long as the state makes coverage available to more people and as long as the federal government doesn’t get stuck footing the bill,” reported Fox News. And though the impact of that population on Covered California has not been fully estimated, it would be significant: Lara suggested nearly 400,000 unlawful immigrants “would be eligible to receive health insurance,” according to the channel.

Federal hurdles

But the political landscape has become uncertain enough at the federal level to create an extra layer of difficulty — and urgency — for Lara and his allies. “The proposal needs federal approval, an involved bureaucratic process that could be thwarted under a new presidency. So California advocates are acting swiftly to get their application to President Obama before he leaves office, and to do so must win support from at least a few California Republican lawmakers,” Capital Public Radio noted. “Lara put an urgency clause on the bill, which requires a two-thirds majority vote to pass the Legislature. At least one Republican state senator has indicated his support” — Andy Vidak, R-Hanford — “a cherry grower in the Central Valley’s Kings County, which has a 53 percent Latino population.”

Even with adequate Republican support for urgency, however, SB10 could be stymied inside the Beltway. Public comment review requirements left some analysts skeptical that the new rules could be approved before a change in administrations, CALmatters reported. “And even if the proposal works its way through that maze and is reviewed by the Obama administration, he said, it may not be approved because of current federal guidelines. The U.S. Department of Health and Human Services has strict rules for modifying the Affordable Care Act marketplaces. They might have been put in place to avoid creating a precedent that opens the door to future changes the current administration would deem” problematic.

This piece was originally published by CalWatchdog.com

CA nears letting undocumented immigrants buy health care

As reported by the Sacramento Bee:

Immigrants living in the country illegally would be allowed to buy health coverage on California’s insurance exchange under a bill that passed the state Assembly on Tuesday.

Already at the forefront of enacting immigrant-friendly policies, California could become the first state permitting immigrants to use the insurance exchanges created by the new federal healthcare law. Senate Bill 10 would have California petition the federal government for the right to do so. Undocumented immigrants using the exchange would not be eligible for the public subsidies that extend to other lower-income shoppers.

The measure passed 54-19, with two Republicans locked in tough re-election campaigns joining every Democrat in voting in favor. The measure now heads to the Senate for a final vote, before advancing to Gov. Jerry Brown.

Earlier in May, California began extending full benefits to undocumented children enrolled in Medi-Cal, the state’s low-income insurance program. …

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