Executive realities and immigration

The Supreme Court will hear a legal challenge to President Obama’s executive action granting deportation relief to millions of law-abiding unauthorized immigrants living in the United States. The challenged executive action, known as “DAPA” (Deferred Action for Parents of Americans and Lawful Permanent Residents), allows parents of children who received protection from deportation under an earlier Obama executive action to apply for such protection themselves. Those who successfully receive deferred action from deportation are then eligible to apply to legally work in the United States.

Conservatives roundly went ballistic in response to this convergence of humanitarian immigration policy and liberal executive power, calling the president’s program “domestic caesarism,” accusing him of unilaterally decreeing “stealth amnesty.” The legal challenge followed a similar tack, asserting that DAPA amounted to a power grab against the will of Congress and a disregard of the president’s duty to take care that immigration laws be faithfully executed. In short, these opponents of executive action argue that the president’s programs are both unprecedented and usurp congressional power.

This is nonsense. As I wrote shortly before the president announced DAPA, these immigration actions do little more than formalize existing law enforcement priorities while adding a modicum of humanitarian dignity — allowing family units to remain intact, and allowing those who won’t be targeted for deportation to earn an aboveboard, non-exploitative living.

But don’t take my word for it. A group of ex-immigration and Homeland Security officials submitted an impressive brief with the Supreme Court in support of the president’s executive actions stating much the same. They show that the president’s immigration actions are hardly unprecedented, but rather follow a long line of similar actions by most other modern presidents. Moreover, these actions are fully within the reach of presidential power to enforce our immigration laws and protect national security.

For instance, President Eisenhower twice took executive action to authorize the admission of whole classes of immigrants into the United States. In 1956, he allowed roughly one thousand foreign-born children who had been adopted by American citizens abroad to gain entry into the United States. While this circumvented immigration quotas enacted by Congress, Eisenhower argued it was justified to keep families together — particularly for armed service members who adopted children while stationed abroad.

Eisenhower also granted U.S. admission to Cubans fleeing communism after Castro’s revolution. This program was continued successively by Presidents Kennedy, Johnson, and Nixon.

Most notably, President Reagan enacted a deferred action program strikingly similar to President Obama’s. Following the 1986 immigration reform law passed by Congress, Reagan launched a “Family Fairness Program.” This program gave deferred action to family members of legalized aliens.

This program went directly against the reform law enacted by Congress. The Senate Judiciary Committee Report accompanying the legislation stated: “the families of legalized aliens will obtain no special petitioning right by virtue of the legalization” and “will be required to ‘wait in line.’” In fact, a legislative amendment fixing this family split was considered and rejected by Congress.

Undeterred by signals to the contrary from Congress, the Reagan administration gave deportation relief to these family members anyway. Reagan recognized the distinction between granted permanent legal status (which only Congress could do, and opted not to) and merely deferring deportation (which his Attorney General was empowered to do). Like Eisenhower, he was also moved by the humanitarian case for maintaining families.

This is strikingly similar to President Obama’s executive actions. Congress considered and rejected the DREAM Act, which would have created a pathway to citizenship for certain immigrant children. Obama then took executive action to provide this class of immigrants with the next best thing: deferred deportation. And to keep families together, he followed this policy up with DAPA, which would protect these children’s parents from deportation, too.

President George H.W. Bush expanded Family Fairness in 1990 to reach even more families. In response, Congress actually passed legislation grant legal status to family members, going further than what Reagan and Bush could do through executive action.

Most other modern presidents, including Ford, Carter, Clinton, and George W. Bush, have employed some variant of deferred action. This is a practical necessity to efficiently enforce the law because of the scarce and insufficient resources that Congress allocates to our immigration agencies.

But deferred action also protects national security and public safety. Those granted protection from deportation feel safe to emerge from the shadows and trust in society’s institutions, like police and hospitals. “Communities are safer,” the brief argues, “when undocumented immigrants who are either victims of crimes or witnesses to crimes feel secure enough to report the crimes to the police rather than avoid contact for fear of being deported.”

It is also well within the executive branch’s power to enforce the law in a way that furthers humanitarian interests, like keeping families together. “Immigration officials at all levels have been called upon for decades to exercise prosecutorial discretion in a manner that is faithful to the rule of law without sacrificing the preservation of, and respect for, family units to the greatest extent practicable,” the brief reminds us.

These former DHS officials bring a reality check to a needlessly overheated policy debate by grounding President Obama’s executive actions in our history. These actions simply continue a long tradition of the president using humanitarian and national security interests to prioritize which classes of unauthorized immigrants to target for deportation.

One more note on this Supreme Court challenge that isn’t in the DHS officials’ brief. The Fifth Circuit Court of Appeals looked at past uses of deferred action and determined that these programs are usually adopted in “response to war, civil unrest, or natural disaster.” The court determined that none of these exigencies were at play here.

However, Central America is in the grips of a growing humanitarian crisis. It is the most deadly region in the world, as violent transnational criminal street gangs operate with impunity throughout the region. They coerce young boys into joining their ranks and come after those who resist. They rape and murder, leaving bloodshed in the streets and terror in the hearts of peaceable neighbors. Governments have been able to quell or control the violence, and indeed, law enforcement is often implicated in aiding the gangs.

This crisis has built up over years, and it was substantially driving migrant flows into the United States. It’s also what makes the ethics of the decision to deport so fraught. The degree of violence faced by people in Central America is rising to the level of an international emergency, and it’s becoming increasingly hard to morally distinguish Central American refugees from those fleeing Syria.

This is the geopolitical context of the president’s executive actions. By all means, let’s focus our limited immigration resources on removing criminals and security threats. But the situation in the home countries of these migrants makes it all the harder to, in good conscience, oppose a policy designed to give some small legitimacy and relief to law-abiding families in the United States.

The case for a right to request a better work schedule

Improving life for families in the workplace is taking on increasing importance in our 2016 presidential debate.  While the parties have split on paid family leave, there’s another important policy that’s going overlooked that might just be able to draw bipartisan support.

The Democratic candidates for president have uniformly lined up behind extending twelve weeks of paid family leave to workers to care for new children or ailing family members — a benefit guaranteed by every other developed country in the world.

The Republicans, on the other hand, have uniformly lined up against requiring this kind of workplace benefit. Gov. Jeb Bush and Sen. Ted Cruz both think it’s an unjustifiable new government burden on business.  Sen. Marco Rubio also blasted the Democrats’ “costly federal mandates” and instead proposed a weak tax credit for businesses that would do little to actually expand paid leave to more workers.

Gov. John Kasich too would defer to the employer-based paid leave status quo.  But he also argued we need to think more broadly about workplace flexibility.  “The one thing we need to do for working women is to give them the flexibility to be able to work at home online,” he said. “And we need to accommodate women who want to be at home, having a healthy baby and in fact being involved, however many years they want to take care of the family.”

While paid leave is extremely important, Kasich makes an important point: that there is more to creating a family-friendly workplace than just a few weeks off when a new child is born.  As the New York Times recently put it: “After the first few weeks of a child’s life, working parents have at least 18 more years to juggle work and child rearing.”

There’s a reform growing in popularity that would help parents manage this juggle.  Known as the “right to request,” working parents in countries like the United Kingdom, Germany, the Netherlands, and New Zealand have a statutory right to ask their employers for flexible work arrangements, such as working from home or changing their hours.  Employers do not have to accept the request, but must consider it in good faith and may only decline it for legitimate business reasons.  These reasons are often specified by statute, and if an employee feels her request was wrongfully denied, she generally has a right to appeal.

These “soft touch” laws impose no financial mandates on business.  Instead, they simply empower workers to seek a family-friendly work schedule without fear of retaliation or baseless rejection by their employers.  And with dual-earner families now the norm, these laws make it easier for parents to carve out some much needed space for family life in their work schedules.

Right to request might employ a soft touch, but it’s far from toothless.  During the first two years of the U.K.’s right to request law, one study found that 14 percent of employees requested a flexible schedule.  Yet employers approved more than 80 percent of these requests.  In fact, most employers are finding the law has a valuable impact on employee retention and morale.

The law has been so successful that the U.K. has repeatedly expanded it: first to cover parents with children of all ages, and again to cover workers caring for ill family members.  Recognizing the value of flexible work for business productivity, the U.K. ultimately extended right to request to all workers in 2014.

These laws are slowly making their way across the Atlantic.  Vermont and San Francisco have both adopted right to request laws.  And in Congress, Sen. Bob Casey and Rep. Carolyn Maloney have introduced the Flexibility for Working Families Act, which would provide a national right to request for working families across the country.

There’s a lot to like in these laws.  Rather than impose financial burdens on business, they facilitate fairer and more even-handed discussions between firms and their employees. Today, only unions and highly sought workers (like Speaker Paul Ryan) enjoy the bargaining power necessary to confidently command quality-of-life accommodations from their employers.  Right to request democratizes workplace flexibility by boosting the standing of all workers.

Right to request also stands for the principle that work life should be subsidiary to family life, and not the other way around.  In an era where work increasingly encroaches on other aspects of our lives, right to request boldly reasserts the primacy of family life.

A reform that empowers workers while promoting family values and preserving employer discretion ought to be the kind of policy that both parties could rally around.  Let’s hope they do so.  The Democrats’ family leave policies are an important protection during a crucial time in a family’s life.  But we ought to go further to even the deck for families throughout their careers by encouraging the kind of job flexibility that brings our workplaces into the twenty-first century.

The nascent bipartisan momentum for fighting poverty

The end-of-year budget deal struck in Congress has rightly been hailed as a surprising triumph for a legislative body weakened by years of gridlock.  But it was also a major success for millions of low-income working families, who benefit from anti-poverty tax code programs that were finally made permanent by the budget deal.

The Earned Income Tax Credit is our most successful anti-poverty program, saving six million people from poverty each year.  It provides refundable tax benefits to low-income working families that increase with their earnings up to a certain income level.  The budget deal solidified EITC expansions for married couples and families with three or more children.

Congress shouldn’t stop there, however.  It should seize this newfound momentum to enact commonsense EITC improvements that have support on both sides of the aisle.

The EITC enjoys rare bipartisan support.  While conservatives wavered in recent years, they’ve largely come back around to the tax credit that they dreamt up in the 1970s, heartened by the EITC’s ability to promote work.  Likewise, liberals support the EITC because it puts extra money in the pockets of the poor.

Both parties also broadly agree on how to continue making the EITC better. For instance, leaders from both parties support expanding the number of workers benefiting from the EITC.  The current EITC provides generous benefits to working families, but provides little to childless workers.

As President Obama briefly alluded to in his final State of the Union, both he and Speaker Paul Ryan have proposed increasing EITC benefits for childless workers.  But they disagree on how to fund it.  Liberals like Obama and Sen. Patty Murray favor closing corporate tax loopholes, while conservatives like Ryan want to pay for it through cuts to other anti-poverty programs.  While hardly insurmountable, this funding disagreement poses a hurdle to expanding the EITC.

A better place to start may be with reforming how we pay the EITC to current beneficiaries.  Today, families receive their EITC in a lump sum through a single annual tax refund.  This makes it costly to access benefits that families have earned, as many find it necessary to pay for tax preparation services.  It also weakens the connection between EITC benefits and work.  According to economist Raj Chetty, only 5 percent of those eligible for the EITC understand that its value increases as their earnings rise — a key policy tenet behind the EITC.

Both liberals and conservatives have embraced ideas to fix this by making periodic EITC payments throughout the year.  In Speaker Ryan’s 2014 anti-poverty plan, he endorsed converting the EITC into a wage subsidy so that it would automatically top off a worker’s paychecks.  Aside from simplifying access and tightening the connection to work, Ryan also favored periodic payments because they would reduce fraud and defuse the case for a higher minimum wage.

Liberals rightly balk at undermining the minimum wage, but have nonetheless endorsed variations on periodic EITC payments of their own.  Proposals from the liberal Center for American Progress and Sen. Sherrod Brown would allow workers to tap into some of their EITC refunds early to cover unexpected expenses.  These proposals help reduce the boom-and-bust budget cycle experienced by low-income households under the current EITC.

Aside from the potential for increased EITC participation, providing a periodic payment option would be virtually costless to administer.  And there’s already evidence that this kind of program works.

In Chicago, researchers enlisted 343 families to receive half of their expected EITC refund in four periodic payments.  By receiving periodic payments, these families gained improved financial stability and greater disposable income.  They built up their savings while avoiding costly short-term debt and predatory private refund advances.  Ninety percent wanted to sign up for periodic payments again.

Even better, periodic payments may increase earnings among participants. Economists like Chetty have found that making the program’s core incentive more apparent — that earning more nets you a higher refund — tends to increase recipients’ earnings.  If periodic payments help increase the general understanding of the connection between work and refund size, EITC recipients’ total earnings may very well increase under such a reform.

The details of the program will need to be hashed out.  Conservatives (including Sen. Marco Rubio) support regular payments made through workers’ paychecks, whereas liberals have so far supported less frequent payments through government checks.  The Advance EITC, which was scrapped in 2010, essentially tried the conservative method, but failed to attract many beneficiaries because it was run through employers and ran the risk of overpayment.  Still, EITC expert Steve Holt notes that periodic payments for tax credits like the EITC have proven highly popular in countries like Australia and New Zealand.

Giving working families the chance to receive their EITC throughout the year would provide them with much-needed financial relief and would strengthen the program’s work incentives.  Liberals and conservatives can coalesce around this reform, and keep the budding legislative momentum around improving the EITC going in the new year.

Coaxing and wooing ObamaCare’s opt-outs

I wrote recently about how flimsy bronze plans were discouraging some people from purchasing insurance on ObamaCare’s health exchanges at all.  These people are likely, on the whole, healthy and relatively young, upsetting the careful risk pool balance that insurers need to keep the exchanges sustainable.  United Health Group has signaled that it may exit the exchange business next year altogether because of the destabilizing bad customer mix.

There’s essentially two ways fix this problem: (1) make the exchanges’ low-cost insurance options more attractive, and (2) increase the consequences of going uninsured (i.e., raise the individual mandate penalty).

A new study from the Kaiser Family Foundation focuses on the latter, finding that the average penalty faced by the current uninsured eligible to buy on exchanges will increase from $661 to $969 next year.  For about 3.5 million people, a bronze plan will cost less than their prospective tax penalty.  So if they are smart cost-benefit consumers, they should purchase insurance.  For 7.1 million, however, the cost of insurance will still exceed their hit from the mandate’s penalty.

This is, on the whole, good news for getting more people insured and shoring up the health exchanges.  Certainly, tightening the mandate will push more people into the exchanges and make the business more sustainable for insurers.

But some — perhaps many — of those 3.5 million who are expected to opt for insurance this time around will sign on to the health exchanges and be disappointed by what they can afford.  Kaiser tells us that these individuals can get a net-$0 bronze plan (the cost of the bronze plan is less than the penalty).  While buying this makes economic sense, a bronze plan isn’t a very appealing option for many people.  It comes with high deductibles and, aside from routine preventive services, leaves individuals self-funding their insurance until they hit that deductible.

Moreover, bronze plans aren’t eligible for ObamaCare’s cost-sharing subsidies, meaning that individuals won’t receive help with their copays and deductibles.  But for many of the 3.5 million, a silver plan — which is both more comprehensive insurance and has cost-sharing subsidies — will have premiums out of reach for their budgets.

Among the remaining uninsured, those most likely to get fed up by the disappointing options they can afford are the least risk averse.  On the whole, this will be the young, healthy people (the so-called “young invincibles”) that insurers are relying on to financially support their risk pools.

So a tighter individual mandate will help incentivize more of the remaining uninsured to sign up.  It will certainly increase ObamaCare’s take-up rate, which stood at 35 percent of exchange-eligible individuals in June.

But at the end of the day, we’ll need to improve the appeal and quality of the most affordable plans on the exchanges to capture more of the people that we need to keep the exchanges sustainable.  Tightening the individual mandate will only do so much.  And ultimately, we want people to have insurance that truly protects them from the risk of sickness and injury, not just from a tax penalty.

ObamaCare’s Cost Control Dilemma

Health reform might be quietly approaching a crossroads. While the primary goal of ObamaCare was to expand health insurance, a secondary but extremely important goal of the law was to make healthcare spending more cost-effective. These costs are increasingly eating up our public and private budgets, consuming a whopping 17 percent of our national GDP.

But ObamaCare juggles two different theories of cost control: increasing the efficiency of care, and promoting competition among private insurers financing care. These theories aren’t necessarily always in tension, but they are beginning to butt heads.

In short, ObamaCare may have inadvertently set off an arms race in the healthcare industry. The law creates a number of incentives for hospitals and physicians to integrate their care for a patient in order to make treatment more cohesive and more efficient. These incentives were meant to both control costs while getting more bang for the buck in healthcare spending via higher quality care. So the law promotes integrated care networks like accountable care organizations and moves toward global bundled payments to hospitals for the total episode of treatment. This in turn has fueled large mergers among physicians and hospitals in order to better coordinate their care — mergers that antitrust regulators have agreed to tolerate if the efficiency gains are shown to outweigh the costs.

This has divergent effects on our various healthcare payers. We have a highly fragmented healthcare system, providing single-payer insurance for the poor and old, government-run hospitals for veterans, and private market-based insurance for just about everyone else. Other countries have a single system for everyone, be it single-payer, socialized medicine, or commercial insurance, which makes it easier for them to craft a single cohesive cost containment strategy.

In the U.S., however, private insurers are likely to be hit harder by provider mergers than public insurers like Medicare and Medicaid. The quality-based reimbursement programs crafted by the Affordable Care Act were foremost designed to control costs for Medicare. But the side effects of these programs — provider mergers — hurt private insurers by giving provider networks more leverage to negotiate higher fees for medical services. Larger networks become “must-have” networks for insurers, and thus can command higher prices. These prices then get passed on to consumers through higher premiums.

To keep up and regain their standing, insurers have merged in response. If regulators approve the proposed mergers, the number of large national insurance companies would fall from five to just three.

Antitrust experts warn that these mergers could jeopardize a key piece of ObamaCare’s consumer cost control program, and in turn, its strategy to increase the availability of insurance: the health exchanges. These exchanges rely on having a multitude of insurance offerings to foster competition and drive down prices for consumers. With fewer companies, consumers would have fewer available choices to pick from on the health exchanges.

Aside from provider mergers, another part of ObamaCare may also be spurring the wave of insurer mergers. The law sets a minimum medical loss ratio of 85 percent for most large insurers, meaning that insurers must spend 85 percent of the premiums they take in on medical care, devoting the remaining 15 percent on administrative costs and profits. This essentially puts a cap on insurance companies’ profits, so one of the remaining ways to boost profits is by scaling up with another company and economizing administrative costs.

In response to insurance mergers, more providers are expected to consider merging to ratchet up their own bargaining power. So insurance and provider mergers feed off of each other in a chain reaction.

The upshot of these ricocheting mergers exposes a tension in our fragmented healthcare system between (a) controlling health care costs at a systemic level, and (b) controlling health financing costs for individual consumers. Doing the former relies in part on increasing efficiency among providers, which entails some degree of consolidation and integration. Doing the latter relies on preserving competition among private insurers (meaning no consolidation), as well as government subsidization of out-of-pocket costs.

But here, doing (a) may compromise (b) because it creates a power imbalance that favors consolidated providers over private insurance companies. Big provider networks then charge heftier fees to insurers, which get passed on to consumers through higher premiums. And on the individual market, these higher fees ultimately hit government coffers through increased subsidies for purchasing insurance on the exchanges.

Americans and their political leaders tend to be reflexively skeptical of big companies merging, worrying about price gouging from excess market power. But there’s an argument that health insurance might be different — that bigger insurance companies might have some benefits.

For starters, when it comes to negotiating prices with providers, insurers’ incentives are aligned with consumers. They aim to get the best price possible, which keeps premiums low. Larger and stronger insurance companies may be better positioned to do just that.

The extreme result in health insurance consolidation is a single-payer system, where there is only one (typically public) insurance institution. Many liberals favor such a system in part because of its absolute negotiating power to control costs. Consolidating private insurers essentially approximates this feature of a single-payer system by capturing some of this negotiating clout. Insurers thus argue that by joining forces, they can better push back on provider attempts to hike healthcare costs.

Law professor and healthcare antitrust expert Thomas Greaney calls this the “Sumo Wrestler theory” of health economics: the notion that a large insurer will effectively bargain down the prices demanded by large providers, which savings will be passed along to consumers. According to Greaney, “There is no compelling economic evidence that ‘bilateral’ monopoly produces better results for consumers; and even if a dominant payor succeeds in bargaining successfully with providers it has little incentive to pass along the savings to its policyholders.”

But under ObamaCare, this would seem to depend on which side of the minimum medical loss ratio an insurer is on. If it is below 85 percent, then any concessions from providers will be passed along to consumers, either via reduced premiums or through rebates mandated by law.

Moreover, federal and state regulation—particularly under the Affordable Care Act—have virtually transformed parts of the private insurance business into quasi-public utilities. Most states review proposed premium increases, as does the Department of Health and Human Services in some cases. The ACA’s medical loss ratio rules diminish the incentives to unjustifiably increase premiums. Along with the ACA’s regulations over plan pricing, essential benefits, and guaranteed issue, these oversight roles guard against unchecked insurer power.

When providers integrate their care, this is largely a good thing for patients, as it improves the quality and consistency of their treatment. But when providers merge as a consequence, this ratchets up the pressure on insurers to merge too in order to bargain more effectively. This in turn undermines the competition ethic that health reformers want to foster in the market for individual insurance.

This leaves health reformers in a bind. While insurance mergers may even out the leverage discrepancy inadvertently caused by ObamaCare, the most leverage still lies with the Obama administration, whose Department of Justice has the power to halt any merger that falls on the wrong side of antitrust analysis. Ultimately, the administration will need to decide how to reconcile its dueling theories of healthcare cost control: Should we increase efficiency, or increase competition?

What could have been…

How’s this for a public policy counterfactual: What would our healthcare costs look like today if the biggest government insurance program had spent the last 50 years regulating the costs of care?  Turns out we were one congressman’s pen stroke away from living in that world.

I recently stumbled upon this New Yorker piece from February by historian Julian Zelizer.  It’s an adaptation of his book “The Fierce Urgency of Now,” which tells the story of the arduous passage of Medicare.  Medicare’s legislative journey is reminiscent of the Affordable Care Act’s: a compromised effort at universal healthcare nonetheless attacked as socialized medicine by ideological and industry opponents.

As Zelizer explains, the key congressional leader in allowing Medicare to pass was House Ways and Means Chairman Wilbur Mills, a Democrat from Arkansas.  After the bill passed the House and Senate, Mills saw amendments from Senate liberals as the last remaining threat to the bill, and was determined to remove these threats in conference committee:

[I]n the conference committee, Mills systematically knocked down each amendment. He made only one major compromise, that hospitals and doctors would determine the “reasonable charges” for costs rather than the government doing so through regulated prices. He incorrectly assumed that this would not result in huge costs.

That’s how close we were to Medicare regulating health service fees.  The government-regulated pricing that Mills rejected is known as all-payer rate setting, which is how the state of Maryland pays for healthcare services.  Medicare would have determined what price to provide for each service, and doctors and hospitals would have to take it or leave it.

When compounded year over year, the cost of Medicare today could have been exponentially lower today if Mills hadn’t cut government rate setting out of the Medicare bill.  CMS estimates that Maryland’s rate-setting system alone saves Medicare $330 million over five years.  Imagine the savings if we paid for health services that way nationwide…

This wouldn’t just mean savings for Medicare, either.  Costs would likely be substantially lower across the whole health system, as the prices Medicare pays tend to spill over into the private insurance market.  Private insurers essentially piggyback off of Medicare pricing, negotiating fees with hospitals equal to the Medicare rate plus a percentage more.  For instance, one study found that a $1.00 decrease in Medicare reimbursement for a certain service leads to a $1.16 decrease in private insurance reimbursement for that service.  Medicare and private insurance fees thus appear to move in sync.

So Mills’s miscalculation about how best to control health costs had unappreciated drastic long-term consequences, fueling our ballooned health expenditures today, which account for 17 percent of our national GDP.  Maybe Mills worried about regulatory capture over the price-setting process.  More likely, he was sensitive to the AMA’s attacks of socialized medicine and overzealous government intervention in the healthcare system.

All-payer rate setting is coming back into the national conversation about how to bend our healthcare cost curve today.  Maryland Governor Martin O’Malley is trying to make it an issue in the presidential campaign, pointing to his state’s success in controlling health costs.  But in reading Zelizer’s account of Medicare’s enactment, it’s hard to fathom how close we were to having that kind of cost containment as our national norm for the last half century.

The conservative health idea that is dragging down Obamacare

After a remarkable run of success, Obamacare has hit some speed bumps lately. From premium hikes to unaffordable deductibles to backtracking insurers, cracks in the law’s foundational health exchanges have sprung into public view. These issues, however, all stem from a basic structural flaw in a key part of the law: it’s too conservative.

These problems are arising because a number of shoppers on Obamacare’s health exchanges aren’t finding much to like. The most affordable plans (called bronze and silver plans) often come with high deductibles that leave consumers on the hook for as much as the first $6,000 of their medical expenses.   For silver plans, the law’s cost-sharing reduction—essentially co-insurance kicked in by the government—eases these deductibles for most exchange consumers. No such subsidy is available for people who can only afford the monthly premiums for a bronze plan.

For many consumers trying to comply with the law’s insurance mandate, these deductibles leave them insured in name only. “The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” one consumer told the New York Times. “We have insurance, but can’t afford to use it.” His family ultimately dropped their insurance plan.

While these kinds of plans cover certain preventive services, they otherwise provide little more than catastrophic coverage. These kinds of catastrophic care plans have long been staples in the conservative vision of health reform, providing insurance for serious and expensive medical episodes, but leave the consumer self-funding virtually everything else. They’ve been part of recent conservative repeal-and-replace proposals, typically coupled with tax credits and health savings accounts.

Catastrophic care insurance is part of what political scientist Jacob Hacker calls conservatives’ “personal responsibility crusade” in his 2006 book, The Great Risk Shift. Conservatives worry that insurance creates moral hazard in the insured, encouraging them to engage in irresponsible behavior when they don’t bear the full cost of that behavior. Force individuals to own more of their risk, conservatives believe, and they will become more judicious healthcare consumers.

Liberals reject this and aim to spread risk faced in the typical course of life across society. But under Obamacare, they also wanted to provide a low-cost option to consumers compelled into the health insurance market by the law’s mandate. They thus included inexpensive bronze plans on the exchanges, while providing cost-sharing incentives for consumers to spring for a more comprehensive silver plan instead.

By providing a menu of options, health reformers hoped to draw in a broad pool of insurance consumers, including the young and healthy. Because insurers can no longer charge more to people with pre-existing conditions, they’ve counted on premiums from relatively healthy people to subsidize the sick.

But many people just aren’t biting. So far only 35 percent of eligible individuals have signed up for plans through the health exchanges. The nudge toward silver plans leaves some shoppers in limbo: they could buy a low-premium bronze plan that provides little actual insurance, or a silver plan that, while providing more coverage and more subsidies, may still be out of reach for their budget.

These unappealing options drive some people who are on the fence about purchasing insurance out of the market. One twenty-nine-year-old told the Times, “The deductibles are ridiculously high. I will never be able to go over the deductible unless something catastrophic happened to me. I’m better off not purchasing that insurance and saving the money in case something bad happens.”

For many, the perceived benefits of buying this kind of insurance are minimal, and the costs of defying the law’s insurance mandate are surprisingly bearable. The penalty for forgoing insurance was the greater of $325 or 1 percent of income last year, which could be far less than the cost of premiums. (This increases to $650 or 2.5 percent of income in 2016.)

The upshot is that many people are still electing not to purchase insurance. This creates a lopsided risk pool among those who are signing up, leaving companies insuring more sick people than they anticipated. Some companies have responded by raising premiums and others are threatening to leave the market altogether. They simply aren’t receiving the right mix of customers to sustain their exchange business.

Policymakers need to be proactive to shore up the health exchanges. Healthcare expert Andrew Sprung proposes simply extending cost-sharing subsidies to bronze plans. This would strengthen the insurance coverage of these plans, making them more appealing to more consumers. We could also redouble outreach efforts to sign up the uninsured and consider tightening the individual mandate further.

Obamacare has been tremendously successful at getting people insured. But its insurance exchanges need to be self-sustaining. Improving the quality and affordability of the insurance options on its exchanges would help this cause immensely. It would encourage more people to sign up, cutting the ranks of the uninsured even more. And it would discard a misguided conservative approach to health reform and embrace true social insurance instead.

Republicans’ desperate labor force lie

The United States is in the midst of one of the longest economic expansions in its history, but you would never know that from listening to the Republican candidates for president.

In the face of steady monthly jobs gains, Republicans have latched on to a different metric to claim that the tumbling unemployment rate is a mirage: the labor force participation rate. This figure — a measure of what percentage of the population is either employed or actively seeking work — has fallen from a high of nearly 70 percent in 2000 to 62.4 percent today.

To the Republican candidates, this is proof that Obamanomics really has been the catastrophe they always believed it to be. But falling labor force participation has little to do with the Great Recession or Obama’s policies. It’s really about preexisting long-term trends, but that hasn’t stopped conservatives from arguing otherwise.

The most patently egregious rhetorical misuse of the LFPR is the notion that 40 percent of Americans aren’t working. This figure has been an outraged staple of Donald Trump’s stump speech for months, and was repeated by Maria Bartiromo at the Fox Business Network debate. But the bulk of this 40 percent are retirees, students, and stay-at-home parents — not the shiftless deadbeats or displaced victims of the Obama economy that conservatives would have you believe.

Certainly, the LFPR has been on a steady decline for many years now. But business cycle factors, such as the lingering effects of the Great Recession, account for very little of this decline. Goldman Sachs attributes only 0.3 percentage points of the decline to cyclical forces. The White House’s Council of Economic Advisers says it’s at most 1 percent, likely made up of the Great Recession’s long-term unemployed giving up and dropping out of the labor force.

So what accounts for the big decline in the LFPR? Most of the decline is simply the natural result of Baby Boomers reaching retirement age and exiting the workforce. The CEA estimates that the aging population accounts for half of the decline in the labor force participation. Another large chunk are greater numbers of young people attending college and graduate school rather than entering the workforce.

It also includes an increasing number of women leaving the workforce to stay home with children. This is a decision that traditionalist conservatives generally applaud, but there should be some cause for concern. After rising for decades, women’s labor force participation rate has started to tick back down, and there’s evidence that escalating childcare costs are squeezing mothers out of the workforce. Providing government assistance for childcare costs and advanced early education would help reverse this trend.

Some of the LFPR decline may also be a result of increases in federal disability rolls. Since the 1980s, the number of individuals receiving Social Security Disability Insurance has grown substantially and in close correlation to the shuttering of the blue-collar economy. As disability standards have loosened, the program has increasingly become a safety net for jobless middle-aged blue-collar workers. And once workers go on disability, they are unlikely to leave the program to rejoin the workforce.

Because most of the decline in LFPR comes from seniors aging out of the labor force, this actually makes the recent jobs numbers look even better. While the old rule of thumb was that the economy needed to add about 150,000 jobs per month just to keep up with population growth, the exodus of retirees out of the job market has changed that. According to White House economic adviser Jason Furman, we now need only about 77,000 new jobs each month to break even. This makes this month’s 271,000 jobs number look even better

Granted, the economic recovery has been steady has fallen short for many Americans, and the wage effects of the recovery have been far too muted for the majority of workers. But we’ve been in an extended period of economic growth for over six years now.

Still, Republicans want to pretend that we are in the midst of an economic downturn, as Sen. Marco Rubio asserted in Tuesday’s debate. But that’s just not the case. Their brazen statistical malpractice only proves it.

Cash instead of Cadillacs

ObamaCare’s Cadillac tax is quickly becoming a 2016 campaign issue. The law imposes a 40 percent excise tax on the most expensive — and generous — health insurance plans offered by employers starting in 2018. The tax aims to control healthcare costs by deterring employers from offering these kinds of plans, which insulate consumers from health costs and therefore drive up spending.

Though conservatives have long railed against it, liberal candidates for president are increasingly joining them in calling for repeal. At the urging of organized labor, Bernie Sanders and now Hillary Clinton now support repealing the tax, a key revenue source for ObamaCare’s coverage provision.

In the premier episode of Vox’s excellent new podcast, “The Weeds,” Sarah Kliff and Ezra Klein question one of the Cadillac Tax’s key justifications. We presume that employers typically allocate resources with a set pool of money to set aside for total employee compensation. This money is then divvied up between wages and in-kind benefits, like health insurance. So when health insurance costs rise, there’s less money available to give workers pay raises.

But policymakers have also assumed that the opposite is true: that if an employer is spending less on benefits, they will direct those savings toward increasing wages. But this is a big assumption, as Klein and Kliff point out. There’s little evidence in research or simple common experience to suggest that this is true. If an employer limits the generosity of its health benefits because of the Cadillac Tax, it might pocket those savings as profits, pay out higher dividends, or redirect these savings into other investments. This would be entirely consistent with an unequal economy where workers are increasingly cut out of a fair share of rising profits.

However, it seems that this analysis largely depends on what types of employers are going to be most affected by the Cadillac Tax. That is, which employers are offering generous health plans that will face a 40 percent excise tax in 2018?

The tax largely appears to affect two different groups of people: (1) highly compensated executives and finance professionals, and (2) middle-class unionized workers. ObamaCare’s proponents pitched the Cadillac Tax as a tax on the first set of people: politically expedient revenue sources in the one percent. For instance, David Axelrod sold the tax as “an excise tax on high-end health care policies like the ones that executives at Goldman Sachs have.”

Few tears would be shed if executives and financiers lose out on uber-generous insurance plans. But the teachers, autoworkers, and other unionized workers in the second group are a much more sympathetic and politically sensitive constituency. Few politicians — particularly Democrats — are eager to impose taxes or raise costs on average middle-class Americans.

Which is why the political bargain at the core of the Cadillac tax is so important. Policymakers have promised these workers that they’ll be compensated for lost benefits with increased wages. So if the Vox team is right that this trade is hardly a guarantee, then that’s a big deal.

But it also seems possible to me that, in the short term at least, these worries are misplaced. The employers that are offering high-cost Cadillac plans to blue-collar and middle-class workers tend to be those with highly unionized workforces. They began offering Cadillac plans in the first place because of pressure from the negotiating power of unions.

So if these plans are jettisoned, workers at these firms are thus also the ones best positioned to ensure that their employers’ savings are actually rebated to them. At the bargaining table, organized labor groups would undoubtedly insist that employers compensate their workers for these reduced benefits through higher wages or other benefits.

During the Vox discussion, Matt Yglesias points out that the compensation structure for public school teachers is sticky and subject to lock-step contractual agreements.  But if teachers’ unions know that the Cadillac tax will be jeopardizing their bargained-for benefits in 2018, then they can (and should) call for renegotiation of these contracts in anticipation to secure replacement salary increases.

Thus, while it might be true that we have no idea if employers generally would pass health insurance savings on to workers through higher wages, it does seem reasonably likely that the employers affected by the current Cadillac tax would do so.

There are caveats to this, of course. The Cadillac Tax is designed to reach more and more insurance plans as health insurance costs rise. By one estimate, it could affect 40 percent of employers by 2028. This would affect far more than just the financial elite and the unionized workforce.

But for its immediate impact in 2018, the Cadillac tax might work out as policymakers have promised. Unions are among the most vociferous opponents of the Cadillac tax, so it stands to reason that their members have the most to lose. But they are also the workers best positioned to ensure that employers hold up their end of the bargain: reduced insurance benefits in exchange for higher pay.

A better way to pay the Earned Income Tax Credit

The Earned Income Tax Credit is our most significant modern anti-poverty federal program. The EITC supports low-income working families with children by topping off annual income during tax season. It’s a fully refundable credit, so families with no or minimal federal tax liability still benefit from the EITC by getting a refund check from the federal government.

The EITC provides as much as $6,000 annually to families with three or more children. It saves 9.4 million people from poverty each year, and is associated with a whole host of positive social outcomes, from improved infant health, to increase academic achievement, to long-term lifetime earnings gains by children in EITC-recipient families.

Because the EITC is a once-per-year income boost, it essentially functions like an annual bonus from the federal government. Though it’s proven highly effective, there might be ways that we could improve upon this “lumpy” structure of the EITC. For instance, we could smooth out payment of a family’s expected EITC across regular biweekly or monthly so that they receive income support year-round.

Wouldn’t a “smooth” EITC be better than a “lumpy” EITC? While the smooth EITC has begun to quietly gain support in policy circles, a prominent group of policy experts has pushed back, arguing that the lumpy EITC provides superior financial and psychic benefits to working families. However, as I explain below, this pushback rings hollow, and the smooth EITC is ultimately a program that we should seriously pursue.

Unlike our current lumpy EITC, a smooth EITC would simply provide a family’s estimated EITC value in advance through regular periodic payments throughout the year. This essentially unlocks a family’s earned tax-credit income, giving them regular access to their benefits rather than limiting access to tax season.

The most prominent plan to turn the EITC into this kind of periodic income subsidy has come from Sen. Marco Rubio. More recently, Oren Cass (former policy director for Mitt Romney’s 2012 presidential campaign) proposed a similar wage subsidy plan to replace the EITC in a policy paper from the Manhattan Institute. The Center for American Progress has proposed a different but related early refund option that would allow families to access part of the EITC to cover unexpected expenses.

There are compelling reasons to convert the EITC into a regularly paid wage subsidy. Smoothing payment out over the course of a year would have a greater positive financial impact on family budgets, economists have found. And for a government program that is explicitly meant to promote work, periodic payment similar to a worker’s paycheck cycle would strengthen the connection between the EITC and work.

Paying the EITC directly to workers throughout the year would also detach the program from our costly and complex tax code. In order to claim the EITC, two-thirds of claimants incur costs by resorting to help from commercial tax preparers. This loss is especially acute among the many families who make too little to otherwise need to file federal income tax returns and only do so for the sake of claiming EITC benefits. For these families, a portion of their EITC is given over to tax prep companies—the cost of retrieving earned benefits that are submerged in our convoluted tax code.

While there’s a strong case for this kind of reform to the EITC, recent work from researchers and policy experts has challenged this position. Defenders of the current form of the EITC make three principal arguments for preserving the status quo EITC: First, they argue that the lump-sum structure of the EITC promotes dignity and pride among its recipients. It’s an acknowledgement and reward for a year’s worth of hard work. And by baking it into a tax refund, we avoid the stigma of year-round welfare subsidization.

Second, where a periodic EITC would promote income smoothing, the lump sum EITC is said to better promote saving. Because it is paid out once a year, the current EITC acts as a de facto forced savings device, accruing over the course of the year and paying out to families during tax season.

Third (and relatedly), the lump sum EITC also protects its recipients from having a positive tax liability (i.e., owing the federal government taxes instead of receiving a refund) and thus may reduce the stress and uncertainty around tax filing for some families.

The pitfalls of these arguments become apparent when analyzing the alternative to a lump sum EITC. Consider a program that gives EITC-eligible families the option to elect to receive all or part of the EITC in periodic installments throughout the year. This option would revive and improve upon the Advance EITC — an IRS program that allowed workers to receive a portion of the EITC in every paycheck.

The Advance EITC was disbanded in 2010 because it had a low take-up rate — only 3 percent of EITC claimants elected to receive advance payments. However, eligible workers had little knowledge of the program. Those who did know about it may have been discouraged by its requirement that workers sign up for the Advance EITC through their jobs, perhaps fearing stigma from supervisors. Others may have worried about changes in income that affect EITC eligibility, understandably hesitant to risk owing the IRS money at the end of the tax year.

Each of these flaws in the original Advance EITC program, however, could be fixed through simple technocratic tweaks. The IRS could reach out directly to EITC eligible households to provide information on a smooth EITC and simplify the process for opting into the program. This would both enhance knowledge and reduce the sense of stigma by decoupling the smooth EITC from one’s place of work.

Moreover, the IRS could adopt a modest safe harbor to guard against overpayment problems. This would tolerate the potential that when individuals choose to receive the smooth EITC, they may receive higher payments than they are entitled to due to income increases over the course of a year. Such a tolerance is not unprecedented, either; we’ve embraced it before with the Advance Child Tax Credit (used in the 2003 stimulus) and the Affordable Care Act’s premium subsidies. Accepting this inefficiency is worthwhile in that it would cushion recipients from shocks at tax time, making them more comfortable to elect to receive the smooth EITC.

Though Advance EITC take-up rate was low, the financial straits of EITC recipients indicate a pressing need for a revamped periodic income subsidy. According to a 2012 study of EITC recipients in Boston and Chicago, nearly 40 percent of EITC refund dollars were spent paying down bills and debt. While nearly 90 percent of the families surveyed used EITC funds to pay off debt, less than 40 percent used the EITC for savings, tucking away about $637 on average, about 15 percent of their total refund.

Families receiving the EITC are simply too cash-strapped for the tax credit to significantly build savings. And given the demand for costly private sector tax refund advances like refund anticipation checks, it seems clear that creating an option for earlier EITC payments would provide relief to many financially-strained Americans.

So while defenders of a lump sum EITC claim it promotes savings, it might actually be doing the opposite: forcing many recipients into short-term debt.   The families that the EITC benefits largely live paycheck to paycheck, or close to it, and their most pressing need is to avoid debt before creating savings. Thus, we could avoid these financial losses and boost the real impact of the EITC by advancing it to families throughout the year.

If the current EITC isn’t actually promoting savings, and if a periodic EITC can be structured to guard against repayment liability, then the current EITC’s defenders are left to depend on a single argument for their case: that a lump-sum, tax code-based EITC better preserves the dignity of its beneficiaries. Professors and authors Laura Tach and Kathryn Edin argue: “The dignity-building nature of [the EITC] is reinforced by the way it is administered, through tax preparation offices. Here, low-wage workers are customers served with a smile, not supplicants seeking a handout.”

Edin and co-authors make this argument more explicitly in a 2012 paper: “At H&R Block and its competitors, one is no longer a ‘recipient’ but a customer. The facilities are pleasant, well lit, and clean. This stands in stark contrast to the often run-down welfare office, the long wait to be seen, and the caseworker who may be more concerned with detecting misuse of funds than with client service.”

Perhaps the early spring ritual of trudging to the local tax preparer binds low-income families to a unifying national slog. Nonetheless, this argument hinges on the assumption that there is a special dignity in private, typically for-profit interactions. That is, claiming a lump sum tax benefit at a tax prep center is a respectable and well-earned benefit, whereas receiving a government check smacks of welfarism.

The problem is that the “dignity” of the ubiquitous private tax prep offices in low-income neighborhoods is all too often a deeply manipulative, predatory kind of faux dignity. In 2011, Mother Jones published an important investigation into how tax prep centers were pushing loan products on EITC claimants and other low-income filers expecting tax refunds. These centers advanced the refunds owed to cash-strapped filers so they wouldn’t have to wait for the IRS — doing so at annualized interest rates climbing over 100 percent.

One tax prep agent explained how he relied on the indignities of the other financial options in low-income communities to help draw in these customers. “At the check-cashing place, they’re talking to someone behind bulletproof glass[.] . . . The welfare building—you can imagine what that’s like. Here, we treat them well, and they want to come back.” Once in the center, customers who were due refunds were then urged to take on high-interest refund loans.

Though banks have largely discontinued financing usurious advances of their customers’ own money, tax prep centers have simply replaced the refund anticipation loan with the only slightly less egregious refund anticipation check. And recently, the tax prep industry was caught lobbying Congress to increase the complexity of the form used to claim the EITC, hoping that the added confusion would drum up business and fees among low-income families.

True, Edin and her co-authors studied EITC recipients utilizing free community tax preparation centers. Maybe these individuals did find an authentic dignity during the EITC claiming process that was unsullied by exploitative money grabbing. But some two-thirds of all EITC claimants rely on commercial tax preparation companies. For these families, some substantial but regrettable part of the dignity that Edin and others praise is the dignity of a fleecing by businesses looking to take a cut of families’ hard-earned benefits.

So the case for a lumpy EITC — that it promotes savings, guards against positive tax liability, and preserves dignity — ultimately falls short. Providing families with the option for a smooth EITC would seem to be eminently sensible policy. But given the disappointment of the Advance EITC, how do we know what a retooled smooth EITC would look like in practice?

Over the past two years, the city of Chicago (backed by the Center for Economic Progress) has been conducting a pilot program that makes half of the EITC available to certain eligible families in quarterly payments spread throughout the year. The smooth EITC pilot proved overwhelming appealing, with nearly all families who were given the option and presented with an explanation of the program electing to sign up.

The Center for Economic Progress recently released its final report analyzing the results of the pilot program, and their findings were encouraging. The participating families gained disposable income and had higher savings rates in comparison to a control group of families receiving the lumpy EITC. This was because families receiving a smooth EITC were able to avoid taking on debt throughout the year. Not surprisingly, the smooth EITC also decreased financial stress and improved mental health.

We should move toward taking these reforms national and adopting a smooth EITC option for eligible families across the country. The EITC is already our most successful anti-poverty effort. Its effect would only be amplified if it were paid out several times per year, providing financial support year-round and saving families from needless debt.