More About Paul N. Van de Water

Paul N. Van de Water

Paul N. Van de Water is a Senior Fellow at the Center on Budget and Policy Priorities, where he specializes in Medicare, Social Security, and health coverage issues.

Full bio and recent public appearances | Research archive at CBPP.org


Trade Agreement Needs to Protect Access to Affordable Drugs

December 18, 2014 at 10:02 am

AARP, the AFL-CIO, Doctors Without Borders, the Generic Pharmaceutical Association, and Oxfam have written President Obama expressing several concerns — which we share — about the Trans-Pacific Partnership (TPP), a trade agreement that the United States and 11 other Pacific Rim countries are negotiating.  The proposed agreement requires changes to avoid reducing access to affordable drugs both in the United States and abroad, they explain.  Here are three excerpts:

  • “[T]he intellectual property (IP) provisions that the U.S. Trade Representative has proposed fail to strike a proper balance between fostering innovation and ensuring expedited access to more affordable generic drugs through increased competition in the pharmaceutical market. . . . [They] would not only require TPP parties to grant very high levels of IP protection that go beyond existing international trade commitments, but would also lock in policies, for example with respect to biologic pharmaceuticals, that would contribute to putting these very expensive drugs and vaccines out of the reach of patients.”
  • “[T]he Annex on Transparency . . . could jeopardize governments’ efforts to contain costs in publicly supported health care programs. . . . [It] puts too much emphasis on the priorities of the originator [that is, pharmaceutical] industry, and does not give equal weight to patients and public health priorities such as drug affordability, safety, efficacy, and cost-effectiveness.  Indeed, this proposed text could have a negative impact on cost containment mechanisms, such as preferred drug lists, rebates, discounts, and formularies in all countries.  For example, it could adversely impact formularies and utilization rules used in U.S. health care programs, including Medicare, Medicaid, the Veterans Health Administration, the TRICARE program, and the 340B Drug Pricing Program.”
  • “Investor State Dispute Settlement proposals in the Investment Chapter could be used to limit competition, by allowing originator pharmaceutical firms to challenge efforts to manage pharmaceutical spending in public programs, including those used by state legislatures, Congress and public agencies here in the U.S. and abroad. For example, a manufacturer could challenge a state’s Medicaid preferred drug list or utilization rules that limit access to a certain drug under specific circumstances.”

We hope that the U.S. Trade Representative will heed these concerns as the TPP negotiations continue.

New York Times Warns Against “Dynamic Scoring”

December 8, 2014 at 12:06 pm

A New York Times editorial this weekend raised several red flags about so-called “dynamic scoring” — that is, including estimates of the macroeconomic effects of policy changes in official cost estimates for tax and spending legislation.  We strongly agree.  Our recent paper making the case against dynamic scoring, and a short summary we released today, explain that:

  • Current budget estimates aren’t “static.” The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) incorporate in their cost estimates many changes in individuals’ and companies’ behavior in response to proposed changes in tax rates and other policies.
  • Dynamic estimates are highly uncertain. Different models and assumptions produce widely varying estimates of how policy changes would affect the overall economy.  Some models’ results depend on assumptions about how future Congresses will reduce deficits.  And the models all have significant gaps.
  • Dynamic estimates are prone to manipulation. Because of this uncertainty, congressional leaders will likely cherry-pick the model and assumptions that give the most favorable estimates.  That’s exactly what House Ways and Means Chairman Dave Camp did in touting the highest estimates of economic and revenue growth for his tax reform proposal — estimates more than ten times greater than JCT’s lowest ones.  (See figure.)
  • CBO did not use dynamic scoring for the 2013 Senate immigration bill. Some members of Congress claim, incorrectly, that CBO used dynamic scoring to estimate the bill’s budgetary effects.  CBO’s official cost estimate took account of the bill’s direct effect on the U.S. population and labor force.  But it did not include estimates of the bill’s more speculative and uncertain effects on the economy, such as its effects on investment and productivity.

You can follow me on Twitter at @PaulNVandeWater and my co-author Chye-Ching Huang at @dashching.

Six Ways Health Reform Helps the Middle Class

December 2, 2014 at 2:21 pm

Health reform offers substantial benefits to middle-class Americans, contrary to some recent claims.  Here are some of the most important ones:

  1. A safety net for all. Insurers can no longer refuse to sell someone health coverage or charge higher premiums because of a pre-existing health condition.  Health plans must now cover preventive care, such as vaccinations and routine screenings, with no cost sharing.  Plans must also limit the amount they can require enrollees to pay out-of-pocket each year for covered benefits.
  2. Financial help buying insurance. People without access to affordable coverage from an employer can receive premium tax credits to help them buy insurance in the marketplaces.  Credits are available to households with incomes up to 400 percent of the poverty level.  That’s up to $95,000 a year for a family of four.
  3. No more job lock. Because health reform helps workers without access to affordable job-based coverage afford coverage on their own, workers no longer have to stay in or choose an otherwise less desirable job simply because it offers health coverage.  They can start a business or retire early without worrying about access to health insurance.  And losing a job no longer means losing health insurance.
  4. Health coverage for young adults. Parents whose insurance provides dependent coverage may now include children up to age 26 on their plans.  As a result, more than 6 million additional young adults have enrolled in a parent’s health plan, 3 million of whom would otherwise be uninsured.
  5. Improving Medicare benefits. Health reform is gradually closing the prescription drug “donut hole,” the gap in coverage faced by beneficiaries with high drug costs.  Last year alone, 3 million seniors and persons with disabilities saved $3.9 billion on their prescriptions — more than $900 per beneficiary.  Health reform also eliminated cost-sharing charges for preventive health services (such as cancer screenings), and 37 million Medicare beneficiaries received at least one free preventive service last year.
  6. Strengthening Medicare financing. Health reform includes a number of measures to slow Medicare cost growth, such as cutting overpayments to private Medicare Advantage plans. These steps, along with other factors, have significantly strengthened Medicare’s financial outlook.  Medicare’s Hospital Insurance (HI) trust fund is now projected to remain solvent 13 years longer than before health reform’s enactment.  And the HI program’s projected 75-year shortfall has shrunk by three-quarters.

“Dynamic” Estimates Are Highly Uncertain, Subject to Manipulation

November 17, 2014 at 5:10 pm

An American Action Forum event today to promote “dynamic scoring” for tax and spending legislation unintentionally illustrates what Chye-Ching Huang and I explain in a newly updated paper:  estimates of the macroeconomic effects of policy changes — which is what dynamic scoring would include — are highly uncertain and subject to manipulation, so they shouldn’t be part of official cost estimates.

In reasonably balanced remarks, Senator Orrin Hatch (R-UT) said that “we should not expect dynamic scoring to produce outsized miracles from either the supply side or the demand side.”

But Tax Foundation President Scott Hodge, in giving his organization’s estimates of the effects of several tax proposals, promised just such miracles.  According to Hodge, cutting the corporate income tax rate or allowing full expensing of investments (that is, allowing firms to deduct the investments’ full cost from their taxable income up front, rather than depreciating it over the investments’ lifetime) would more than pay for itself by boosting economic growth and, in turn, tax revenues.

That’s highly implausible.  But it shows how advocates can manipulate assumptions or cherry-pick dynamic-scoring estimates to buttress their agenda.  Ways and Means Committee Chairman Dave Camp (R-MI) did the same thing when he cited only the most optimistic of many “dynamic” estimates in touting the benefits of his tax reform proposal, as our paper and the graph below show.

Boehner, McConnell Mislead on Health Reform’s Employer Mandate

November 7, 2014 at 11:06 am

House Speaker Boehner and Senate Minority Leader McConnell called this week for a major change in health reform’s requirement that larger employers offer health coverage to employees who work 30 or more hours a week or face a penalty.  Claiming that the 30-hour threshold is “an arbitrary and destructive government barrier to more hours,” they propose raising it to 40 hours.  In reality, however, that step would lead to fewer hours and more part-time work — the exact opposite of what their rhetoric about “restoring” the 40-hour work week implies.

Critics of health reform claim that employers are shifting some employees to part-time work to avoid offering them health insurance.  But the data provide scant evidence of such a shift.

Moreover, raising the threshold for mandating coverage from 30 to 40 hours would make a shift toward part-time employment much more likely — not less so.

Only about 7 percent of employees work 30 to 34 hours (that is, at or modestly above health reform’s 30-hour threshold), but 44 percent of employees work 40 hours a week and thus would be vulnerable to cuts in their hours if the threshold rose to 40 hours.  (See figure.)  Under the Boehner-McConnell proposal, employers could easily cut back large numbers of employees from 40 to 39 hours so they wouldn’t have to offer them health coverage.

If you exclude workers at firms that already offer health insurance and thus won’t be tempted to cut workers’ hours, more than twice as many workers would face a high risk of reduced hours under a 40-hour threshold than under the current 30-hour threshold, according to New York University economist Sherry Glied.

There’s little evidence to date that health reform has caused a shift to part-time work.  There’s every reason to expect the impact to be small as a share of total employment, as we have explained.  And raising the cutoff for the employer mandate from 30 to 40 hours a week would be a step in the wrong direction.