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  • November 2014
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MR. GRUBER – COME ON DOWN!

On November 20, 2014, Chairman Darrel Issa of the House Oversight and Government Reform Committee sent letters to Center for Medicare and Medicaid Services (CMS) Director Marilyn Tavenner and Massachusetts Institute for Technology (MIT) professor Jonathan Gruber asking them to testify before his committee on December 9 at 9:30 AM.  The topic: to examine the transparency failures related to the implementation of the Affordable Care Act (ACA), better known as ObamaCare.  So mark your calendars now for a lively hearing.

Director Tavenner has already testified before the committee on the numerous ObamaCare’s problems.  No doubt a main focus of this hearing will be how her agency inflated ObamaCare’s September enrollment numbers by including dental policies.   The actual enrollment numbers were not 7.3 million as announced, but closer to 6.7 million.

But it is Professor Gruber’s maiden appearance that will attract all the attention.  Most of you are probably are familiar with Mr. Gruber by now but for those of you who are not, he is often referred to as one of the major architects of ObamaCare.  He was paid $400,000 in consulting fees by the White House to help design the healthcare reform law and millions of dollars in additional consulting fees from federal and state agencies.

The reason he has been asked to appear before the committee is because many of his video-taped speeches in which he discusses his role in designing ObamaCare have finally come to light.  His words are not flattering to the writers of the law, nor the law itself, because he unwittingly tells the truth.

As you watch many of the videos, there is a sense of elitist smugness as the professor discusses his role being part of ObamaCare’s “inner circle.”  He provides an insight into the behind-the-scenes thought process in its design.  Many of his speeches, particularly those before fellow economists, are eye-opening as his audience laughs about many policy decisions, such as the deception around the creation of the “Cadillac tax,” selling it to the public as a tax on insurance companies, while hiding the fact the tax really falls on individuals.  And, it’s almost amusing to watch him talk, gushing like a school-girl with a crush, about being in the same room, breathing the same air, as President Obama.

The video, which really kick-started the “Gruber Film Fest,” is from the October 2013 Annual Health Economics Conference held at the University of Pennsylvania.  Gruber discusses the political advantage of having a lack of transparency with many aspects of ObamaCare, such as how the bill was cleverly written so the Congressional Budget Office did not score the mandate as a tax, hiding the fact that healthy people would pay more so sick people would get money to purchase insurance, and essentially relying on the “stupidity of the American voter” to make sure the legislation got passed.

In another video [begin at 31:23], Gruber discusses the taxpayer-funded subsidies for health insurance at a forum held January 18, 201 at the Noblis Innovation and Collaboration Center.  He clearly states that the subsidies for health insurance can only be issued to people who purchase ObamaCare in the state-run exchanges, not the federal exchange.  Gruber says the reason the law was written this way was to encourage the states to play nice and develop an exchange.  But, thirty-six states had a little “revolution” and have either failed or refused to establish an exchange.  The Gruber quote is particularly valuable because the policy is the basis of four lawsuits against the federal government.  The IRS has interpreted the law to say subsidies can be given in the federal exchange while the plaintiffs argue the law only allows subsidies in the state-run exchanges.  The Supreme Court has granted certiorari in one of the lawsuits: King v Burwell.  If the Court should agree with the plaintiffs, then taxpayer-funded subsidies will become non-existent in the federally-run exchange and ObamaCare will certainly collapse.

Who can the public thank for finding many of these videos?  Rich Weinstein, an investment advisor who lost his health insurance because of ObamaCare.  He has spent hours surfing the internet looking for and listening to lengthy, mind-numbing lectures and shares what he finds with conservative policy wonks who have long known ObamaCare was not going to be the panacea that was promised.

Not too long ago, ACA supporters such as House Minority Leader Nancy Pelosi (D-Calif.) and the President spoke highly of Professor Gruber; now they are running away from him.  Nancy Pelosi says she doesn’t know who he is and the President belittles his participation in the creation of the healthcare law.

One thing Mr. Gruber has certainly learned is Harry Truman’s old adage, “If you want a friend in Washington, get a dog.”

_______

 

Here are some Gruber videos for your viewing pleasure.  HT to Phil Kerpen of AmericanCommitment and Norm Singleton at Campaign for Liberty

 

Gov. Mitt Romney praises Gruber

https://www.youtube.com/watch?v=tcBjRfZO7QE

Tax is really on the people…not the insurance companies

https://www.youtube.com/watch?v=m54CqiMGe-k&feature=youtu.be

University of Penn lecture, voters are stupid

https://www.youtube.com/watch?v=iHihDa_VPWw

The states get the subsidies, not the federal exchange

https://www.youtube.com/watch?v=LbMmWhfZyEI&feature=youtu.be

Budget Impact of Healthcare Reform

http://pioneerinstitute.org/hewitt-lecture/2011-hewitt-health-care-lecture/

 

Ding, Ding, Ding – Arlington, Virginia Hops Off the Trolley

Good for Arlington, Virginia for pulling the plug on its wasteful trolley project.

May the action of a few sages in Arlington become a beacon of light to other municipalities, which may be experiencing the intense pressure of the “smart growth,” mass transit zealots, but really don’t want to bleed scarce tax dollars on projects that never move masses of people anywhere.

That northern Virginia trolley/streetcar project was slated to cost $550 million all in, but these novelty projects are no different from any other transportation project in that they rarely come in on budget or on schedule.

One of the nails in the Arlington project coffin might have been the ill-conceived, ridiculous “super stop” that was unveiled in Arlington March, 2014…a bus and trolley stop that cost $1 million.

Residents of the relatively wealthy DC suburb were appropriately outraged and may have started to do the math on the costs associated with 24 more such stops, plus the streetcar/trolley itself.   City officials all over the nation are dealing with similar cost-benefit considerations and are being lured/hounded/worked over by (depending upon your point of view) an alliance of green urban planners, big developers, affordable housing advocates, etc. to spend billions of dollars on them.

Interestingly, in left-leaning Arlington, the recent election to the Arlington County Board of Republican-running-as-an-Independent John Vihstadt by a wide-margin was the death knell for the streetcar.  Vihstadt ran on an explicitly anti-trolley/streetcar platform and won by a wide margin.  According to The Washington Post:

“Residents of the affluent suburb seem increasingly fed up with spending on what some call “vanity projects” and the perception that voters have little influence over them. And public officials are taking notice.”

In the Washington D.C. area, there are other transit projects like this going on, including the $2.45 billion, 16-mile light rail Purple Line in Montgomery County, Maryland and the H Street Trolley in northeast DC, which was recently named the “worst transit project in America” by Matthew Yglesias at Vox, a liberal news and opinion blog (Yglesias doesn’t seem to have a problem with other light rail projects, just streetcars, which don’t have dedicated lanes and tend to increase congestion, and siphon money from other more worthy mass transit projects, something along those fixed lines).

So many of the light rail and streetcar/trolley projects are poorly thought out, controversial, their raisons d’etre are often based upon questionable ridership stats and tortured estimates of future economic benefits (usually provided by the proponents and often difficult to verify).  The pols who have the authority to green light the projects are often captive of special interests and perhaps captivated by the potential for ribbon-cutting ceremonies and the inevitable naming of buildings, etc.  But, at least in Arlington, voters finally grew weary of the disconnect and rebuked their imperious elected officials.  And there’s also this:

“Financing for the streetcar project remains uncertain. County officials were turned down for some federal funding last year because U.S. transportation officials said the project probably would cost $60 million to $150 million more than the $250 million the county was estimating at the time.”

In a great post on The Federalist, reporter Georgi Boorman highlights the fact that even that green Mecca, Seattle, Washington, is having second thoughts on the wisdom of streetcars and trolleys:

Some locals know that Central Link, Seattle’s first light rail line, was North America’s most expensive light rail at over $100,000 per yard when it opened in 2009. It serves less than 3 percent of total commuters, as only 3 to 4 percent of Seattle commuters get to work through mass transit. Apparently flush with cash in 2014, the City of Seattle will now shell out $10 million to study new streetcar lines. Yes, to study them. Mike Lindbolm of the Seattle Times writes, “At least four routes would be examined…all once served by streetcar tracks before the citywide system was abandoned in 1941.” Yes, abandoned. Did we ever stop to think that perhaps there was a reason for that? Like, say, the much niftier invention of trolley buses,  since as it turns out the invention of the wheel was all it’s cracked up to be?

“Nevertheless, almost a decade after the initial plan to build the South Lake Union Streetcar (also called the SLU Trolley and affectionately titled S.L.U.T. by critics), it accounts for just 1 percent of the region’s passenger boardings and is heavily dependent on its sugar daddy, the City of Seattle.  In 2005 at the time the project was announced, opposing Councilman Steinbrueck, referencing the necessary accompaniment of new sidewalks, re-paved streets, and streetlights, called the S.L.U.T. a “luxury.”  John Fox of the Seattle Displacement Coalition offered the most telling critique: “[It’s] not that there shouldn’t be a streetcar, but that it’s more of a real-estate toy that shouldn’t be propped up by more vital services around the city.”

Cities might be waking to the inherent dumbness of spending tens of millions of dollars (whether it’s local, state, or federal money) on these streetcar and trolley projects.  So, unlike trolleys and streetcars, public opinion on the wisdom of funding these projects might finally be…turning.



DOE Doublespeak: The “Profit” in Solar Energy Loan Programs?

George Orwell would feel vindicated. As he wrote in his blistering essay, “Politics and the English Language” (1946), “…[the English language] becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts… In our time, political speech and writing are largely the defense of the indefensible.”

More recently, a federal government loan program, whose proponents acknowledge may actually lose money, is ballyhooed by the media to be turning a profit.

From the November 13, 2014 edition of The Washington Post, Max Ehrenfreund (writing for WaPo’s “Wonkblog”) observes, under the headline, “Remember Solyndra? Those loans are making money”: “…the Department of Energy’s loan program is expected to make money for taxpayers.” And this from the lefty apologist Paul Krugman (The New York Times, November 16, 2014): “…the program that included Solyndra is, in fact, on track to return profits of $5 billion or more.”

“Unfortunately, that’s not true,” wrote Donald Marron in Forbes. “Taxpayers are losing money on DOE lending. Less than originally expected, and less than you would expect given media coverage of Solyndra, Fisker, and a few other failed loans. But smaller losses are still losses, not profits.”

Essentially, the case that proponents make is this, as described in Forbes (November 17, 2014). Loans and loan guarantees issued ($30.29 billion), plus conditional commitments ($3.96 billion), amount about $34.25 billion in guarantees for which taxpayers could be on the hook. But so far, only $21.71 billion has been disbursed, with $3.49 billion (roughly, a respectable one-sixth) in principal already repaid. The proponents further argue that Interest Earned* amounts to $810 million, while loan losses are less, at (only?) $780 million, apparently yielding a $30 million profit.

Of course, few, if any, have highlighted the fact that this purported “profit” amounts to a negligible one-sixth of one percent of the outstanding principal. It sounds a lot more like a rounding error.

And footnotes, like facts, are stubborn things. That little asterisk (*) after the heading “Interest Earned” alludes to the following footnote from the Department of Energy’s report: “Calculated without respect to Treasury’s borrowing cost.” Given that this cost is borne by taxpayers, it is entirely conceivable that even this minuscule “profit” is erased.

To his credit, Ehrenfreund quickly tried to redeem himself a few days later in his November 18, 2014 “Wonkblog” post, under the heading, “Why the government’s claim that the Solyndra program is earning interest may be misleading.” While his earlier thesis (“Those loans are making money”) may have been grammatically accurate – the loans were actually earning interest, therefore “making money” – there is little evidence that the program will turn a profit over its 22-year repayment term. Marron writes, “It’s technically true, but tells you nothing about profits.” So, some of the “misleading” was perpetrated by Ehrenfreund’s own pen. He comes clean in the end: “Relative to the massive scale of the loans, the program is close to breaking even either way, but there’s still a difference between profit and loss.”

While the Wonkblogger was not alone in distorting the truth, he acted responsibly by correcting the record rather quickly. But whither the rest?

Sloppy reporting? Well, George Orwell might use the term “slovenly.”

Family Feud

On October 22, 2014, Senator Tom Coburn, M.D. (R-Okla.) released his annual “Wastebook 2014: What Washington Doesn’t Want You To Read.”  The report listed 100 wasteful spending programs that cost taxpayers $25 billion annually.  The Wastebook always brings chuckles and disbelief that the government could dish out so much money so foolishly.  On the other hand, it is not a joke that so much taxpayer money is wastefully spent year after year.

The Wastebook always includes a plethora of grants that have been dispensed for frivolous projects, such as a $371,026 grant from the National Institutes of Health (NIH) to do the first comparison study of MRI-related brain activation patterns in women as they viewed images of their dogs and kids to see if they loved them equally or not.  The total amount of NIH grants in the Wastebook was $904,402, but as is the case with every other agency included in the publication, there is always more waste to be exposed.

And while it is bad enough when an agency spends taxpayer money foolishly, it is even worse when those expenditures end up undermining the findings of another agency.

For example, between 2000 and 2014, NIH sent $172.7 million in grant money to scientists to study the chemical bisphenol-A (BPA) and its effect on humans, particularly as an endocrine disruptor, which is a chemical that interferes with hormonal activity.  Some of these taxpayer-funded research studies have in turn been used to by non-governmental organizations (NGOs) to attack a sister agency of NIH within the Department of Health and Human Services:  the Food and Drug Administration (FDA), which has regulatory oversight for BPA.

According to the FDA, “BPA is an industrial chemical used to make polycarbonate, a hard, clear plastic, which is used in many consumer products.  BPA is also found in epoxy resins, which act as a protective lining on the inside of some metal-based food and beverage cans.  Uses of all substances that migrate from packaging into food, including BPA, are subject to premarket approval by FDA as indirect food additives or food contact substances.  FDA can make regulatory changes based on new safety or usage information.  The original approvals for BPA were issued under FDA’s food additive regulations and date from the 1960s.”

The FDA has found that BPA “is safe at the current levels occurring in foods.  Based on FDA’s ongoing safety review of scientific evidence, the available information continues to support the safety of BPA for the currently approved uses in food containers and packaging.”  Considering the FDA is better known for being overly cautious in its scientific and regulatory decisions, especially when it comes to approving life-saving drugs and medical devices, their conclusion that BPA is safe as it is currently used is significant.

Even though the FDA has statutory authority to regulate BPA and has concluded that the science proves it is safe, NIH continues to dish out grant money in an effort to provide a contrary result.  Even worse, the basis for these studies may not be academic; they may be political.

Of the NIH grants that CAGW reviewed, 70 percent were provided between 2010 and 2014.  This time period also coincides with the tenure of NIH National Institute of Environmental Health Sciences (NIEHS) and the National Toxicology Program Director Linda Birnbaum, Ph.D, a 35-year federal scientist, who was appointed to the position on January 18, 2009.  She has been called out by members of both the House and Senate for her participation in biased activities when, as a federal official at a science-based agency, she should be focused instead on providing impartial research.

Jon Entine, a journalist and researcher who focuses on science and public policy and has written with skepticism about the relationship of public policy, the media, and NGOs, believes Birnbaum is an unabashed anti-BPA activist and a “high-profile supporter” of “academic scientists who look for endocrine effects regardless of whether those effects can cause harm.”

In an October 31, 2012 Forbes online article, Entine discussed the continued attacks on BPA.  He wrote, “one of the most disturbing trends in science reporting” is “the increasing tendency of reporters and [NGOs] to trumpet research that supports a pre-determined perspective, no matter how tenuous – or dubious – a study might be.”  According to Entine, this trend has been coined “single-study syndrome” by New York Times columnist Andrew Revkin.

Sure enough, following the single-study syndrome methodology, the Natural Resources Defense Council and the Environmental Working Group, along with Mother Jones, among others, have used the expected predisposed NIH-funded research to attack the FDA’s work on BPA, tying up the agency’s resources.

There are many occasions when the bureaucratic left hand often doesn’t know what the right hand is doing, usually as a result of a lack of transparency and communication.  But, when one federal agency is handing out millions of tax dollars to outside influences knowing that the findings will be used for the purpose of attacking, undermining, and reversing the taxpayer-funded work of another agency, that idiom is elevated to a whole new and absurd level.

The taxpayer-funded family feud between the NIH and the FDA should be stopped.

 

To read more about it, see CAGW’s November’s WasteWatcher Dueling Agencies

Innovation = Jobs

Innovation creates jobs.

That is the central premise of Jay Walker’s keynote address, “Making Innovation Work for America and Americans,” at the first meeting of the IP Dealmakers Forum on November 6, 2014. The forum linked investors together with intellectual property (IP) information and opportunities.

Walker’s speech is particularly timely given the release on November 17, 2014, of a new book from Citizens Against Government Waste (CAGW), “Intellectual Property: Making it Personal;” the November 18, 2014 Global IP Summit hosted by the U.S. Chamber of Commerce’s Global Intellectual Property Center; and the November 12, 2014 report by Economists Incorporated, “Unlocking Patents: Costs of Failure, Benefits of Success.”

As the holder of more than 700 issued and pending U.S. and international patents and ranking as the world’s 11th most patented inventor, Walker has almost unparalleled credibility on the subject of intellectual property (IP). On top of his impressive array of patents, he is the Executive Chairman of Patent Properties, chairman and curator of TEDMED, and the founder of three companies that each serve more than 50 million customers, including Priceline.

Walker began his speech by asking how a job is created in the U.S. or any other country. After discussing and rebuffing the idea that companies or (especially) governments create jobs, Walker said that jobs are created when customers purchase a service or product. In order to get more customers, it is essential to have inventors, who “improve products and services in a way that has market value.” As Walker said, “you create customers by delivering something that a customer wants more than the money they have.”

Walker noted that America’s “competitive advantage is primarily our ability to innovate,” and that most other countries do not reward success. Nonetheless, the use of IP, particularly patents, could be an even larger part of economic growth if unlicensed patents were made more widely available.

As CAGW noted in its report and Walker stated in his remarks, there are several companies that have created a voluntary and affordable process that would provide greater access to unlicensed patents by bundling them together and selling them at a reasonable price. This system would both provide income to the patent holders that they would not otherwise receive and help patent users solve problems, create improved products, increase sales, and open up new markets.

The Economists Incorporated report estimated that intellectual capital derived from patents and other IP constitutes approximately 55 percent of GDP. Increasing the number of licensed patents by 20 to 40 percent could add as much as $200 billion annually in new growth to the U.S. economy as well as help improve the global economy.

Since the first three patents were approved in 1790, more than 5.1 million patents have been approved by the U.S. government, including a record 302,948 patents in 2013. About 2.3 million patents are “active,” but 95 percent of those patents do not provide any licensing revenue.

It is obvious that very few patents have the same value as the telegraph, phonograph, light bulb, television, transistor, cellphone, and microprocessor. However, with the potential to add $200 billion annually to the U.S. economy, every effort should be made to unlock the value of every patent.

On Title II, Just Say No to FCC Overreach

Back in the 1980s, First Lady Nancy Reagan had a slogan to go with her anti-drug campaign, “Just Say No.”  Perhaps this same slogan should be used in the ongoing debate over the Federal Communications Commission’s (FCC) efforts on net neutrality and Title II reclassification of the Internet.

On November 10, 2014, the White House released a statement regarding the President’s views on net neutrality.  By calling upon the FCC to reclassify the Internet as a Title II telecommunications service, the President means to impose greater restrictions over an industry in an attempt to fix a problem that just doesn’t exist.  Under Title II of the Communications Act, the FCC would be placed squarely in the middle of Internet Service providers (ISPs) and their customers, injecting price controls and other burdensome restrictions currently imposed on land line telephone service, slowing investment in broadband across the country.

It is interesting that the President chose a week when Americans are focused on honoring their nation’s veterans to propose increasing government restrictions over the Internet, which has up to now been allowed to evolve and grow under a light regulatory regime.  These same veterans are using the Internet to find jobs, obtain health care benefits, and apply for educational benefits. In a couple of weeks, consumers across the country will be engaging in “Cyber Monday” to purchase holiday gifts online.  Because the Internet was free from these regulatory burdens it has flourished and grown to become the driving economic engine that it is today.  The President intends to hamstring the companies that provide this service with restrictive regulations dating back to the 1930s.

By asking the FCC to reclassify the Internet as a Title II service, the President is circumventing the duly elected Congress, which has already begun work on developing a much needed modernization of the Communications Act of 1934.  Such dramatic shifts and changes in the laws regulating communications or any other government reform initiative should be handled by the nation’s duly elected lawmaking body, not by an unelected commission of five individuals.

The President has unilaterally called upon the FCC to do Congress’ job.  Imposing a restrictive antiquated regulatory regime over the Internet will stymie innovation and harm the economy, and Internet service providers will be less able to improve services for consumers without first asking permission from the FCC under Title II.  Repeatedly over the past six years, the President has stated “We can’t wait.” Well in this instance, the FCC can and should wait.

Postal Delivery Times for Mail Slip, But Groceries Get Delivered in San Francisco !

Even as the USPS has ramped up a demo project to delivery groceries with Amazon in a few cities and made a deal to deliver some parcels for certain retailers on Sunday, the USPS is scaling back delivery standards for core customers, the folks who pay their bills, first class mail customers.  While we support comprehensive postal reform that will allow the agency to right-size its massive structure, shrink its workforce, outsource many of its functions to private sectors actors who can do it as well or better, and close and consolidate postal facilities, there are a lot of cost-allocation questions that remain unanswered.  Regulators shouldn’t be allowing the USPS to strike off in any direction, especially under its current, unreformed operational structure, which has been dubbed a “broken business model” by the Government Accountability Office (GAO).

Fresh off the presses at the GAO), today’s report documents the slippage.  As a first-class mailer, you may have already started to notice the slower service.

The costs and the revenues associated with the new grocery delivery experiment are being kept under wraps by the Postal Regulatory Commission, as well as the Sunday parcel delivery program.  In fact, all of the USPS’s cost allocations are a bit dicey, which ought to make all stakeholders sit up and take notice, maybe demand the release of the details of the grocery deal and the Sunday delivery deal.  In this case, the PRC greenlit the two-year grocery delivery experiment claiming that it will not cause market disruption and does not constitute an unfair competitive advantage.

Question for the PRC:  Before you permit the USPS to dive into new private sector businesses, have you verified without a doubt that the USPS is correctly allocating its overhead costs and not unfairly undercutting its private sector competitors.  Are first-class mailer subsidizing these new ventures, which benefit a select number of big retailers?

And while they are trolling for new competitive ventures, chasing new sources of revenues, there has been talk of allowing them to get into…BANKING!  Talk about Halloween Horrors.

By Your Leave: Federal Employees on Administrative Leave Cost Taxpayers Billions

ICYMI, this American Public Media interview with the Washington Post reporter Lisa Rein is a quick primer on a very big problem.

In a nutshell, over a three-year period, 2011 to 2013, more than 57,000 federal employees hung out at home for a month or longer while cases of wrongdoing or malfeasance or whatever were “adjudicated.”  At a cost that exceeded $775 million in salary alone.  And the Washington Post reporter tells us that this only represents the tip of the iceberg since the GAO reported that isn’t able to gather numbers from most agencies.  Here is the GAO report, if you have a need, as I do, to torture yourself with the gory details.  Here is Lisa Rein’s WaPo report.

Keep in mind a few things as you read that number.  It does not include their paid vacation time accruing, sick days accruing, etc.  Ms. Rein reports that “About 4,000 were idled for three months to a year and several hundred for one to three years.”

And the WaPo story doesn’t address the fact that that taxpayers also pay federal workers for what is called “official time.”  That is time that federal workers spend doing solely union business on the taxpayers’ time.

Here is a link to the Office of Personnel Management’s page on official time with reports on the costs over a period of years.  The GAO reports that there are discrepancies on how agencies report official time, with some reporting it explicitly as official time and others reporting it as paid administrative leave, which fosters more confusion.  GAO also reminds us that “There is no general statutory authority for the use of paid administrative leave, which is an excused absence without loss of pay or charge to leave; however, [GAO], as well as OPM and others, have provided direction in the permissible use of administrative leave.”

Some departments have large numbers of employees who are paid to do nothing but handle union business; at the Veteran’s Administration alone, there are reportedly 258 full-time employees to handle just union work (grievances, etc.). The agency reported 998,483 hours of official time in 2011, up 23 percent from 2010, cost $42.5 million.  This, at a time when we now know that veterans were being kept waiting for months, even years, to be seen by the VA for medical issues.

Just do the math across the whole government.

NVM, I will help. In FY 2011 there were approximately 3.4 million official time hours at a cost to taxpayers, in work not performed for their agencies, of $155 million and it was an increase over the prior year.

The Office of Personnel Management used to report those numbers, but, guess what, crickets since the FY 2011 report, so official time numbers for FY 2012, 2013, are not available, in spite of attempts by members of Congress to obtain them.

FYI:  CAGW’s Tom Schatz appeared on FOX News’ Special Report with Brett Baier on the subject a few days ago:

See You In Court – Again

One of the things that is becoming more disturbing each day is how the Obama Administration is issuing a tsunami of regulations, interpretive rules, sub-regulatory guidance, executive orders, guidelines, and even divine proclamations on White House tissue paper (just kidding on that last one) that contradict, subvert, or circumvent the law.  Even though I just cover healthcare issues, it is practically impossible to keep current with the changes, particularly as a result of the Affordable Care Act (ACA), better known as ObamaCare.

From the Department of Agriculture to the Environmental Protection Agency (EPA), to Health and Human Services (HHS), and the Treasury, the Obama administration is crafting sub-rosa rules at an alarming rate.  Law professor and Constitution scholar Jonathan Turley says it is a “massive gravitational shift” of power to the executive branch.  The Competitive Enterprise Institute just released its annual study, “The Ten Thousand Commandments,” which “shines a light on the large, growing, and hidden costs of America’s regulatory state.”  According to Wayne Crews, author of the report, the “costs for Americans to comply with federal regulations reached $1.863 trillion in 2013. That is more than the GDPs of Canada or Australia.”

Often, the end result are lawsuits challenging the Obama Administration’s arbitrary decisions in court.  For example, some of the more well-known cases are the four challenges to the IRS’s interpretation that taxpayer-funded subsidies are allowed in the federally-run ObamaCare exchanges.  According to the plaintiffs, ACA contains no such provision that authorizes subsidies in the federal exchanges, yet subsidies have been provided.  The outcome of these cases are still to be determined.

The Murray Energy Corporation and twelve states that rely on coal production are suing the EPA over its proposed rules to cut greenhouse gases from coal plants, excusing the agency for overstepping its authority under the Clean Air Act.  Indiana Governor Mike Pence (R), and one of the plaintiffs, said, “Congress has already rejected legislation that would put limits on carbon dioxide emissions, and a law of this significance should be passed by the legislative branch.”

But often the legal challenges are about relatively obscure issues that don’t grab a lot of public attention.  One issue that I have been tracking has fallen under this rubric.  You may recall I have written about a federal drug discount program called 340B. Citizens Against Government Waste (CAGW) believes that Congress needs to conduct vigorous oversight of the program (the last oversight hearing was in 2005) and reform it. Things are starting to heat up again with program and legal challenges, so I thought I would give you an update.  First, a bit of background.

My blog posted in CAGW’s May 2014 SwineLine described the 340B program and why taxpayers needed to pay attention to what was happening to it even then.  It started out in 1992 as a relatively small program intended to help certain healthcare entities that served large populations of indigent, uninsured patients offer deeply discounted pharmaceuticals to those patients.  If pharmaceutical companies wanted to participate in Medicaid, then they had to participate in the 340B program.  The understanding was these discounts given by the manufacturers would be passed along to uninsured patients.

The 340B program was greatly expanded under the ACA and is now being exploited nationwide by healthcare providers for their own gain.  In many cases, patients who are supposed to be benefitting from the lower prices do not get them; in fact, the poorly-written law does not specifically mandate that healthcare entities to pass along the savings to patients, whether insured or not.

What has happened is the program has turned into a money-making scheme that helps large non-profit hospital systems and their contract pharmacies, reap billions in profit.  The Charlotte Observer, for example, ran a series of articles on non-profit hospitals making huge earnings at the expense of patients while providing little charity care.  The series included at least two articles on how the 340B program was being abused by the hospitals, entitled “Hospitals Probed on Use of Drug Discounts” and “Hospitals Profited on Drugs for Poor, Uninsured.”

Who ends up paying for the misuse of the 340B program?  Taxpayers of course, through higher insurance premium costs, increased drug prices, and taxes.

Since 2011, there has also been an on-going and troubling issue with the 340B program over orphan drugs.  An orphan drug gets its designation from the Food and Drug Administration if it is intended for use in the treatment of a rare disease that affects fewer than 200,000 people in the United States.  Research-based companies are provided incentives to create these drugs because the patient populations are very small.

In May 2011, Health and Human Services’(HHS) Health Resources and Services Administration (HRSA), the agency that oversees the 340B program, issued a proposed regulation that would allow the 340B discount apply to orphan drugs if they are used for a non-rare disease indication (in other words, off-label) by certain 340B-covered healthcare entities.  But the ACA explicitly exempts orphan drugs from the 340B discount and makes no distinction whether the drug is used for a rare disease or not.  Once again, the Obama administration is changing law by regulatory fiat.

In July 2013, HRSA finalized the rule.  In Congress, Senator Orrin Hatch (R-Utah) was strongly critical of the new interpretation, laying out his reasons in a July 2013 letter to HRSA Administrator Mary Wakefield, in which he reminded HRSA that the law exempts orphan drugs from the 340B program, without any qualifiers, and also points out that the agency has proven itself incapable of good oversight.  For example, he believes the agency will be unable to track when orphan drugs are used for a rare disease and when they are not.

The Pharmaceutical Research and Manufacturers of America (PhRMA) sued HHS in September 2013.  Modern Healthcare reported on Oct 2, 2013 that, “The drug trade group this year said that final rule on the orphan-drug exclusion would ‘undermine’ Congress’ intent to preserve orphan-drug development incentives.  In the lawsuit, PhRMA said its member companies will suffer financial harms if they are required to offer 340B pricing ‘beyond the clear boundaries of the 340B statute.’”

In May 2014, the Judge Rudolph Contreras of the United States District Court for the District of Columbia invalidated the rule, siding with PhRMA, and stating that HHS does not have the legal authority to issue the regulation.  The judge did suggest that HHS might want to write an interpretive rule.  Thomas Barker and Igor Gorlach of the law firm FoleyHoag (LLP) questioned “how recasting the same rulemaking as an interpretive rule and repeating the same argument would change the opinion of the Court.”

Just like zombies, the bureaucrats kept on coming.  Predictably, on July 21, HRSA released a new interpretive rule, basically the old rule in a new suit, as an effort to circumvent the court’s decision.  PhRMA requested that Judge Contreras throw out the “new” interpretive rule because it was substantially identical to the one he had just declared the agency had no legal authority to issue.

However, on August 27, 2014 Judge Contreras disagreed with PhRMA’s request because the interpretive rule is a new action and not part of the earlier suit.  He said that PhRMA was free to file another lawsuit.

Sure enough, PhRMA did file another suit.  Here is what the trade association said in its press release:

At issue is the Health Resources and Services Administration’s (HRSA) interpretation of the 340B orphan drug exemption, enacted as part of the Affordable Care Act (ACA). The ACA significantly expanded the type of entities that can access 340B discounts for prescription drugs. To preserve incentives to invest in research and development of new treatments for rare diseases, the ACA expressly exempts manufacturers from having to provide these discounts on orphan drugs to newly eligible providers.

“After the Federal District Court of the District of Columbia vacated the HRSA July 23, 2013 rulemaking regarding the 340B orphan drug exemption, in July 2014, the agency issued the exact same rule, but labeled it ‘interpretive.’  HRSA’s action in this regard is unlawful.

“While we value the hard work and efforts of all agencies, it is important federal agencies recognize and work within the bounds set by Congress. PhRMA is therefore filing suit against the U.S. Department of Health and Human Services to challenge its second attempt to issue a rule conflicting with the plain language of the statute.

So the expensive waiting game begins again and taxpayer money continues to seep out all over the place.

Meanwhile, this case is just one representation of what is happening across business sectors and around the country.  More valuable resources are tied up playing “Whack-A-Mole” as companies scramble to keep up and defend themselves against the regulatory onslaught and an administration that routinely violates and re-interprets the law with reckless indifference.

 

(For further reading on the 340B issue see CAGW’s May Waste Watcher and in my June 2014 Swine Line post.)

John Locke was Right….

When he said “I have always thought the actions of men the best interpreters of their thoughts.”

Partisan ideology, never-ending campaigning, and empty rhetoric is no substitute for leadership, competence, and good management.  The Keystone Cop character of the “we first heard about it when we read about it in the news” Obama administration is all the proof you need of the vacuum of ideas at the top in DC.

Not only has the administration been exposed as lacking in creativity, it is also clear that it is incapable, loathe one might say, even when failure is staring it in the face,  to reach out beyond its own (extremely limited and rigid) world view to solicit and implement workable ideas from anyone else, not even its congressional allies.

Even Obama’s left-of-center supporters get it:

“I’ve never seen a guy want to coast this much as president.  Even Bush who couldn’t wait to get out of office and be an ex-president was at least still trying really bad ideas to the end. What in the world is President Obama’s agenda?!…The base has been eviscerated. There is no vision. The approval ratings have been battered. And President Obama hasn’t really done anything colossally wrong yet. ”

Obviously, that last sentence borders on delusional and most of his supporters are dissatisfied because they want something more from him, more stuff, more wealth transfers, more punitive regulatory policies against perceived enemies, bigger government programs, higher taxes, more give-aways, etc. (The Huffington Post article title says it all, “What has Obama Done for You Lately?”).

But on the saner side, Elaine Kamarck, Democrat and former Clinton administration official, nails it in an LA Times op ed:

“Today, presidents travel nonstop and talk nonstop,” she said. “That wasn’t always true. This addiction to PR has been terrible for the presidency. Every hour he’s on the campaign trail is an hour he could be talking with members of Congress. My advice to any president would be: Stop talking. Start working. “This administration has been disconnected from the government it’s supposed to be running,” Kamarck charges (and, remember, she’s a Democrat). “They seem to view the federal workforce as hostile territory. They don’t engage with it…. They don’t have a strong system of getting info from the agencies to the president.

The clearest proof: “They keep getting surprised by stuff. And the surprise is almost worse than anything else. It conveys the sense that the White House doesn’t know what its own government is doing. “You can’t prevent all these problems from happening, but you can certainly get ahead of the curve on some of them. Kamarck points to a larger historical trend at the root of the White House’s failings: the transformation of the presidency since the 1960s into an engine of the permanent political campaign.

“When a president suffers an implementation meltdown, those are far worse than legislative losses,” she said. “Legislative losses, there’s always another party to blame. Implementation problems, voters are going to blame the president — because they think part of his job is running the government. And Americans expect competence.”

Read it all, well worth it.