Dems' Dilemma on Lowering Gas Prices

Dems' Dilemma on Lowering Gas Prices

By Yuval Rosenberg and Michael Rainey
Friday, April 29, 2022

Happy Friday! Here’s your fiscal news update to close out the week.

Dems’ Dilemma on Lowering Gas Prices

Some Democrats are pressing House Speaker Nancy Pelosi (D-CA) to reconsider her rejection of a gas-tax holiday, The Hill reports.

“The grumbling is especially pronounced among lawmakers facing tough reelection contests in November, who are eager to bring home a policy they say would provide tangible and immediate savings for drivers at the pump,” The Hill’s Mike Lillis writes.

Pelosi has argued that a suspension of the federal gas tax might help lawmakers look like they’re taking action in response to high fuel prices, but it wouldn’t actually help consumers much since oil companies wouldn’t have to pass on the savings. She has also expressed concern that a gas-tax holiday would deprive the Highway Trust Fund of needed funding, a worry reportedly shared by the White House.

Vulnerable Democrats acknowledge that a gas-tax holiday would come with downsides but are pushing for one nonetheless. “It’s not perfect, what I’m proposing, but it is something. And if you are from a state where people drive 40 miles one-way to work, you’re interested in whatever helps,” Rep. Elissa Slotkin (D-MI) told The Hill.

Democratic leaders are reportedly more focused on legislation that would give state and federal officials more power to police the price-setting tactics of energy companies, which they say have been price gouging. “In focusing their initial legislative efforts here, Democrats are acknowledging other ideas floated by vulnerable members, such as the gas tax holiday and providing direct rebates to drivers, are dividing the caucus,” Politico’s Josh Siegel suggests.

But the price gouging narrative could still resonate. Both Exxon Mobil and Chevron reported sharply higher first-quarter profits on Friday. Exxon posted a profit of $5.5 billion, even after taking a $3.4 billion charge related to its divestment from operations in Russia. Its quarterly earnings were more than double its $2.7 billion profit for the same period a year earlier (but down from the $8.87 billion the company earned over the fourth quarter of 2021). Chevron, meanwhile, announced a profit of $6.3 billion for the first three months of 2022, its highest quarterly profit in almost 10 years and nearly quadruple the $1.37 billion it earned during the same quarter in 2021.

The two oil giants “will together give more cash to shareholders than they invest in oil and gas production this year even as political leaders call on the industry to increase output to help ease soaring consumer prices,” Bloomberg’s Kevin Crowley reports. And The Wall Street Journal’s Collin Eaton notes: “Energy executives say that sustained pressure from investors to return more cash to shareholders is the primary factor holding back investment in growth.”

Progressive critics of the oil companies seized on the quarterly earnings announcements to again call for instituting a windfall profits tax. Rep. Ro Khanna (D-CA), who has introduced a windfall tax bill with Sen. Sheldon Whitehouse (D-RI), tweeted: “Big Oil's profits skyrocketed last quarter while hardworking Americans suffered at the pump. Let's pass my bill with @SenWhitehouse to stop this profiteering.”

The bottom line: Democrats have limited options — and little consensus thus far — when it comes to bringing down prices at the pump, but they’ll continue to face pressure to do something, or at least demonstrate to voters that they are addressing the issue.

Quote of the Day

“Less every day.”

An unnamed Democratic senator, asked by The Hill how much confidence party members have that Sen. Joe Manchin (D-WV) will agree to a budget reconciliation package containing key elements of their agenda. Manchin has reportedly scheduled two meetings next week with a bipartisan group of senators that he organized to work on an energy and climate bill, an effort that overlaps with and has raised concerns about Democrat’s party-line reconciliation bill.

Medicare Advantage Plans Sometimes Deny Medically Necessary Care: Report

Private Medicare Advantage insurance plans are growing rapidly in popularity and are expected to cover a majority of Medicare beneficiaries within just a few years, but a federal watchdog report released Thursday found that the plans have a bad track record of denying needed medical care that should be covered under the terms of the federal insurance program for those 65 and older.

In a 61-page report, a team of investigators from the inspector general's office of the U.S. Department of Health and Human Services found that tens of thousands of seniors with Medicare Advantage insurance plans had been denied or faced delays for necessary medical for which they were eligible. The care frequently delayed and denied included imaging services such as MRIs and CT scans, as well as stays in rehabilitation facilities — all of which could jeopardize the health of those who need the prescribed medical services.

“Although MAOs [Medicare Advantage Organizations] approve the vast majority of requests for services and payment, they issue millions of denials each year, and CMS’s annual audits of MAOs have highlighted widespread and persistent problems related to inappropriate denials of services and payment,” the report says, referring to audits made by The Centers for Medicare & Medicaid Services, which runs Medicare.

The analysis: The investigators reviewed a sample of 430 denials issued by 15 large Medicare Advantage insurers in June of 2019 and found that 13% were made improperly for services that should have been approved. Based on that rate, the investigators estimate that 85,000 requests were improperly denied that year.

Questionable denials are nothing new in Medicare Advantage plans. A 2018 report found that about 75% of all appeals of denials are overturned, suggesting that insurers are being too aggressive, and The New York Times’s Reed Abelson says that “hospitals and doctors have long complained about the insurance company tactics” within the program. Private insurers are paid a flat fee per patient by the federal government and may be motivated to deny services in order to increase profits.

The recommendation: About 29 million Americans are covered by Medicare Advantage plans, and the investigators said the program needs more oversight. They called on CMS to issue new guidelines for insurers to clarify what qualifies as a necessary medical service, and to update the audit system to focus on problems revealed in the report.

Still, some critics say that the problems are unavoidable given the nature of the Medicare Advantage program, which relies on profit-seeking firms to control costs. In a piece at The American Prospect Friday, author Ryan Cooper argues that insurers inevitably seek to game the system in the pursuit of profit by doing things likes denying claims and rigging the risk pool, moves that produce less care but higher cost. “All this (plus a bunch of other complicated scams) means that Advantage enrollees receive something like 10 to 25 percent less in health care spending, but the program costs the government about 3 percent more per person than traditional Medicare,” Cooper says. “The results have been exactly the opposite of free-market nostrums: worse coverage that costs more.”

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