Weekly Newsletter: September 8, 2008

The Outlook Ahead

Congress returns from its annual summer vacation today with several health-related issues on the agenda for the month of September. Specifically, additional Medicaid funding could be included in economic “stimulus” legislation, and a massive expansion of the State Children’s Health Insurance Program (SCHIP) could come up for another vote. Finally, an agreement-in-principle that negotiators reached on mental health parity legislation could receive a final vote if disputes surrounding the bill’s pay-fors can be resolved.

Many conservatives may be concerned about the Medicaid spending provisions (H.R. 5268), which would provide more than $10 billion in aid to states without providing any “stimulus”—as federal spending would merely supplant state outlays. At a time when the federal government’s budget deficit stands at least eight times the size of states’ combined budget deficits, conservatives may question why the federal government should be asked to bail out states facing fiscal difficulties much smaller by comparison.

Just as important, many conservatives may be concerned that this giveaway to states would not be accompanied by any substantive reforms to a Medicaid program that often fails to provide adequate care to the vulnerable patients it was designed to serve. In many cases, bureaucratic obstacles discourage providers from participating, resulting in limited access and months-long waits for beneficiaries, while fraud remains a persistent problem in several states. Some conservatives may believe that time on the legislative calendar debating a Medicaid bailout should instead be used to discuss more comprehensive structural reforms to the program—so that the poorest beneficiaries are not subjected to more of the same from a government health system that does not work for many.

On SCHIP, many conservatives may retain concerns about a significant expansion of the program— which, according to an Congressional Budget Office score, would now cost significantly more than the $35 billion expansion (H.R. 3963) vetoed by the President last fall. At a time of economic uncertainty for many Americans, conservatives may not support a substantial increase in federal tobacco taxes, which would be borne primarily by working-class families, as a way to increase the government’s role in health care. In addition, many conservatives continue to support Administration guidance designed to ensure that states enroll poor children first before expanding their SCHIP programs to wealthier families, and oppose any efforts by Congressional Democrats to repeal this important principle.

In addition to the concerns that some conservatives may have regarding the increases in insurance premiums caused by mental health parity legislation, conservatives may also be concerned about the way in which the bill’s more than $3 billion price tag will be financed. During House consideration of a mental health parity bill (H.R. 1424) in March, many conservatives objected to provisions—restrictions on physician-owned specialty hospitals, and increased drug rebates demanded from pharmaceutical companies—that undermined free markets in health care and expanded government price controls. The mental health bill is currently attached to tax extenders legislation in the Senate, which remains deadlocked over unrelated disputes; if the impasse over tax provisions continues, it remains unclear which direction or form the mental health legislation may take.

The RSC has prepared two new Policy Briefs, providing an update on SCHIP enrollment statistics and analyzing the premium support provisions within SCHIP.

Uninsured Numbers Show Need for Entitlement Reform

During the recess, the Census Bureau released its annual report on income and health insurance coverage during 2007. The report found that the number of uninsured declined by 1.3 million in 2007 when compared to the previous year, due largely to a 2.8 million increase in the number of Americans receiving coverage under various public programs, particularly Medicaid and Medicare.

Some conservatives may believe the significant growth in the number of Americans receiving government-run health insurance coverage provides another reason to re-examine entitlement spending and reform the health care system. In particular, market-based health reforms have the potential to slow the growth of health costs that threaten both America’s fiscal future and the financial well-being of many families.

The RSC has released an updated Policy Brief analyzing the new Census data, as well as a new Policy Brief highlighting the impact of illegal immigrants—who constitute as much as one-fifth of the uninsured in America—on the health care system.

Cooking the Books

During the recess, the Department of Health and Human Services’ Inspector General released a report criticizing the auditing process undertaken by the Centers for Medicare and Medicaid Services (CMS) with respect to the integrity of purchases of durable medical equipment (DME). The report stated that CMS’ guidance to the external auditors hired to examine DME claims failed to implement a rigorous level of scrutiny, and that as a result the level of questionable claims was significantly higher than CMS had first reported. Responding to the IG report, Ways and Means Health Subcommittee Chairman Pete Stark (D-CA) said that “to look better to the public, [CMS] cook[s] the books;” he called the agency “incompetent.”

However, three weeks earlier Mr. Stark himself made dubious claims with respect to Medicare reform and President Bush’s tax relief. During debate on the resolution (H.Res. 1368) turning off the Medicare “trigger” mechanism, Mr. Stark claimed that extending the Bush tax relief would cost $100 trillion over 75 years—about three times’ Medicare’s unfunded obligations over that period—such that forgoing an extension of the tax relief provisions would somehow end Medicare’s long-term financial difficulties. However, a report by the liberal Center for Budget and Policy Priorities cites the 75-year cost of the tax relief as $13.6 trillion—less than one-seventh the number cited by Stark in debate—and explicitly states that Medicare and health costs pose a greater threat to the nation’s fiscal solvency than the President’s tax relief. Asked repeatedly to provide a source of information justifying Stark’s statement, Ways and Means Committee staff could not substantiate his comments, or provide an explanation for the $86 trillion higher figure.