An Individual Mandate — To Eat Your Vegetables?

During their questioning of Elena Kagan yesterday afternoon, Sens. Cornyn and Coburn both touched on the Commerce Clause issues surrounding the individual health insurance mandate and the limits (or lack thereof) on federal power.  In response to Sen. Cornyn’s questioning about the scope of the Commerce Clause, Ms. Kagan said that “the current state of the law is to grant broad deference to Congress in this area, to assume that Congress knows what’s necessary in terms of the regulation of the country’s economy, but to have some limits.”  However, the limits she went on to describe were centered around “activity…not itself economic in nature.”  Left unstated in this exchange was whether NOT buying health insurance constitutes economic activity, as the health care law, and the Justice Department’s defense of it, assert.

Dr. Coburn followed up on this point, asking whether Congress could pass a law forcing individuals to eat three fruits and three vegetables every day.  Ms. Kagan replied that such a measure would be a “dumb law,” but did not answer as to whether or not the Constitution gives Congress power to create and enforce such a mandate.  In fact, she implied that Congress MAY have such a power, noting that “We can come up with, sort of, you know, just ridiculous sounding laws, and the – and the – and the principal protector against bad laws is the political branches themselves.”

Dr. Coburn went on, pointing out Ms. Kagan that a finding that “eating three fruits and three vegetables a day would cut health care costs 20 percent, now – now we’re into commerce.  And since the government pays 65 percent of all the health care costs, why – why isn’t that constitutional?”  Once again, Ms. Kagan declined to say a law would be unconstitutional, and instead asserted that “deference should be provided to Congress with respect to matters affecting interstate commerce.”

It’s worth asking: If Ms. Kagan is unwilling to admit that Congress cannot regulate the diet of all Americans, is there any area where she believes the federal government CANNOT invoke the Commerce Clause to intrude upon every facet of Americans’ daily lives?

JCT: At Least $27 Billion in Improper Insurance Subsidy Payments

CongressDaily has an interesting article this morning on a significant source of over-spending in the health care law – excessive health insurance subsidies provided to individuals and families.  The issue arises from the fact that the new insurance subsidies are based on an individual’s (or family’s) most recent tax return – so that subsidy levels beginning in January 2014 will be based on reported income for 2012.  As might be expected, a family’s circumstances can change significantly during this time lag for a variety of reasons – a change in job, significant raise, divorce, birth, or death, to name just a few.

The health care law established a reconciliation process intended to recapture any subsidy over-payments – but the law capped the amount of such repayments at $250 for individuals and $400 for families.  As the article reports, raising these limits to $1,000 for an individual and $2,000 for a family would result in an additional $27 billion in repaid subsidies.  This $27 billion in subsidy overpayments represents a significant portion of the $464 billion total devoted to insurance subsidies in the new health law.  But the figure does NOT represent the full level of overpayments – it excludes the revenue repaid under the law’s existing provisions (capped at $250 per individual and $400 per family), and it does not include any additional revenue that might be repaid if the repayment cap were lifted entirely, rather than merely raised to $1,000 per individual and $2,000 per family.

It is however fair to say that at least $27 billion – and quite possibly a good bit more than $27 billion – will be paid in insurance subsidies to individuals who do not deserve them based upon their income levels at the time they actually receive the payment.  Some of these payments could be a result of innocent mistakes that a family might not have noticed.  But it’s also worth asking whether the law itself encourages individuals not to report changes that would reduce their subsidy eligibility: After all, would you be quick to disclose a change in income that will result in your insurance subsidy being cut, if you knew that the most you would have to pay back for receiving thousands of dollars in taxpayer-funded subsidies you didn’t deserve would be $400?

The Obama Administration recently announced its intention to cut Medicare fraud in half by 2012.  That’s an admirable goal, considering both the skyrocketing federal budget deficit and Medicare’s shaky long-term financing.  But it’s worth examining whether the overpayments associated with what an expert quoted in the article called “an entirely new welfare system” will erase any gains from anti-fraud efforts in Medicare – and whether, at a time of skyrocketing deficits and high unemployment, it is appropriate for the federal government to raise taxes by more than half a trillion dollars to create a system where individuals will receive more than $27 billion in insurance subsidies to which they are not entitled.

 

Tinkering With Health Credits Eyed As Way To Cut Costs

Wednesday, June 30, 2010
by Peter Cohn

An area of health reform that has received little attention is getting a new look as deficits mount: what happens when someone receives larger health insurance subsidies than they are eligible for because they made too much money.

Under the law, low-income individuals and families can get tax credits to help pay insurance premiums beginning in 2014, when new exchanges come online. The credits are based on income, marital status and number of children — up to 400 percent of the poverty line, when the out-of-pocket expense is capped at 9.5 percent of adjusted gross income and the government picks up the rest.

According to CBO, the credits will cost $464 billion through 2019, the largest expense in the health law. And that’s just in the first six years, meaning the cost should grow considerably beyond 2020.

The kicker is eligibility is based on a household’s most recent tax return. With enrollment beginning in October 2013, eligibility would be determined by 2012 reported income. In January 2014 when the credits take effect, an individual or family could have had much-changed economic circumstances in the intervening years.

It can work both ways: A household could earn significantly less and be eligible for bigger credits due to job loss, divorce, retirement, or a newborn child, for instance. In such cases they can reapply for larger credits, which are awarded monthly. If a household is earning more money, they still get to keep much of their credits received during the year.

There is an IRS “true up” process where the credits are reconciled with actual income, and taxpayers are required to pay back up to $400 in excess credits, or $250 for individuals, which can be a fraction of the overpayments. If income turns out to be above 400 percent of poverty — $88,200 for a family of four based on 2009 guidelines — it can get very expensive. They would have to pay back the entire amount received during the year.

One proposal floating on Capitol Hill would increase the payback requirement from $400 to $2,000 for households and $250 to $1,000 for individuals. The Joint Committee on Taxation scored that idea as raising $27 billion over 10 years, which would barely make a dent in the overall cost but could provide deficit-conscious critics of the law an opening.

Take a family of four earning $44,100, which is 200 percent of the poverty line based on 2009 guidelines. They would have to pay 6.3 percent of income toward health coverage, which under a hypothetical $13,000 insurance plan would total $2,778. The government pays the remaining $10,222 in tax credits, freeing up that money for the family.

Then comes tax season the following April, and due to new income, it turns out the family actually made $55,125. That is up sharply from two years prior, putting that household now at 250 percent of poverty — meaning they should have contributed 8.05 percent, or $4,438, and received tax credits worth $8,562.

That’s a $1,660 difference between credits received and what they were eligible for, of which the family would have to pay back $400 — essentially a $1,260 freebie. Under the alternative scored by JCT, whose authors requested anonymity because the proposal was unofficial, they would have to pay back the full $1,660.

Urban Institute fellow Eugene Steuerle argued the program will likely be error-prone and difficult to administer. “It’s extraordinarily hard to collect from people at the end of the year. That’s why we try to have a tax system that withholds accurately, or over-withholds,” said Steuerle, a Treasury tax official in the George H.W. Bush administration. “They’re really not just creating a new health system; they’re creating an entirely new tax system and an entirely new welfare system.”

He said extra tax liability of up to $2,000 wouldn’t be easy to pay for a family of four earning shy of $90,000.

A Senate Democratic aide said repayments were limited to $400 to ease the burden on poor families, as those earning more than 400 percent of poverty can more easily pay it back. It was also designed that way to avoid similar flaws with Earned Income Tax Credits taken in advance during the year, which many low-income families have turned down for fear their income will end up too large and they would have to pay it back.

Judith Solomon, co-director of health policy at the Center on Budget and Policy Priorities, said increasing the repayment caps could prove a deterrent to getting health coverage through the exchanges.

“For some people, knowing they’re going to have this tax liability, it’s likely they’re going to come in in the middle of the year and say ‘I don’t want a credit anymore,’ ” Solomon said. She added the $400 penalties were probably enough to make credit recipients report changes in income during the year, thus avoiding large overpayments and holding down costs.

Ed Haislmaier, senior research fellow in health policy at the Heritage Foundation, said upping the repayment caps might make the deficit numbers look a little better but wouldn’t resolve basic design flaws in the system. “This is not health policy. This is income redistribution,” Haislmaier said.

Did Democrats’ Health Law Violate the Fifth Commandment?

No, I’m not referring to the dictum to “Honor your father and your mother” and its applicability to the Medicare portions of the law, which is an entirely different discussion.  I write instead about the “Ten Commandments for Fiscal Adjustment in Advanced Economies” that the International Monetary Fund released last week, ahead of the G-20 summit.  That document’s fifth point specifically called on developed countries to pass “early health and pension reforms, as current trends are unsustainable.”

How well did Democrats’ health “reform” law meet this standard, according to the non-partisan Congressional Budget Office?  CBO Director Elmendorf today gave a lukewarm assessment at best, noting that if the law is fully implemented, it will make “steps in the direction of a sustainable fiscal policy.  But they are small steps relative to the journey that will be needed for fiscally sustainability.”

Most critically, even this rather tepid analysis presumes that all the tax increases and savings measures in the health care law are fully implemented – an assumption about which CBO remains highly skeptical.  While today’s CBO report included one current-law baseline estimate that presumes the law is fully implemented, it also included an alternative baseline that presumes many of the largest and most controversial savings proposals will never be allowed to take effect by Congress.  The alternative fiscal scenario is not an unusual phenomenon – at the Fiscal Commission meeting this morning, Budget Committee Chairman Conrad called it a useful tool, and some experts view it as giving a more accurate and realistic picture of the country’s long-term fiscal picture.  What is striking though is the way in which CBO, in arriving at its alternative scenario, assumed that most of the law’s major savings provisions will never take full effect – this only three months after the law was first enacted.

So in sum: While the IMF called current trends on health spending “unsustainable,” the Congressional Budget Office released a report highlighting several “Questions About Sustainability” for a law enacted mere months ago, and recently asserted that even if the law is fully and successfully implemented, “putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including this year’s health legislation).”  Sounds like some Democratic fiscal hawks may need a trip to the IMF confessional.

One final word on health care and the budget: The Center for American Progress released a report today claiming that according to CBO, the health care law “is fully funded, strengthens the Medicare trust fund, and reduces the federal deficit.”  That claim is demonstrably false.  In January CBO stated that “the majority of the [Medicare] trust fund savings under [the health law] would be used to pay for other spending and therefore would not enhance the ability of the government to pay future benefits.”  CBO followed up with a March letter to Congressman Ryan, in which it tallied the budgetary effects of keeping the Medicare Hospital Insurance savings in the Medicare HI trust fund: “the legislation’s effects on the rest of the budget—other than the cash flows of the HI trust fund—would amount to a net increase in federal deficits of $260 billion over” 10 years.  In plain English, the same money can’t be used BOTH to “save” Medicare and to reduce the deficit – if the Medicare savings proposals were dedicated solely toward Medicare, the deficit would soar – so CAP’s claim is clearly false.  Moreover, with respect to the claim that the law is “fully funded,” CBO released a letter last week claiming the high-risk pool program is NOT fully funded, and that as many as 500,000 individuals with pre-existing conditions could lose out on coverage as a result – so that CAP claim needs fact-checking as well.

CBO Exposes Budgetary Gimmicks in Health Care Law

The Congressional Budget Office released its annual long-term budgetary outlook today, and it contains some striking new statements in regards to the health care law.  First, the report notes that in calculating its long-term health spending projections, CBO is “using the same growth rates that would have been applied in the absence of the legislation,” which the fact that CBO “does not have an analytic basis for projecting the effects of the recently enacted legislation on the growth rate of federal health care spending over the very long term.” (citation at page 26; longer discussion at page 36)

When analyzing the health care law, the report includes a section entitled “Questions About Sustainability” on page 35, which I’ve pasted below.  Many of the same quotes were included in CBO’s initial analyses of the health care and reconciliation laws.  CBO notes that “increases in payment rates for many providers will be held below the rate of increase in the average cost of providers’ inputs” and “it is unclear whether the [Medicare provisions] can be sustained, and, if so, whether it will be accomplished through greater efficiencies in the delivery of care or will instead reduce access to care or diminish the quality of care.”  CBO similarly calls provisions in the reconciliation law slowing the growth of insurance subsidies after 2018 “difficult to sustain.”

For these reasons, CBO’s alternative fiscal scenario – which, for example, presumes that physicians will receive increases in Medicare reimbursements, rather than cuts under the sustainable growth rate (SGR) mechanism – similarly assumes that “the continuing reductions in updated for Medicare’s payment rates, the constraints on Medicare imposed by the IPAB, and the additional indexing provision that will slow the growth of exchange [insurance] subsidies…will not continue after 2020” (page 37).  In other words, Congress’ non-partisan budgetary scorekeeper believes that the major savings proposals in the health care law cannot—and will not—be sustained in the long-term.

In addition, CBO highlighted the scope of the “Cadillac tax” on high-cost health plans.  Page 57 of the report asserts that “a greater share of premiums will be subject to” the tax over time.  More importantly, the report notes that “in CBO’s estimation, whether policy-holders pay the excise tax through higher premiums or avoid it by switching to lower-cost plans, total taxes will ultimately rise” as a result of the provision.

Finally, I’ll reference a couple of other interesting tidbits.  First, Table 2-1 on page 31 confirms that from 1975-2008 and 1990-2008, excess cost growth in Medicare has exceeded that of Medicaid and all other health spending (including from private sources), which raises doubts about Medicare’s ability to function as a leader in controlling health care costs.  Second, a discussion on page 30 notes that “the substantial reduction in the percentage of health care costs that people pay out of pocket has also increased demand” – a trend that will likely only get worse as a result of the health care law.

But the major story here – as with CBO Director Elmendorf’s presentation from a month ago – is that Congress’ independent budget arbiter once again confirmed that Democrats’ new, $2.6 trillion health care law is ultimately unsustainable.

 

Questions About Sustainability

One challenge that arises in projecting federal outlays for health care over the long term is that the recent legislation either left in place or put into effect a number of procedures that may be difficult to sustain over a long period.  For example, the legislation did not alter the sustainable growth rate mechanism used for determining updates to Medicare’s payment rates for physicians; under that mechanism, those rates are scheduled to be reduced by about 21 percent in 2010 and then decline further in subsequent years. Since that mechanism was enacted in 1997, its provisions have usually been modified to avoid scheduled reductions in payment rates, and legislation was just enacted to delay cuts in those payment rates until December 2010 (a development that is not reflected in the projections). At the same time, the legislation includes provisions that will constrain payment rates for other providers of Medicare’s services. In particular, increases in payment rates for many providers will be held below the rate of increase in the average cost of providers’ inputs.

Taking all the provisions of the legislation together, CBO expects that, adjusted for inflation, Medicare spending per beneficiary will increase at an average annual rate of less than 2 percent during the next two decades—compared with a roughly 4 percent annual growth rate during the past two decades (a calculation that excludes the effect of establishing the Medicare prescription drug benefit). It is unclear whether that lower rate of growth can be sustained and, if so, whether it will be accomplished through greater efficiencies in the delivery of health care or will instead reduce access to care or diminish the quality of care (relative to the situation under prior law).

Another provision that may be difficult to sustain will slow the growth of federal subsidies for health insurance purchased through the insurance exchanges. For enrollees who receive subsidies, the amount they will have to pay depends primarily on a formula that determines what share of their income they have to contribute to enroll in a relatively low-cost plan (with the subsidy covering the difference between that contribution and the total premium for that plan). Initially, the percentages of income that enrollees must pay are indexed so that the subsidies will cover roughly the same share of the total premium over time. After 2018, however, an additional indexing factor will probably apply; if so, the shares of income that enrollees have to pay will increase more rapidly, and the shares of the premium that the subsidies cover will decline.

Health “Reform:” High Premiums, Rising Costs

The Associated Press has a story this morning profiling the new federal high-risk pool program set to be introduced later this week (more than a week behind the schedule laid out in the health care law).  However, the article also notes that “premiums will be a stretch for many,” and notes that “cost issues dog” the new program.  It points out that “technical experts who advise Congress and the Administration have repeatedly warned that the White House underestimated the cost,” and observes that, if the program runs out of money (which CBO predicted last week it would), “that would be an embarrassment for Obama, since the program is a centerpiece of his plan for putting the nation on a path to coverage for all.”

Again, it’s worth pointing out that Democrats easily could have provided full funding for high-risk pools, had they chosen not to provide $15 billion in taxpayer funding for a “slush fund” for jungle gyms and other dubious spending projects, or billions more in backroom deals needed to obtain the votes necessary to pass the legislation.  Many may question how dedicating billions in taxpayer funds to new backroom deals and pork projects, rather than individuals with pre-existing conditions, constitutes true health care “reform.”

Elena Kagan and the Individual Mandate

As the questioning of Elena Kagan gets underway this morning in the Senate Judiciary Committee, many commentators have focused on the constitutionality of the individual mandate in the health care law – a critical policy issue in its own right, and also a window into Ms. Kagan’s views on the limits (or lack thereof) of federal power.  A Wall Street Journal editorial yesterday pointed out that if Ms. Kagan believes individuals can be forced to buy health insurance – and a specific type of “government-approved” health insurance at that – there is little the federal government cannot compel individuals to do.  George Will made a similar point in his Sunday column, when he raised some hypothetical questions for Ms. Kagan that could logically follow from an individual mandate to purchase health insurance:

— If Congress decides that interstate commerce is substantially affected by the costs of obesity, may Congress require obese people to purchase participation in programs such as Weight Watchers? If not, why not?

— The government having decided that Chrysler’s survival is an urgent national necessity, could it decide that “Cash for Clunkers” is too indirect a subsidy and instead mandate that people buy Chrysler products?

— If Congress concludes that ignorance has a substantial impact on interstate commerce, can it constitutionally require students to do three hours of homework nightly? If not, why not?

— Can you name a human endeavor that Congress cannot regulate on the pretense that the endeavor affects interstate commerce? If courts reflexively defer to that congressional pretense, in what sense do we have limited government?

Conversely, a Politico op-ed this morning claims that if the Court strikes down the individual mandate, future courts could use that decision to invalidate existing civil rights legislation or other acts of Congress.  However, this claim is simply not convincing.  The civil rights laws all involve entering into commerce –businesses that choose to enter into commerce must comply with the laws and may not discriminate by refusing to serve certain customers.  Conversely, the individual mandate claims the federal government’s authority to force individuals into commerce to begin with.   In short, the individual mandate is a claim for unprecedented federal power – which the non-partisan Congressional Research Service acknowledged by stating the individual mandate raises a “novel issue whether Congress may use the [commerce] clause to require an individual to purchase a good or service.”  Because the individual mandate presents a “novel” case, the Court could strike it down without disturbing any of the precedents on which the civil rights and other previous federal laws rest.

How the Obama Administration’s New Regulations Give Insurance Companies More Control Over Small Businesses

President Obama and Democrats in Congress claim that their government takeover of health care will curb insurance company abuses. But in reality a series of new rules will give small businesses struggling to afford coverage for their workers even less ability to control skyrocketing premiums. Instead of being able to negotiate with insurance companies for more affordable coverage, small businesses face a “choice” of either accepting their current carrier’s premium increases or purchasing new, costlier coverage mandated by the health care law:

  • On June 14, 2010, the Administration issued rules affecting the ability of individuals and employees to maintain their current health coverage.[i] Violating the rules would require employers and individuals to purchase new policies that meet all the additional mandates, requirements, and regulations imposed in the law.
  • The Administration estimates that 51 percent of all employees, including 66 percent of workers in small businesses, would find themselves in violation of the rules, and have to obtain new coverage, by 2013—less than three years from now.[ii] Under the worst scenario, nearly seven in 10 workers, and four in five employees in small businesses, would lose their current coverage by 2013.[iii]
  • The rules have a particularly dire effect on small businesses, most of which purchase coverage from an insurer rather than assuming the financial risk themselves. Small businesses will not be permitted to change insurance companies without violating the new rules, giving them a significant disadvantage in negotiating with their current carrier.[iv]
  • As a result, small business owners face a difficult choice: They can accept double-digit premium increases from their existing insurance companies, averaging 10 to18 percent nationwide,[v] or they can shop around for new coverage, in which case they will have to comply with 20 new mandates in the health care law, each of which could raise insurance premiums by one to three percent.[vi]
  • Within days of the rules being released, press accounts told of small business owners forced to accept skyrocketing premium increases because they feel they cannot change carriers. For instance, the Wall Street Journal reported: “Tim Sledz, manager of Windwalker Aviation Services in Romeoville, Illinois, is so worried about the future that he has elected to hang on” to his current policy—but was forced to accept a 15 percent premium increase as a result.[vii] If he had been able to negotiate with other insurance companies, Mr. Sledz may have been able to find a better deal for his workers; instead, he and his employees will be forced to absorb these rapidly rising insurance costs.
  • While small businesses face difficult choices about affording coverage for their workers, labor unions apparently obtained a “backroom deal” during the regulatory process, as the rules would allow collectively bargained plans to switch carriers without violating the new guidelines.[viii] Even though President Obama admitted in January that the health care deal-making “legitimately raised concerns” about an “ugly process,”[ix] this latest sweetheart deal for unions was not subjected to public scrutiny before being announced.

Speaker Pelosi famously said, “We have to pass the bill so that you can find out what is in it.”[x] Many American small businesses have already expressed strong concerns about what they have found in these rules. Small businesses struggling to control rising premiums find their ability to do so limited, not least because they have little ability to shop around for new policies. Violating any of the restrictive new rules would trigger even higher costs to comply with more federal mandates—again placing small businesses at the mercy of their current insurance companies. This death spiral of increasing costs, which violates President Obama’s pledge to “save a typical family up to $2,500 on premiums,”[xi] could also cause more firms to drop their coverage entirely, placing those additional costs on the taxpayer’s back.

Any way you slice it—bureaucratic mandates, rising premiums, loss of coverage, an economic drag on business—the rules, and the law they are implementing, represent the farthest thing from true reform.

 

[i] Interim final rule by Departments of Labor, Treasury, and Health and Human Services regarding grandfathered health insurance status, released June 14, 2010, http://www.federalregister.gov/OFRUpload/OFRData/2010-15278_PI.pdf

[ii] Interim final rule, Table 3, p. 54

[iii] Ibid.

[iv] Paragraph (a)(1)(ii) of the interim final rule would provide that any “new policy, certificate, or contract of insurance after March 23, 2010 (e.g., any previous policy, certificate, or contract of insurance is not being renewed)” would trigger loss of grandfathered status; see pp. 75-76.

[v] “Small Firms Find Changing Insurance Is Trickier” by Avery Johnson, Wall Street Journal June 23, 2010, http://online.wsj.com/article/SB10001424052748703513604575311013340405940.html

[vi] Ibid.

[vii] Ibid.

[viii] Paragraph (f) of the interim final rule would permit collectively bargained plans to make conforming changes to their plan prior to the end of the last collective bargaining agreement in place as of March 23, 2010, and would be permitted to change plan issuers. The restriction in paragraph (a)(1)(ii) prohibiting a change in carrier would not apply to collectively bargained plans until the last of the collective bargaining agreements in place on March 23, 2010 expires—flexibility not granted to small employers and others purchasing fully insured products. See pp. 81-82 of the interim final rule.

[ix] ABC television interview with Diane Sawyer, January 25, 2010, transcript available at http://abcnews.go.com/print?id=9659064

[x] March 2010 speech, available at http://www.youtube.com/watch?v=hV-05TLiiLU&feature=related

[xi] Obama for America campaign document, “Background Questions and Answers on Health Care Plan,” http://www.barackobama.com/pdf/Obama08_HealthcareFAQ.pdf

Washington Post Claims about Donald Berwick Nomination

The Post carries an editorial this morning endorsing Don Berwick’s nomination to head the Centers for Medicare and Medicaid Services this morning, and in the process included several misleading statements about the confirmation debate.  While the Post’s editorial board is entitled to its own opinion of Dr. Berwick, it is not entitled to its own facts, so it’s worth making three points in response:

  1. The editorial accuses Republicans of taking “an opportunity to re-litigate the health care debate.”  On that count, it’s worth pointing out the process by which the majority used a series of backroom deals to ram through a massive 2,700 page piece of legislation on a party-line vote, and the public outcry it caused.  More to the point, multiple polls taken in recent weeks show majorities favoring a repeal of the health care law – and a poll released just yesterday shows a majority of the country disapproving of President Obama’s handling of health care.  In other words, it’s not Republicans that want to “re-litigate the health care debate” – the American people as a whole do.
  2. The editorial claims that Republicans are “latching on to a few of Dr. Berwick’s statements to wage their campaign.”  But the New York Times – no bastion of conservatism – rebutted that very notion last week: “Administration officials say they are confident that Dr. Berwick will be confirmed, and they say Republicans have taken his comments out of context.  In fact, many of the comments have been repeated, with slight variations, in Dr. Berwick’s articles and lectures over the years.”  In other words, it’s not just a “few” statements that have sparked concerns – it’s Dr. Berwick’s decades of writings.  The New York Times piece also pointed out that Dr. Berwick “has championed efforts to ‘reduce the total supply of high-technology medical and surgical care’” and has supported “a cap on total health spending…on more than one occasion” – both positions that could adversely affect millions of Americans, and which Dr. Berwick has yet to publicly explain, or defend, since his nomination.
  3. The editorial notes that “the Senate Finance Committee has not scheduled a hearing on the Berwick nomination; that may not even happen before the August recess.”  The implication in that statement is that Republicans have prevented a hearing from being called – when in reality nothing could be further from the truth.  The majority has not requested a hearing on Dr. Berwick’s nomination, and the nominee himself has yet to respond to all the due diligence requests made of him.  If the Administration wishes faster action on this nomination, it should start by having its nominee respond to the Finance Committee’s requests for information – because claiming that Republicans have prevented a hearing on the nomination is inaccurate, and a false partisan attack.

Donald Berwick’s Socialist Utopia

I wanted to draw to your attention a 1992 Washington Post op-ed co-written by Donald Berwick, President Obama’s nominee to head the Centers for Medicare and Medicaid Services.  The article provides a vision about how the theoretical state of “Coltuckin” reformed its health care system.  As such, it nicely encapsulates Berwick’s philosophy towards health care, and the agenda he would bring to CMS.  Positions of note include:

  • A Capped Budget:  “The Coltuckin Medical Society agreed to devise a long-range plan to bring soaring health costs under control…the medical society agreed to negotiate with the [government-chartered] commission a single total sum each year for all compensation for all physicians in the state.  With this leverage, the medical society was positioned to address the widely discrepant payment structure for primary care doctors and specialists.”
  • A Single Payer—with Total Control:  “Coltuckin chose, in the end, to administer its capped total health care budget in the simplest way: through a single payer, the [government] commission.  The savings in administrative costs alone, through simplifying the insurance system, amounted to almost 8 percent of Coltuckin’s entire health care bill…To ensure that all hospital expansion and purchase of major new equipment would be coordinated, it was agreed that all capital budgets would be negotiated with the commission.  Since the commission was also responsible for negotiating with nursing homes, the nurses’ association, and all other groups involved in health services, it was truly in charge of a global budget.”
  • Shuttered Hospitals and Intensive Care Units:  “The Coltuckin Hospital Association coordinated a statewide program to reduce over a four-year period the number of hospital beds.  Except in two underserved areas of the state, all new hospital bed construction ceased.  Two underutilized hospitals were converted to nursing homes.  Second, the hospitals regionalized and consolidated specialized care including neonatal intensive care, cardiac surgery, expensive imaging procedures, transplant surgery, and trauma care.  They thereby minimized duplication of services.”
  • Less Care:  “People began to understand the limits of medical therapy.  They learned more about illnesses and symptoms that improve spontaneously with time, and the hazards of too much medical care, especially the seductive, high-tech variety.”
  • Entitlements beyond health care:  “To reduce excessive infant mortality…the state adopted a set of guarantees regarding infant nutrition, early childhood intervention, day care and job retraining supports for young, single parents.”

Delays and Confusion on High-Risk Pools

USA Today reports this morning on the many states likely to miss the July 1 start-up date for the state high-risk pool program.  (July 1 is itself a delayed implementation date; the law states the program should have begun by last Monday, June 21.)  Some states like Michigan have said they may not be able to get their programs up and running until as late as October, due to lengthy bidding processes, the need for state legislative action, or both.  The Administration claims a detailed list of state risk pools will be available at www.healthcare.gov; however, this website is not yet operational either.

Likewise, the New York Times also highlights the CBO report from last week stating that the health care law’s $5 billion in funding “will not be sufficient to cover the costs of all applicants.”  The article reports that states “would freeze [risk pool] enrollment if necessary to keep within their budgets,” but also notes that “it is not clear who would be legally responsible for claims that remain unpaid after a state’s allotment runs out” – one of the reasons why 20 states chose not to participate in the program.

Politico reports that states who did choose to run their own high-risk pools have obtained language in contracts signed with HHS that indemnifies them from any lawsuits against the risk pool, and clarifies that “they do not have a financial commitment to run the pool if HHS funds run out.”  That is a welcome outcome for the states, if it avoids imposing yet more unfunded mandates on them, but it also doesn’t answer the fundamental question of what happens should the funds prove insufficient.

To be clear: Many Republicans support high-risk pools as a means to offer quality, affordable coverage to individuals with pre-existing conditions.  The prime questions surrounding this program involve implementation and priorities: What happens if (or, more likely, when) the $5 billion in federal funds runs out?  And why did Democrats spend so much money on other, more dubious programs – $15 billion for a jungle gym “slush fund,” and billions more on backroom deals – rather than funding this critically important program properly in the first place?