Democrat Health “Reform” Picks Winners and Losers

While Democrats allege that their government takeover of health care will create a fairer and more equal society, provisions in Speaker Pelosi’s government takeover of health care (H.R. 3962) and Sen. Reid’s version (H.R. 3590) provide perverse incentives that will only increase inequity among Americans:

The Many Pay for the Few: Over and above significant concern that enacting their legislation will exacerbate out-of-control federal spending, many may question the entire premise of Democrats’ government takeover of health care. According to the CBO score of the Pelosi bill, in 2019, the federal government will spend $207 billion—approximately $612 for each of the country’s projected 338 million residents—in order to only partially subsidize health coverage for 30 million (15 million through Medicaid, and the same amount through subsidies in the Exchange). Many may question such a strategy for both its added burden on the federal government’s already looming fiscal crisis—and its effectiveness in following President Obama’s stated goal for the federal government to “spread the wealth around.”

People with Employer Coverage Pay More: While the Pelosi bill provides affordability credits to subsidize some individuals’ health insurance coverage, “firewall” language included in Section 342(b) of the bill prohibits individuals with an offer of employer-sponsored coverage from obtaining these subsidies unless “the cost of the employee premium…would exceed 12 percent” of income. Thus, while a low-income family of four making $35,000 would receive subsidies capping their premium at about $1,050 if their employer did NOT offer a group policy, the same family would be forced to pay up to $4,200 for an employer policy if offered before it would be considered “unaffordable,” making the family subject for federal subsidies. Many may view this inequity as encouraging employers with large numbers of low-wage workers to drop their current coverage and instead obtain greater subsidies for their employees on federal taxpayers’ dime.

Poor People Denied Choice of Plan: Section 342(a)(1)(C) of the Pelosi bill prohibits individuals eligible for Medicaid—including the 15 million new enrollees projected under the legislation—from receiving affordability credits to purchase a private plan on the Exchange. Under this policy, a family of four with income of $33,000—just below 150 percent of the poverty level in 2009—would be forced on to government-run Medicaid, while a family with just $1,000 more income would receive a choice of plans on the Exchange. Many may question whether and why Democrats believe poor individuals are incapable of choosing the health insurance plan that best meets their needs.

Non-Citizens Granted Choice of Plan Options: While the Pelosi bill maintains the current law provision requiring most legal aliens to wait five years before becoming eligible for Medicaid, Section 342(d) exempts the new affordability credits from the waiting period requirement. Thus, while American citizens eligible for Medicaid will be forced into the government-run program and not permitted a choice of plans on the Exchange, legal aliens will be able to choose their own Exchange plan through affordability credits. Many may question the fairness of a health care plan that provides a better choice of health insurance options to non-citizens (even if legal permanent residents) than to sworn American citizens.

Tax on Savings: Rather than using the traditional measure of adjusted gross income, the Reid bill uses “modified gross income” to calculate eligibility for health insurance subsidies. While contributions to Individual Retirement Accounts (IRAs), Health Savings Accounts (HSAs) and other similar savings vehicles would be exempt from the calculation of adjusted gross income under current law, they will be included in the determination for health insurance subsidies under the Reid bill. At a time when the United States faces both an entitlement crisis and a personal savings deficit, many may question the wisdom of an unprecedented policy that would effectively tax retirement savings by including that money when determining the percentage of income individuals must spend on health care.

Federal Funds Subsidize the Undocumented: The Pelosi bill contains no prohibition on undocumented immigrants purchasing coverage on the Exchange. While a notional prohibition (coupled with a weak enforcement mechanism) may theoretically prevent some undocumented from obtaining taxpayer subsidies to purchase health insurance, many may find these provisions insufficient. Moreover, any outlay by a government-run plan would by definition spend federal funds—so any government-run health plan open to the undocumented would result in federal funds being spent to cover those illegally present.

Given all the inequities present in the Democrat bills, one must ask the true motivation behind their government takeover of health care: To make America a more just and equal society, or to increase dependence on government for special favors and privileges?

What Do the American People Need? JOBS What Do Democrats Want to Give Them? Government-Run Health Care

President Obama’s “jobs summit,” coupled with Friday’s release of November jobs numbers, once again raise serious questions about the majority’s ineffectual attempts to combat record-high unemployment levels. For much of the past year, Democrats have focused on spending trillions on a government takeover of health care—funded by hundreds of billions of dollars in tax increases that will destroy jobs, not create them:

  • November 12, 2008: Senate Finance Committee Chairman Baucus releases his “Call to Action” white paper on health reform—which proposes taxing businesses that cannot afford to provide coverage to their workers. The previous Friday, government statistics revealed the number of long-term unemployed had risen by 10 percent in the past month alone.
  • February 26, 2009: The White House releases its budget outline with a $634 billion “reserve fund” for the uninsured. The reserve fund would receive most of its revenue from tax increases on individuals with incomes over $250,000—including small business owners. The following week, the Labor Department reported that the economy shed 651,000 jobs in February—and 2.6 million over the previous four months.
  • April 29: House and Senate Democrats approve Obama budget, including a “reserve fund” that allows Democrats to raise taxes to fund a government takeover of health care. The move came in a month where private-sector employment fell by 611,000 jobs.
  • May 12: Senate Finance Committee holds roundtable on financing health reform, where witnesses advocate raising taxes on small businesses to finance a government takeover of health care. The previous Friday, the Bureau of Labor Statistics reported the total number of unemployed workers reached 13.7 million.
  • June 7: Press reports indicate that a bill offered by the late Senate HELP Committee Chairman Ted Kennedy would raise taxes on businesses by as much as $300 billion to fund health “reform.” According to a model developed by Council of Economic Advisors Chair Christina Romer, such a proposal would destroy 4.7 million jobs. Two days earlier, the unemployment rate jumped half a percent to reach a 26-year high of 9.4 percent.
  • June 19: The House Democrat leadership unveils legislation imposing an 8 percent tax on businesses that cannot afford to fund their workers’ health coverage. The Democrat proposal for a tax on jobs was released during a month when businesses shed an additional 467,000 jobs.
  • July 17: Two House Committees approve legislation that would raise taxes on businesses that cannot afford to offer health coverage by $208 billion—along with more than half a trillion dollars in a “surtax” that would hit many small business owners. That month, the average period of workers’ unemployment exceeded 25 weeks—an all-time high.
  • September 9: President Obama’s message to a joint session of Congress criticizes companies who cannot afford to buy health coverage for their employees as “gam[ing] the system by avoiding responsibility to themselves or their employees.” That same month, the number of long-term unemployed—those out of work for at least six months—exceeded 5 million—an all-time high, and more than double the number in January 2009.
  • October 13: Senate Finance Committee Democrats approve legislation (S. 1796) imposing “fair share” taxes on employers who cannot afford to offer coverage, which the liberal Center for Budget and Policy Priorities criticized as a “tax [on firms] for hiring people from low- or moderate-income families.” That same month, the unemployment rate among youth, who are most likely to be affected by such mandates, reached 27.6 percent—also an all-time high.
  • November 7: The House passes Speaker Pelosi’s government takeover of health care (H.R. 3962), complete with more than $700 billion in job-killing tax increases that would according to an Obama Administration model demolish or destroy up to 5 million jobs. The vote took place one day after the unemployment rate jumped above 10 percent for the first time in a generation—and on the same day that the front-page of the New York Times asserted that unemployment and under-employment had reached levels not seen since the Great Depression.

The American economy remains in the midst of record-high unemployment. Yet the Democrat leadership in both chambers insists on pushing forward their government takeover of health care that would only increase job losses, while causing millions to lose their current health coverage in the process. Many may question: What are the majority’s misplaced priorities that would see them dither on stemming job losses in order to pursue a single-minded fixation with creating a new government-run health care system?

AARP’s Profits

Given AARP’s endorsement of more than $400 billion in Medicare “savings,” it’s worth highlighting the organization’s comparative level of profit from selling Medigap and other insurance policies.  According to its own financial statements from 2008, AARP generated 38 percent of its $1.1 billion in revenue—or more than $414 million—in “royalty fees” from United Health Group.  Forbes lists insurance company profits in 2008, and according to that list the royalty fees (which are pure profit to AARP) would rank the organization fifth on its list of insurance company profits.  Here’s the full breakdown of the rankings by profits (in millions):

United Health Group:    $2,977

WellPoint:                           $2,491

Aetna:                                  $1,384

Humana:                              $647

AARP:                                   $414

Coventry Health:              $382

Cigna:                                    $292

HealthSpring:                     $119

Universal American:       $95

Health Net:                         $95

Centene:                             $84

Ohio Medical Mutual:    $74

Molina Healthcare:          $62

WellCare Health:              $-37

Amerigroup:                      $-51

Note also that ALL of these companies have much higher revenues than AARP.  For instance, United Health Group’s nearly $3 billion in profit was achieved on a base of more than $81 billion in revenue (a profit margin of 3.7%)—versus AARP’s revenue base of $1.1 billion, and profit margin on its “royalty fees” of 100%.

Government-Run Health Care: Hazardous to Patients’ Health

Even Britain Wants MORE Cancer Screening—But American Bureaucrats Want LESS…

 

“These delays in the patient presenting with symptoms and cancer being diagnosed at a late stage inevitably costs lives. This situation is unacceptable…”

— Britain’s National Cancer Director Professor Mike Richards, quoted in BBC News article discussing government-run health care in the U.K.

 

While Democrats claim their government takeover of health care would improve care and lower costs, recent reports from both sides of the Atlantic have reinforced the message that government-run health care results in delays in both screening and treatment that can prove costly—even deadly:

  • The “cancer czar” for Britain’s National Health Service (NHS) recently admitted that failure to detect early-stage cancers costs up to 10,000 lives per year in Britain. This “unacceptable” situation stems largely from the fact that over 90 percent of patients are diagnosed with cancer due to the onset of symptoms, rather than early detection and screening.
  • An official NHS analysis of cancer outcomes demonstrates that of the “big four” cancers—breast, colon, lung, and prostate—England’s government-run health plan significantly lags behind other European nations. And those European outcomes themselves significantly lag American standards: A Lancet Oncology article published in September 2007 revealed that for 10 of 16 specific cancers, American patients had statistically better outcomes than their European counterparts.
  • This week’s NHS reports follow on a June study outlining how up to 15,000 lives could be saved every year if patients in Britain’s National Health Service received the same quality care that patients in the United States obtain. For instance, one woman noted that her 74-year-old mother had to travel overseas to receive a proper diagnosis: “It was only when she went back to visit family in Iran and saw a doctor there that she was diagnosed. They did a scan and found a large lump in her fallopian tube. When she came back to the UK, doctors found the cancer had spread to one of her lymph glands. It was the size of a tennis ball. She then had a six-week wait before having a hysterectomy and then chemo.

Given the dynamic in Britain—where even a country famous for its “rationing watchdog” the National Institute for Health and Clinical Excellence (NICE) has published a report advocating for more cancer screening—many may question why American bureaucrats on the United States Preventive Services Task Force have publicly advocated for a less aggressive approach to breast cancer screening. Some may ask questions about whether this strategy will lead to the kind of cancer outcomes currently plaguing government-run health care in Great Britain—and why Democrats want to empower this board of unaccountable bureaucrats with the ability to determine what “acceptable” treatments should be covered by health insurance.

CBO Confirms the Result of Democrats’ Health “Reform:” Higher Premiums

Where’s the Promised $2,500 in Savings Per Family?

 

“Obama’s plan will save a typical family up to $2,500 on premiums…”

— Obama campaign handout, “Questions and Answers on Health Care Plan”

 

While Democrats have alleged that their government takeover of health care will lower costs, the Congressional Budget Office (CBO) confirmed that legislation being considered in the Senate (H.R. 3590) would raise health care premiums for struggling middle-class families:

  • The CBO analysis found that in the non-group market, average premiums would be “about 10 to 13 percent higher in 2016…than under current law.” The result would be a premium increase of $300 per year for individuals and $2,100 for families.
  • CBO also found that the “user fees”—i.e., taxes—imposed in the Senate bill “would be largely passed through to customers in the form of higher premiums for private coverage.”
  • Contrary to President Obama’s repeated promises that “You will not have to change [health insurance] plans,” CBO also found that “relatively few non-group policies would remain grandfathered by 2016”—meaning millions of individuals will lose their current individual health insurance plans as a result of Democrats’ government takeover of health care.
  • While then-Senator Obama promised during his campaign that reform would lower health care costs by up to $2,500 per family annually, CBO’s analysis confirmed that provisions in the legislation would raise health care costs. Specifically, CBO found that raising the required level of coverage for the individual market would raise premiums on its own—and “reduced cost sharing” from the new, richer benefit policies “would lead to greater use of medical services, which would tend to push premiums up further.”
  • While Democrats may claim that some individuals will pay lower premiums due to federal subsidies, those subsidies will help impose a new cost to the taxpayers of $2.5 trillion in the bill’s first ten years of implementation alone. Furthermore, because the Reid bill does not link subsidy levels to rising medical inflation levels, even trillions of dollars in federal subsidies will be insufficient for families to afford insurance if health care costs continue to rise faster than incomes. Given CBO’s analysis of health care cost growth as a result of provisions in the Senate bill, many may question the legislation’s ability to deliver on this critical goal.
  • Although CBO stated that premiums in the employer-based markets may remain constant, that judgment is based in part on an assumption that an individual mandate will increase participation in group coverage by encouraging young and healthy people to take up their employer’s plan. However, some may find such a conclusion counter-intuitive, as many individuals may find it more affordable to circumvent the mandate and instead pay the tax penalty. For instance, the $2,250 maximum tax for a family not purchasing coverage in 2016 would be dwarfed by the $3,515 average family contribution for an employer-sponsored policy in 2009 alone.

The analysis from the non-partisan Congressional Budget Office raises further questions about the reasoning behind Democrats’ efforts. While Republicans offered a bill that would reduce health care premiums by up to 10 percent according to CBO, the Democrat legislation would raise costs by at least that much—imposing new costs of up to $2,100 per family for non-group coverage. How much more evidence do Democrats need to desist their harmful government takeover of health care that will lead to higher premiums and lost coverage for millions of Americans?

The Last Senate Debate on Health Reform

With the Senate about to embark on a debate regarding health care legislation, it’s important to recall the last time the upper chamber considered health “reform.”  Contrary to some press reports, the Senate DID in fact debate health care legislation in 1994 – a proposal was introduced by then-Majority Leader Mitchell as S. 2357, which the Senate considered in August of that year without the debate coming to a conclusion or final vote.

The CBO analysis of the Mitchell bill from 1994 is available online here.  CBO estimated that the bill would cover 95% of the population and leave 14 million individuals uninsured.  By comparison, CBO’s analysis of the Reid bill found that the bill would cover 94% of legal American residents, leaving 16 million uninsured.  In other words, the Reid bill would leave more uninsured in both percentage and absolute terms than George Mitchell’s 1994 bill – even before accounting for the fact that CBO’s models at that time did not exclude the impact of undocumented immigrants when calculating the number of remaining uninsured.

For these reasons, it’s particularly interesting to note the reaction from Democrats to the Mitchell bill.  Haynes Johnson and David Broder write in The System that President Clinton’s statement to the National Governors Association outlining Mitchell’s strategy to cover “somewhere in the ballpark of 95%” of Americans sparked “pandemonium” and “chaos.”  AARP’s John Rother called the strategy “f—ing unbelievable.”  Pete Stark said that “If there is a bill without universal coverage, I would leave and a lot of liberal members would say no.”  Jim McDermott noted that Clinton “just put in jeopardy all the single-payer votes.”  Remember, this bill that caused so much liberal angst covered MORE people in both absolute and relative terms than the Reid bill being considered today.

Finally, Lawrence O’Donnell, then the Chief of Staff to Finance Chairman Moynihan, discussed the impending Senate debate on MSNBC last Tuesday; his comments can be found here.  It’s worth highlighting O’Donnell’s suggestion that the Senate should spend three months debating amendments to the health care bill – which would put a vote on cloture and final passage no sooner than the President’s Day recess.  It will be interesting to see whether Leader Reid will follow the words of wisdom of a prominent fellow Democrat in the way the debate is structured…

Legislative Bulletin: Second Motion to Recommit H.R. 3961, Medicare Physician Payment Reform Act

The second Republican motion to recommit would provide a two year “fix” to the Sustainable Growth Rate mechanism for Medicare physician payments, providing up to $22.3 billion.  The motion would include a finding that the Secretary of Health and Human Services should transfer a commensurate amount from the Medicare Improvement Fund to finance the cost of the SGR fix.

Legislative Bulletin: Motion to Recommit H.R. 3961, Medicare Physician Payment Reform Act

The Republican motion to recommit would provide a four year “fix” to the Sustainable Growth Rate mechanism for Medicare physician payments, providing 2 percent updates to physicians over each of the next four years.  The motion to recommit would be fully paid for by enacting reasonable limits on medical malpractice lawsuits, providing a path to approval for follow-on biologics, and enacting reforms that would simplify administrative inefficiencies in the insurance system.

Will $210 Billion in New Deficit Spending Kill American Jobs?

“It is important though to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession.”

— President Barack Obama, interview quoted by Reuters, November 18, 2009

 

While some may attempt to assert that Speaker Pelosi’s government takeover of health care is fiscally responsible, even President Obama has finally recognized that its provisions could put the health of the American economy at risk:

  • This week the House is expected to consider legislation providing for permanent increases in the Medicare Sustainable Growth Rate (SGR) mechanism for physician reimbursement. Because the Democrat bill is not paid for, CBO scores H.R. 3961 as increasing the deficit by at least $210 billion.
  • In the longer term, an independent analysis of official data conducted by former Medicare public trustee Tom Saving found that a permanent reversal of these current-law reductions, if not paid for by appropriate offsets in spending, could increase Medicare’s unfunded obligations by up to $1.9 trillion over a 75-year period.
  • Despite offering a “responsible” budget that would more than double the national debt to over $24 trillion, President Obama has finally recognized that further increasing federal deficits—as H.R. 3961 would do—could erode economic confidence, resulting in unemployment levels even higher than the current rate of 10.2 percent, a 26-year high.
  • America’s largest foreign creditor has already expressed strong concern about runaway federal spending and deficits. Treasury Secretary Geithner’s claims of the United States’ fiscal rectitude were publicly mocked by an audience during his visit to China earlier this year, and the New York Times ran a front-page article this Sunday noting significant Chinese skepticism about Democrats’ government takeover of health care, as “Chinese officials expect that they will help finance whatever Congress and the White House settle on.” Many may wonder the extent to which passing an unpaid-for “doc fix” adding up to $1.9 trillion in long-term obligations to the federal fisc will further undermine international confidence in the dollar—jeopardizing the American economy and jobs.
  • Many may also note that passage of stand-alone SGR legislation is intended to ease the passage of Democrats’ government takeover of health care—which itself contains job-killing tax increases that could choke any nascent economic recovery. According to a model developed by President Obama’s chief economic advisor, the tax increases in the Pelosi health care bill (H.R. 3962) would demolish or destroy up to 5 million jobs.

While many Members may support SGR reform that is fully paid for, many may also oppose any attempt to increase the deficit by hundreds of billions of dollars in a way that could jeopardize millions of American jobs as part of Democrats’ unpopular government takeover of health care.

Legislative Bulletin: H.R. 3961, Medicare Physician Payment Reform Act

Order of Business: H.R. 3961 is being considered under a closed rule.  The rule provides that following its passage, the Clerk will be directed to append the text of H.R. 2920, the Statutory PAYGO bill that passed the House on July 22, 2009, to the legislation before sending it to the Senate.  The legislation was introduced by Rep. John Dingell (D-MI) on October 29, 2009.
Summary: H.R. 3961 provides for an increase in Medicare physician reimbursements for 2010 equal to the increase in medical inflation, and recalibrates the Sustainable Growth Rate (SGR) mechanism such that year 2009 physician expenditures shall be used as the new baseline for computing whether total physician payments exceed the SGR targets.  The bill establishes two separate conversion factors—one for evaluation and management services, including primary care and preventive services, and one for all other services provided.  Thus evaluation and management services and all other specialist services would receive different annual payment rates, based on the growth of each service over time; the former would also receive a higher conversion factor under the bill—GDP growth plus two percent for evaluation and management services, as opposed to GDP growth plus one percent for all other services.  Finally, the bill allows accountable care organizations established to opt-out of the national expenditure targets created in the bill and establish their own organization-specific targets.
Background: As part of spending reforms included in the Balanced Budget Act of 1997, Congress enacted a sustainable growth rate (SGR) mechanism for Medicare physician payment levels.  The SGR mechanism is designed to balance the previous year’s increase in physician spending with a decrease in the next year, in order to maintain aggregate growth targets.  In light of increased Medicare spending in recent years, the statutory formula has resulted in negative annual updates.  While an imperfect formula, the SGR was designed as a cost-containment mechanism to help deal with Medicare’s exploding costs.
While Democrats claim Speaker Pelosi’s 1,990-page health “reform” bill (H.R. 3962) is “deficit-neutral,” the hundreds of billions of dollars in new spending in H.R. 3961 is not paid for.  While Members may support reform of the SGR mechanism, many may oppose what amounts to an obvious attempt to hide the apparent cost of health “reform” by introducing separate legislation to repeal the SGR mechanism without paying for this more than $200 billion increase in federal spending in its first ten years.  Moreover, H.R. 3961 would permanently alter the SGR mechanism, and an independent analysis of official data conducted by former Medicare public trustee Tom Saving found that a permanent reversal of these current-law reductions, if not paid for by appropriate offsets in spending, would increase Medicare’s unfunded obligations by nearly $2 trillion over a 75-year period.
Due to these significant concerns about rising deficits and higher federal spending, a bipartisan majority in the Senate recently rejected similar legislation (S. 1776) designed to increase physician payments over the next 10 years that did not include any offsetting spending reductions.
Press reports indicate that the Democrat majority desires to pass a stand-alone “doc fix” bill in order to help facilitate passage of its broader health “reform” initiative.  A CQ Today article noted that omitting an SGR “fix” from the Democrat health “reform” legislation “could free up billions of dollars that Democratic leaders could apply to make other changes in a health care plan”—making it easier for the majority to pass its government takeover of health care.  Therefore, some may view a vote for H.R. 3961 that is not paid for through appropriate spending reductions as helping to facilitate a government takeover of health care, with all its flaws: More than $700 billion in job-killing new taxes, regulations that will raise premiums for millions of Americans, and creation of a government-run health plan causing as many as 114 million Americans to lose their current coverage.
In its rollout of the Pelosi bill, the Democrat majority released a one-page document claiming that “a previous Congress established the policy for paying Medicare doctors, so the update for 2010 is not a new policy to be paid for.”  By this logic, future Congresses will not have to pay for any increases in federal deficits and spending associated with the Pelosi health “reform” bill—directly contradicting President Obama’s pledge that his bill would not increase the federal deficit by one dime.  Regardless, many may note that adding hundreds of billions in new spending will be paid for—by America’s children and grandchildren, through mountains of new federal debt.
Cost: The Congressional Budget Office earlier this year estimated that a full SGR repeal would cost $285 billion over ten years.  However, the Administration has already begun the process of “reforming” the SGR by hiding approximately $80 billion of a repeal’s cost (the amount of the SGR attributed to physician-administered drugs) into the budgetary baseline as “current law”—even though some have questioned the Administration’s authority to do so.  Therefore, CBO scores H.R. 3961 as increasing the deficit by nearly $210 billion, though as stated earlier, the full impact of a long-term SGR “fix” approaches nearly $300 billion.
Members may particularly note that because seniors pay for one-quarter of total physician spending through their Medicare Part B premiums, CBO also notes that H.R. 3961 would raise seniors’ Medicare premiums by nearly $50 billion over ten years.   These premium increases would be on top of the 20 percent increase in Part D prescription drug premiums as a result of the Pelosi health care bill.
Moreover, today the Congressional Budget Office released a report finding that enactment of H.R. 3961, when coupled with the spending provisions in the Pelosi bill (H.R. 3962), would increase federal deficits by $89 billion in the 2010-2019 period.  CBO further found that enactment of both provisions would increase deficits by $23 billion in 2019, and “those increments would grow during the following decade.”  CBO concluded:  “If both H.R. 3961 and H.R. 3962 were enacted, CBO expects that federal budget deficits during the decade following the 10-year budget window would increase relative to those projected under current law—with a total effect during that decade that is in a broad range between zero and one quarter percent of GDP.” [Emphasis original]