Three Obstacles to Senate Democrats’ Health Care Vision

If Democrats win a “clean sweep” in the 2020 elections—win back the White House and the Senate, while retaining control of the House—what will their health care vision look like? Surprisingly for those watching Democratic presidential debates, single payer does not feature prominently for some members of Congress—at least not explicitly, or immediately. But that doesn’t make the proposals any more plausible.

Ezra Klein at Vox spent some time talking with prominent Senate Democrats, to take their temperature on what they would do should the political trifecta provide them an opportunity to legislate in 2021. Apart from the typical “Voxplanations” in the article—really, did Klein have to make not one but two factual errors in his article’s first sentence?—the philosophy and policies the Senate Democrats laid out don’t stand up to serious scrutiny, on multiple levels.

Problem 1: Politics

The first problem comes in the form of a dilemma articulated by none other than Ezra Klein, just a few weeks ago. Just before the last Democratic debate in July, Klein wrote that liberals should not dismiss with a patronizing shrug Americans’ reluctance to give up their current health coverage:

If the private insurance market is such a nightmare, why is the public so loath to abandon it? Why have past reformers so often been punished for trying to take away what people have and replace it with something better?…

Risk aversion [in health policy] is real, and it’s dangerous. Health reformers don’t tiptoe around it because they wouldn’t prefer to imagine bigger, more ambitious plans. They tiptoe around it because they have seen its power to destroy even modest plans. There may be a better strategy than that. I hope there is. But it starts with taking the public’s fear of dramatic change seriously, not trying to deny its power.

Democrats’ “go big or go home” theory lies in direct contrast to the inherent unease Klein identified in the zeitgeist not four weeks ago.

Problem 2: Policy

Klein and the Senate Democrats attempt to square the circle by talking about choice and keeping a role for private insurance. The problem comes because at bottom, many if not most Democrats don’t truly believe in that principle. Their own statements belie their claims, and the policy Democrats end up crafting would doubtless follow suit.

Does this sound like someone who 1) would maintain private insurance, if she could get away with abolishing it, and 2) will write legislation that puts the private system on a truly level playing field with the government-run plan? If you believe either of those premises, I’ve got some land to sell you.

In my forthcoming book and elsewhere, I have outlined some of the inherent biases that Democratic proposals would give to government-run coverage over private insurance: Billions in taxpayer funding; a network of physicians and hospitals coerced into participating in government insurance, and paid far less than private insurance can pay medical providers; automatic enrollment into the government-run plan; and many more. Why else would the founder of the “public option” say that “it’s not a Trojan horse” for single payer—“it’s just right there!”

Problem 3: Process

Because Democrats will not have a 60-vote margin to overcome a Republican filibuster even if they retake the majority in 2020, Klein argues they can enact the bulk of their agenda through the budget reconciliation process. He claims that “if Democrats confine themselves to lowering the Medicare age, adding a [government-run plan], and negotiating drug prices, there’s reason to believe it might pass parliamentary muster.”

Of course Klein would say that—because he never worked in the Senate. It also appears he never read my primer on the Senate’s “Byrd rule,” which governs reconciliation procedures in the Senate. Had he done either, he probably wouldn’t have made that overly simplistic, and likely incorrect, statement.

Take negotiating drug prices. The Congressional Budget Office first stated in 2007—and reaffirmed this May—its opinion that on its own, allowing Medicare to negotiate drug prices would not lead to any additional savings.

That said, Democrats this year have introduced legislation with a “stick” designed to force drug companies to the “negotiating” table. Rep. Lloyd Doggett (D-Texas) introduced a bill (H.R. 1046) requiring federal officials to license the patents of companies that refuse to “negotiate” with Medicare.

While threatening to confiscate their patents might allow federal bureaucrats to coerce additional price concessions from drug companies, and thus scorable budgetary savings, the provisions of the Doggett bill bring their own procedural problems. Patents lie within the scope of the House and Senate Judiciary Committees, not the committees with jurisdiction over health care issues (Senate Finance, House Ways and Means, and House Energy and Commerce).

While Doggett tried to draft his bill to avoid touching those committees’ jurisdiction, he did not, and likely could not, avoid it entirely. For instance, language on lines 4-7 of page six of the Doggett bill allows drug companies whose patents get licensed to “seek recovery against the United States in the…Court of Federal Claims”—a clear reference to matter within the jurisdiction of the Judiciary Committees. If Democrats include this provision in a reconciliation bill, the parliamentarian almost certainly advise that this provision exceeds the scope of the health care committees, which could kill the reconciliation bill entirely.

But if Democrats don’t include a provision allowing drug manufacturers whose patents get licensed the opportunity to receive fair compensation, the drug companies would likely challenge the bill’s constitutionality. They would claim the drug “negotiation” language violates the Fifth Amendment’s prohibition on “takings,” and omitting the language to let them apply for just compensation in court would give them a much more compelling case. Therein lies the “darned if you do, darned if you don’t” dilemma reconciliation often presents: including provisions could kill the entire legislation, but excluding them could make portions of the legislation unworkable.

Remember: Republicans had to take stricter verification provisions out of their “repeal-and-replace” legislation in March 2017—as I had predicted—due to the “Byrd rule.” (The provisions went outside the scope of the committees of jurisdiction, and touched on Title II of the Social Security Act—both verboten under budget reconciliation.)

If Republicans had to give up on provisions designed to ensure illegal immigrants couldn’t receive taxpayer-funded insurance subsidies due to Senate procedure, Democrats similarly will have to give up provisions they care about should they use budget reconciliation for health care. While it’s premature to speculate, I wouldn’t count myself surprised if they have to give up on drug “negotiation” entirely.

1994 Redux?

Klein’s claims of a “consensus” aside, Democrats could face a reprise of their debacle in 1993-94—or, frankly, of Republicans’ efforts in 2017. During both health care debates, a lack of agreement among the majority party in Congress—single payer versus “managed competition” in 1993-94, and “repeal versus replace” in 2017—meant that each majority party ended up spinning its wheels.

To achieve “consensus” on health care, the left hand of the Democratic Party must banish the far-left hand. But even Democrats have admitted that the rhetoric in the presidential debates is having the opposite effect—which makes Klein’s talk of success in 2021 wishful thinking more than a realistic prediction.

This post was originally published at The Federalist.

Floor Update on 1099 and Repeal Votes

In case you hadn’t seen it, on this round of Senate votes just concluded:

  • The Levin amendment (1099 repeal paid for by tax increases on oil and gas companies) failed on a 44-54 vote;
  • The Stabenow amendment (1099 repeal paid for by rescission of discretionary appropriations) passed, following an 81-17 vote to waive a Budget Act point of order;
  • The McConnell amendment on repeal failed on a party-line 47-51 vote to waive a Budget Act point of order.

Stabenow Amendment (#9) on 1099 Reporting

Senator Stabenow has offered an amendment (#9) to the FAA reauthorization bill (S. 223) regarding new corporate reporting requirements included in the health care law.  
Summary and Background
  • The amendment repeals Section 9006 of the health care law.  This Section 9006 information reporting provision requires vendors and small businesses to file Forms 1099 for any goods purchases that total over $600 in the aggregate over the course of a year—which will force all businesses, including small businesses, to file tax forms listing the amount of their annual transactions with vendors like their paper supplier, bottled water distributor, caterer, etc.
  • The Stabenow amendment is paid for through a rescission of $44 billion in unobligated discretionary funds from accounts other than the Departments of Defense and Veterans Affairs and the Social Security Administration. (Although repealing the 1099 provision results in the loss of only about $19 billion in revenue, the amendment rescinds $44 billion because, in scoring the amendment, CBO assumed that not all of the rescinded funds would have been spent in the first place; therefore the amendment must rescind more than $19 billion.)  The Office of Management and Budget (OMB) is given discretion to find appropriate sources for the rescissions.
  • The amendment is virtually identical to the Johanns amendment previously offered during the 111th Congress, and which received 61 votes on November 29.
  • The prime difference between the Stabenow amendment and the Johanns amendment is that the former would also exempt the Social Security Administration from a rescission of unobligated funds in addition to the exemptions for the Defense and Veterans Affairs Departments (included in both Stabenow and Johanns).  However, as both the Johanns amendment and the Stabenow amendment rescind “appropriated discretionary funds,” BOTH measures would NOT result in reductions in mandatory spending on Social Security retirement and disability benefits.  Moreover, as both measures give OMB discretion to determine “the amount of such rescission” from each agency budget, the Johanns amendment would only result in a rescission of Social Security discretionary funds if the Administration affirmatively chose to make such a reduction.
  • According to a report issued by the National Taxpayer Advocate, the new 1099 reporting requirements will affect 40 million businesses—ten times the number of firms the Administration asserts will benefit from small business tax credits.
  • The Taxpayer Advocate has also called the reporting requirement “disproportionate” and “burdensome” for small business.  For instance, the Taxpayer Advocate noted that small businesses “may lose customers” to larger chains more easily able to comply with the new requirements, and that “it is highly likely that the IRS will improperly assess penalties” for not filing forms.
  • The Taxpayer Advocate has also noted that “the IRS will face challenges making productive use of this new volume of information reports” required by the health care law, because “the amounts on the information reports and the tax returns” will not match for a variety of technical reasons.
  • The amendment fully repeals the 1099 reporting requirements, and does so by reducing federal spending.

CBO Report Shows Cost of “Doc Fix” Skyrockets

The below piece from this morning’s CongressDaily examines a CBO table released last week that shows the cost of fixing the Medicare sustainable growth rate (SGR) mechanism “just got a lot more expensive.”  Specifically, a 10 year freeze on Medicare physician payment rates would cost $275.8 billion – up 33 percent in just one year.  A five year freeze costing “only” $88.5 billion would necessitate a 30 percent cut in Medicare payments in 2015 – another unrealistic funding “cliff” intended to mask the long-term costs of SGR reform.

Amidst Democrat discussions about adding the cost of the SGR fix to the deficit, it’s important to remember that, because seniors pay one-quarter of the cost of Medicare physician spending in the form of their Part B premiums, a portion of any unpaid-for “doc fix” will ultimately be financed by seniors themselves.  For instance, the five-year unpaid for “doc fix” would raise Medicare premiums by more than $20 billion.  So at a time when the federal government faces record budget deficits, an unpaid for SGR bill would add to the debt burden faced by America’s children and grandchildren – even while raising premiums for seniors.  This doubly unpalatable scenario leaves many to wonder: How does either course represent true reform?


Latest CBO Figures Show Higher ‘Doc Fix’ Price Tag

Tuesday, May 4, 2010

A solution for lawmakers’ annual ritual of applying a Band-Aid to Medicare physician payment cuts just got a lot more expensive, according to new estimates from congressional budget scorekeepers.

That will make it more difficult to comply with the demands for a permanent fix by physicians — who have barely begun to spend in advance of the midterm elections. Democrats are already laying backup plans to provide payment boosts for a shorter period, perhaps five years, but they need to act soon before scheduled cuts take effect June 1.

To get a sense of the increased costs, the cleanest comparison is probably an option outlined Friday by CBO to freeze Medicare payment rates, which under the new figures would cost $275.8 billion through 2020. That is a 33 percent increase from legislation that would accomplish that goal introduced late last year by Sen. Debbie Stabenow, D-Mich., estimated to cost $207 billion at the time. That bill did not advance in the Senate, nor did a House-passed bill with a different formula but a similar price tag.

Aides on both sides of the aisle attributed the cost increase to assumptions of an improved economy, which tends to add more to the cost of health services, as well as demographic changes that foresee increased numbers of retirees in 2020 over the previous year. The new estimates also take into account Medicare changes approved as part of the healthcare overhaul law, which may have produced some interactions that held back the “doc fix” cost from rising further.

The new numbers from CBO could be the final nail in the coffin for the influential physician lobby’s effort to repeal the Sustainable Growth Rate formula, which triggers automatic Medicare payment cuts if spending rises above a certain level. Simply keeping scheduled cuts at bay for five years would cost $88.5 billion, CBO said, and that is as far as February’s pay/go law will allow Congress to go without offsets. Aides said lawmakers are evaluating options that would patch the formula for a lesser amount of time but provide higher fees to physicians; they also said Democratic leaders haven’t ruled out a longer-term solution, provided they find offsets.

The measure could hitch a ride on a package of tax breaks and extensions of unemployment insurance, health subsidies for laid-off workers and other items that Democratic leaders want to enact before Memorial Day. If there is no action, Medicare physician payments would be cut 21 percent on June 1.

The American Medical Association is continuing to lobby hard for a permanent fix, despite the cost. In a statement Monday in response to the new CBO numbers, AMA President James Rohack said the cost would keep rising the more Congress resorts to short-term fixes. For example, the five-year $88.5 billion estimate factors in a “cliff” that assumes a 30 percent cut to Medicare physician fees beginning in 2015.

“It’s well known that the budgetary gimmicks used by Congress to delay Medicare physician payment cuts increase the cost of reform and the size of the cuts, so these new CBO projections are not surprising,” said Rohack. “It’s time for Congress to put aside the short-term actions that have more than quadrupled the price of a solution for American taxpayers and fix the problem once and for all for seniors, military families and their physicians.”

Based on the most recent FEC filings, the AMA’s PAC has contributed about $157,000 to lawmakers for the 2010 election cycle, according to the Center for Responsive Politics. The AMA is sitting on PAC contributions totaling $2.1 million, however, meaning they have plenty more to spend. The physicians’ lobby has been more or less even-handed, delivering about 53 percent to Democrats and 47 percent to Republicans this cycle.

by Peter Cohn

More Taxpayer-Funded Propaganda…

CongressDaily reports this morning that the Administration is mailing out millions of postcards to small businesses to tout the small business tax credit included in Democrats’ health care takeover.  This of course raises intriguing questions about what other elements of the health care law the Administration will be reaching out to inform Americans about:

  • Has the White House pointed out in its postcards about the tax credit that businesses who do not offer “acceptable” coverage will be taxed by $2,000 per employee beginning in 2014?
  • Will the White House send postcards to the 11 million seniors in Medicare Advantage plans highlighting the fact that their extra benefits will be reduced to fund the health care takeover – and the coverage they have and like could go away entirely?
  • Will the White House send postcards informing consumers insurance premiums on the individual market will go up by $2,100 per family?
  • Will the White House send postcards to all Americans pointing out that they will be taxed if they do not purchase government-approved health insurance, and that the IRS will have the power to garnish their tax refunds and take other punitive actions against them?

Of course, the White House had its own response to these questions: “The outreach is going to vary depending on what the provision is.”  In other words, benefits of the law will be trumpeted through mass mailings to millions of Americans sent at taxpayers’ expense – while the costs will be ignored and minimized whenever possible.

Wikipedia notes that propaganda as defined “often presents facts selectively to encourage a particular synthesis, or uses loaded messages to produce an emotional rather than rational response to the information presented” – which sounds a lot like the scenario being described by the White House.  So the ultimate question is: With the federal government running up trillion-dollar record deficits, why are millions of dollars in taxpayer funds being used for these transparent attempts to promote Democrats’ unpopular government takeover of health care?


For Small Businesses, Healthcare Pitch Is In The Mail

Tuesday, April 20, 2010
by George E. Condon Jr.

More than 4 million postcards were mailed Monday to small-business owners, touting a tax credit in the new healthcare law that many of them are eligible to receive.

The mass mailing is the first step in an aggressive sales and information campaign planned by the White House in an effort to blunt criticism of the law.

“We want to make sure small employers across the nation realize that effective this tax year you may be eligible for a valuable new tax credit,” said White House Press Secretary Robert Gibbs. “We urge every small employer to take advantage of this credit if they qualify.”

Behind the mailing shows concern that pummeling from critics has taken a toll and branded the law as a big-spending, tax-raising measure to many Americans who are already skeptical of government solutions.

“There has been a lot of misinformation,” said a White House official, speaking on background. “But the facts are facts. And we are dead-set on doing everything we can to communicate what is in the bill.”

Opponents of the law predicted the mass mailing will have little impact on reluctance to embrace healthcare reform as it passed Congress. “Good luck with that,” joked conservative strategist Keith Appell, laughing at the notion that 4.4 million postcards could make people embrace the changes.

“The tax credit is going to be transcended by the higher costs,” said Appell. “Costs inevitably go up and up and up. So what good does a tax credit do for you?”

Ryan Ellis, tax policy director for the right-leaning Americans for Tax Reform, acknowledged the tax credits, but said the postcards leave out the context.

“They are $32 billion in costs, which is pretty small when you compare it to the fact that the whole healthcare bill had a tax increase total of $550 [billion] to $560 billion. … “It is tax relief that goes to small-business owners. But it kind of misses the larger point,” Ellis said.

The White House aide said the IRS mailing is “an example of the kind of thing we are going to be doing now. The outreach is going to vary depending on what the provision is. But in this case, the IRS wants to make sure that small-business owners know that the tax credit is retroactive to Jan. 1st of this year.”

The White House hopes that when millions of postcards start arriving, it will be a powerful sign “to show that this is happening right now, and they can take advantage of it.”

Politically, the White House expects Democratic candidates to become more aggressive in touting specific benefits in the law and President Obama also getting specific in his remarks. “He surely is not done talking about it,” said the aide. “He is proud of the bill and the good things it does, particularly the immediate benefits that start this year. And he will talk about them.”

The White House credited Sen. Debbie Stabenow, D-Mich., with pushing them toward this kind of campaign. “This is the kind of things they wanted us to do, something tangible that they can put in the hands of constituents who come to the office,” the aide said, adding the White House plans to keep adjusting based on what Congress reports.

“We are basically trying to make sure that every question that comes up we are getting answers to, that if there is a prevalent question that it is a question we answer online,” he said. “If a member comes to us and says we know we are getting a great reaction or people are confused by this, we will take that into account and respond quickly.”

Much of the response will be online on the White House Web site, which will be updated as criticisms or vulnerabilities surface. The aide acknowledged “it can be frustrating” keeping up with misperceptions of what is actually in the law.

But Ellis said the opposition is not based on a misreading of the law or on a lack of education about the contents. “It is not a matter of perception. It is a matter of arithmetic,” he said. “This is a matter of facts.

“It is not that conservatives are being irrational. What would be irrational is to only look at what they’re telling us to look at. We are looking at the total picture.”

Doc Fix Update

As a follow up to the e-mail of last week regarding the status of the Medicare “doc fix,” you may have seen a letter the AMA and AARP sent to Leader Reid and Speaker Pelosi today calling for permanent repeal of the Sustainable Growth Rate (SGR) formula.  To that end, Sen. Reid has placed the House-passed SGR bill (H.R. 3961) on the Senate calendar.  These efforts come in advance of the expiration of the two-month SGR “patch” included in last year’s Defense appropriations bill (P.L. 111-118); the patch expires February 28, triggering cuts of over 21 percent in Medicare physician payment levels absent further action.

As background, the House-passed bill would eliminate any potential future “cuts” by permanently replacing the SGR formula with two separate formulae for physician spending – primary care and preventive services would grow at a rate totaling GDP growth plus 2 percent, and all other services would grow at a rate totaling GDP growth plus 1 percent. (By comparison, the Stabenow bill (S. 1776) the Senate considered in October would freeze the SGR for ten years, at which point the SGR’s payment cuts would return.)  This new spending would NOT be offset; CBO has estimated the cost of H.R. 3961 at nearly $210 billion, and further estimates the bill would raise seniors’ Medicare Part B premiums by nearly $50 billion over ten years.  H.R. 3961 also includes House-passed PAYGO language (H.R. 2920), that was added during the engrossment process on the House floor.

The Legislative Bulletin from the House Republican Conference summarizing the legislation, and offering potential concerns with this new deficit spending, can be found here.  We will have more information as it becomes available.

Heads Up: Medicare Physician “Bailout” on Debt Limit Next Week

As an FYI, we have received word from multiple sources that the Senate may consider an unpaid-for SGR “fix” as part of the increase in the debt limit (H.J.Res. 45) being brought to the floor next week under a UC propounded in December.  It remains unclear whether the Stabenow Senate bill (S. 1776) or the House bill (H.R. 3961) will be the vehicle for debate; however, any legislation providing a long-term “doc fix” is likely to raise the deficit by upwards of $200 billion – and will be voted on in the context of legislation increasing the debt limit by up to $1.8 trillion.

As a demonstration of how the SGR bill comports with demands for “fiscal responsibility” in Washington, below is a transcript from This Week on October 18, where George Stephanopoulos questioned David Axelrod as the Senate prepared to debate the Stabenow bill last fall.  You will note that his lone defense of the bill was that an SGR fix was “in the budget” – even though the President’s budget also proposed to increase the deficit by $330 billion in order to pay for a long-term SGR fix.  Video of the exchange can be found here (exchange begins with 7:45 remaining in the video) – by my count, Axelrod used the word “um” at least 15 times in a 90-second span while trying to square an unpaid-for SGR bill with the President’s promise of a deficit-neutral bill.



STEPHANOPOULOS: The president has drawn one other very red line in the sand, that he won’t sign any health care bill that increases the deficit. (BEGIN VIDEO CLIP)

OBAMA: I will not sign a plan that adds one dime to our deficits, either now or in the future. (APPLAUSE) I will not sign it if it adds one dime to the deficit now or in the future, period. (END VIDEO CLIP)

STEPHANOPOULOS: Yet just this week, the Senate majority leader, Harry Reid, is going to bring a bill to the floor that — Republicans call this the first installment on health care, which is going to permanently repeal savings gotten from payments — Medicare payments to doctors, $248 billion over 10 years. Must that be paid for, for the president to sign it?

AXELROD: George, first of all, understand that that — when the Republicans say this is the first installment on health care, it’s not part of the health care bill. This — this has been — there’s been…

STEPHANOPOULOS: It was in the House bill.

AXELROD: Yes, but the point is that, every year, this — this provision of the Medicare law goes into effect. Every year, draconian cuts are proposed for doctors that would have a deleterious effect on patients. And every year, the Congress acts on it and defers on that. And the fact is, it’s a charade. Everyone in the Congress knows they’re not going to let that go forward. All that we’re saying here is, let’s be honest about it. The president provided for it in his budgets, and we ought to acknowledge that this is a — this is an ongoing expense that we’ll have to meet.

STEPHANOPOULOS: But isn’t it actually — isn’t it also a charade if you’re saying, “We’re going to do this. We’re not going to pay for this $248 billion,” and that’s the only way you can end up not increasing the deficit… (CROSSTALK)

AXELROD: Well, it will be — it will be part of the budget. It will be paid for as we move — as we move forward. The fundamental health reform, George, that we’re talking about that would provide subsidies to people who can’t afford health care today and ancillary expenses are all going to be paid for.

STEPHANOPOULOS: But will — would this particular bill have to be paid for? Because the House — Speaker Nancy Pelosi has said that she’s not going to pass it through her chamber unless there are specific things… (CROSSTALK)

AXELROD: As I said, the president’s provided for it in his — in his budget, and we will account for it.