Another Chart Shows How You Will Lose Your Current Coverage

Ahead of this week’s round of Democratic presidential debates, former vice president Joe Biden continued his attacks on Vermont Sen. Bernie Sanders’ single-payer health plan. Biden said it would undermine people currently receiving coverage through Obamacare.

In response, Sanders’s campaign accused Biden of using “insurance company scare tactics.” This week’s debates will see similar sets of allegations. Opponents of immediate single-payer will attack the disruption caused by a transition to socialized medicine, while supporters call single-payer skeptics pawns of the insurance companies, pharmaceutical companies, or both.

But the dueling sets of insults amount to little more than a sideshow. As these pages have previously argued, most Democrats ultimately want to get to a government-run system—they only differ on how quickly to throw Americans off their current health coverage. A series of recently released figures provide further proof of this theory.

200 Million Americans on Government-Run Health Care

Last week, the Center for American Progress (CAP) released some results of an analysis performed by Avalere Health regarding their “Medicare Extra” proposal. That plan, first released in February 2018, would combine enrollees in Medicaid and the Obamacare exchanges into one large government-run health plan.

Under the CAP plan, employers could choose to keep their current coverage offerings, but employees could “cash-out” the amount of their employer’s insurance contribution and put it towards the cost of the government-run plan. Likewise, seniors could convert from existing Medicare to the “new” government-run plan.

More to the point: The study concluded that, within a decade, nearly 200 million Americans would obtain coverage from this new, supercharged, government-run health plan:

As the chart demonstrates, the new government-run plan would suck enrollees from other forms of coverage, including at least 14 million who would lose insurance because their employer stopped offering it. By comparison, Barack Obama’s infamous “If you like your plan, you can keep it” broken promise resulted in a mere 4.7 million Americans receiving cancellation notices in late 2013.

Neither Plan Is a Moderate Solution

Whether 119.1 million Americans losing their private coverage, or 200 million Americans driven onto a government-run plan, none of these studies, nor any of these supposedly “incremental” and “moderate” plans, shows anything but a massive erosion of private health care provision, and a massive expansion of government-run health care.

Case in point: Earlier this year, Reps. Rosa DeLauro (D-Conn.) and Jan Schakowsky (D-Ill.) introduced a version of the CAP plan as H.R. 2452, the Medicare for America bill. As I wrote in June, the version of the legislation reintroduced this year completely bans private health care.

Under their legislation, individuals could not just pay their doctor $50 or $100 to treat an ailment like the flu or a sprained ankle. The legislation would prohibit—yes, prohibit—doctors from treating patients on a “cash-and-carry” basis, without federal bureaucrats and regulations involved.

Whether the Medicare for America bill, the CAP proposal, or Biden’s proposal for a government-run health plan, all these plans will eventually lead to full-on socialized medicine. Sanders has the wrong solutions for health policy (and much else besides), but at least he, unlike Biden, wins points for honesty about his ultimate goals.

This post was originally published at The Federalist.

This Chart Explains How Democrats Will Take Away Your Current Coverage

This week, Democratic presidential candidates will gather in Miami for their first debates of the 2020 campaign cycle. Health care, including Sen. Bernie Sanders’ single-payer scheme, will surely serve as a prime point of contention.

More candidates who want to appear more moderate, such as former vice president Joe Biden, might try to contrast themselves with Vermont’s socialist senator. Because Biden and others instead want to allow people to buy into the Medicare program—the so-called “public option”—they will claim that individuals who like their current health coverage need not fear losing it.

In an April 2009 study, Lewin concluded that within one short year, a government-run health plan would eliminate the private coverage of 119.1 million individuals—two-thirds of those with employer-provided insurance:

Democrats’ proposals for a government-run health plan have slightly different details, but they share several characteristics that explain this massive erosion of private health coverage. First, most of the plans receive dollars from the Treasury—seed funding, funding for reserves, or both. These billions of taxpayer dollars, to say nothing of the possibility of additional bailout funds should it into financial distress, would give a government-run plan an inherent advantage over private insurers.

Third, and most importantly, the government-run plan would pay doctors and hospitals at or near Medicare payment levels. These payment levels fall far short of what private health plans pay medical providers, and in most cases fall short of the actual cost of care.

The Lewin Group concluded in 2009 that, by paying doctors and hospitals at Medicare rates, a government-run plan would lead to massive disruption in the employer-provided insurance market. It also concluded that the migration to the government plan would cost hospitals an estimated $36 billion in revenue, and doctors an estimated $33.1 billion. As Lewin noted, under this scenario “health care providers are providing more care for more people with less revenue”—a recipe for a rapid exodus of doctors out of the profession.

Democrats have spent the past two years criticizing President Trump for his supposed “sabotage” of Obamacare. But proposals to create a government-run health plan would sabotage private health insurance, to drive everyone into a single-payer system over time. And some of the plan’s biggest proponents have said as much publicly.

Many moderate and establishment Democrats view the government-run plan as a more appealing method to reach their single-payer goal, because it would take away individuals’ private coverage more gradually. Few believe in the efficiency of competition, or the private sector, as a policy matter; instead, they view the millions of people with private health coverage as a political obstacle, one they can overcome over time.

Senator and presidential candidate Kirsten Gillibrand (D-N.Y.) epitomizes this belief. In March, she called for “a not-for-profit public option [to] compete for the business—I think over a couple years you’re going to transition into single payer.” Of course, by making these comments, Gillibrand indicated a clear bias toward her preferred outcome. So when she said “I don’t think that [private insurers] will compete,” Gillibrand really meant that she—and her Democratic colleagues—will sabotage them so badly that they cannot.

Democrats may claim that they don’t want to take away individuals’ insurance, but the numbers from the Lewin Group survey don’t lie. Regardless of whether they support Sanders’ bill or not, the health coverage of more than 100 million Americans remains at risk in the presidential election.

This post was originally published at The Federalist.

CBO Tries But Fails to Defend Its Illegal Budget Gimmick

In a blog post released last Thursday, the Congressional Budget Office (CBO) attempted to defend its actions regarding what I have characterized as an illegal budget gimmick designed to facilitate passage of an Obamacare bailout. When fully parsed, the response does not answer any of the key questions, likely because CBO has no justifiable answers to them.

The issue surrounds the budgetary treatment of cost-sharing reductions (CSRs), which President Trump cancelled last fall. While initially CBO said it would not change its budgetary treatment of CSRs, last month the agency changed course, saying it would instead assume that CSRs are “being funded through higher premiums and larger premium tax credit subsidies rather than through a direct appropriation.”

That claim fails on multiple fronts. First, it fails to address the states that did not assume that CSR payments get met through “higher premiums and larger premium tax credit subsidies.” As I noted in a March post, while most states allowed insurers to raise premiums for 2018 to take into account the loss of CSR payments, a few states—including Vermont, North Dakota, the District of Columbia, and a few other carriers in other states—did not. In those cases, the CSR payments cannot be accounted for through indirect premium subsidies, because premiums do not reflect CSR payments.

In its newest post, CBO admits that “most”—not all, but only “most”—insurers have covered the higher costs associated with lowering cost-sharing “by increasing premiums for silver plans.” But by using that phraseology, CBO cannot assume CSRs are being “fully funded” through higher premium subsidies, because not all insurers have covered their CSR costs through higher premiums. Therefore, even by CBO’s own logic, this new budgetary treatment violates the Gramm-Rudman-Hollings statutory requirements.

Second, even assuming that (eventually) all states migrate to the same strategy, and do allow for insurers to recover CSR payments through premium subsidies, CBO’s rationale does not comply with the actual text of the law. The law itself—2 U.S.C. 907—requires CBO to assume that “funding for entitlement authority is…adequate to make all payments required by those laws” (emphasis mine).

I reached out to CBO to ask about their reasoning in the blog post—how the organization can reconcile its admission that not all, but only “most,” insurers raised premiums to account for the lack of CSR funding with CBO’s claim that the CSRs are “fully funded” in the new baseline. A spokesman declined to comment, stating that more information about this issue would be included in a forthcoming publication. However, CBO did not explain why it published a blog post on the issue “provid[ing] additional information” when it now admits that post did not include all relevant information.

In addition, CBO also has not addressed the question of why Director Keith Hall reneged on his January 30 testimony before the House Budget Committee. At that January hearing, Reps. Jan Schakowsky (D-IL) and Dave Brat (R-VA) asked Hall about the budgetary treatment of CSRs. In both cases, the director said he would not make any changes “until we get other direction from the Budget Committees.”

That’s not what happened. CBO now claims that the change “was made by CBO after consultation with the House and Senate Budget Committees” (emphasis mine). No one directed CBO to make this change—or so the agency claims. But curiously enough, as I previously noted, Hall declined to answer a direct question from Rep. Gary Palmer (R-AL) at an April 12 hearing: “Why did you do that [i.e., change the baseline]?…You would have had to have gotten instruction to” make the change.

Moreover, Brat specifically asked how the agency would treat CSRs—as if they were being paid directly, or indirectly. Hall repeated the same response he gave Schakowsky, that CBO would not change its treatment “unless we get direction to do something different”—an answer which, given the agency’s later actions, could constitute a materially misleading statement to Congress.

Reasonable as it may seem from outward appearances, CBO’s excuses do not stand up to any serious scrutiny. The agency should finally come clean and admit that its recent actions do not comport with the law—as well as who put CBO up to making this change in the first place.

This post was originally published at The Federalist.

Is the CBO Director Breaking the Law to Help Paul Ryan Bail Out Obamacare?

Why would an ostensibly nonpartisan Congressional Budget Office (CBO) director violate the law and the word he gave to Congress only a few short weeks ago? Maybe because Paul Ryan asked him to.

In late January, I wrote about how the House speaker wanted CBO to violate budget rules to make it easier for Congress to pass an Obamacare bailout. At the time, House leadership aides dismissed my theories as unfounded and inaccurate speculation. Yet buried on page 103 of Monday’s report on the budget and economic outlook, CBO did exactly what I reported on earlier this year—it changed the rules, and violated the law, to make it easier for Congress to pass an Obamacare bailout.

The Making of a Budget Gimmick

Because of the interactions between the (higher) premiums and federal premium subsidies (which went up in turn), the federal government will likely spend more on subsidies this year without making CSR payments than with them.

Therein lay the basis of the budgetary gimmick Ryan and congressional leaders wanted CBO to help them accomplish. House staffers wanted CBO to adjust its baseline and assume the higher levels of spending under the “no-CSR” scenario. By turning around and appropriating funds for CSRs, thereby lowering this higher baseline, Congress could generate budgetary “savings”—which Republicans could spend on more corporate welfare for insurers, in the form of reinsurance payments.

The Problem? It’s Illegal

As I previously noted, the House’s scheme, and CBO’s actions on Monday to perpetrate that scheme, violate the law. Section 257(b)(1) of the Gramm-Rudman-Hollings Act (available here) requires budget scorekeeping agencies to assume that “funding for entitlement authority is…adequate to make all payments required by those laws.”

Following my January post, Rep. Dave Brat (R-VA) asked CBO Director Keith Hall about this issue at a House Budget Committee hearing. Hall noted that CBO had been treating the cost-sharing reductions “as an entitlement, so it’s”—that is, the full funding of CSRs in the baseline—“remained there, unless we get direction to do something different. We’re assuming essentially that the money will be found somewhere, because it’s an entitlement.”

In a separate exchange with Rep. Jan Schakowsky (D-IL) at the same hearing, Hall went even further: He said, “We’ve treated the cost-sharing reductions actually as an entitlement, at least so far until we get other direction from the Budget Committee.”

Then Comes the Flip-Flop

Yet Monday’s document on the budget outlook did exactly what Hall said mere weeks ago that CBO would not. A paragraph deep in the section on “Technical Changes in Outlays” included this nugget:

Technical revisions caused estimates of spending for subsidies for coverage purchased through the marketplaces established under the ACA and related spending to be $44 billion higher, on net, over the 2018–2027 period than in CBO’s June baseline. A significant factor contributing to the increase is that the current baseline projections reflect that the entitlement for subsidies for cost-sharing reductions (CSRs) is being funded through higher premiums and larger premium tax credit subsidies rather than through a direct appropriation.

In the span of a few weeks, then, Hall and CBO went from “We’re assuming essentially that the money [i.e., the CSR appropriation] will be found somewhere” to the exact opposite assumption. Yet the report mentions no directive from the budget committees asking CBO to change its scorekeeping methodology, likely because the committees did not give such a directive.

In analyzing the status of the Medicare trust fund, which CBO projects will become exhausted in fiscal year 2026, Footnote A of Table C-1 notes how the baseline “shows a zero [balance] rather than a cumulative negative balance in the trust fund after the exhaustion date”—because that’s what Gramm-Rudman-Hollings requires:

CBO may try to make the semantic argument, implied in the passage quoted above, that it continues to assume full funding of CSRs, albeit through indirect means (i.e., higher spending on premium subsidies) rather than “a direct appropriation.” But that violates what Hall himself said back in late January, when he laid out CBO’s position, and said it would not change absent an explicit directive—even though the budget report nowhere indicates that CBO received such direction.

It also violates sheer common sense that the budget office should assume “funding for entitlement authority is…adequate to make all payments” by assuming that the administration does not make all payments, namely the direct CSR payments to insurers.

Coming Up: An Embarrassing Spectacle

During his testimony before the House and Senate Budget Committees this week, Hall may make a spectacle of himself—and not in a good way. He will have to explain why he unilaterally changed the budgetary baseline in a way that explicitly violated his January testimony. He will also have to justify why CBO believes Gramm-Rudman-Hollings’ direction to assume full funding for “all payments” allows CBO to assume that Congress will not make direct CSR payments to insurers.

Conservatives should fight to expose this absurd and costly budget gimmick, and demand answers from Hall as to what—or, more specifically, whom—prompted his U-turn. If Hall wants to transform himself into the puppet of House leadership, and break his word to Congress in the process, he should at least be transparent about it.

This post was originally published at The Federalist.

Liberals’ Silly Contortions over Premium Support

Earlier this week the Center for American Progress released a paper, and former Obama Administration official Zeke Emanuel wrote a blog post, attacking the Ryan-Wyden premium support model.  The gist of both documents is their assertion that government-run Medicare would attract sicker beneficiaries than private plans, and in so doing fatally undermine the government-run program.  From the CAP report:

No version of premium support fully prevents private health insurance plans from attracting healthier beneficiaries, driving up premiums for those who remain in traditional Medicare.  In addition, no version of premium support creates a level playing field between private plans and traditional Medicare.  As a result of these two factors, more and more beneficiaries would gradually shift to private plans over time.

Compare the above position to the (in)famous quote from a Congressional Democrat two years ago, in which she said that a government-run plan for those under age 65 would eradicate private insurance:

Next to me was a guy from the insurance company, who then argued against the public health insurance option, saying it wouldn’t let private insurance compete – that a public option will put the private insurance industry out of business and lead to single payer [loud cheering]. My single payer friends: He was right. The man was right.

So the liberal groups who once claimed that a government-run plan “will put the private insurance industry out of business and lead to single payer” NOW believe that government-run Medicare CANNOT compete on a “level playing field” against the private sector.  Why didn’t they tell us this two years ago…?

There are three possible explanations for this abrupt U-turn by the left:

  • Liberals believe that risk adjustment to adjust for beneficiaries’ health status will not work effectively, and that allowing plans to offer benefits actuarially equivalent to, but not exact replicas of, government-run Medicare will attract healthier beneficiaries.  In this case, the left is admitting Obamacare will fail – because Obamacare includes provisions allowing for actuarially equivalent plans (Section 1302(d)) and a risk adjustment program (Section 1343).
  • Liberals believe that unlike the above-65 population in Medicare, everyone below age 65 has identical health status, rendering concerns about certain plans attracting sicker-than-average beneficiaries moot.
  • Liberals will say one thing when it comes to expanding government control, and another when it comes to giving individuals more private choices.

Feel free to decide amongst yourselves which option you find most accurate…

Deficit Commission Co-Chairs’ Draft Recommendations on Health Care

As you may have seen, the co-chairs of the deficit commission – Erskine Bowles and former Sen. Alan Simpson – released their draft recommendations earlier today.  Recommendations on mandatory spending can be found in this Powerpoint; a longer list of potential discretionary spending cuts are found here.  (The discretionary cuts document largely avoids health care, except for two proposals to re-structure defense and veterans’ health spending, including potential inflation increases in cost-sharing, saving a total of $6.7 billion in 2015.)

For mandatory spending on health care, slides 31-36 include several proposals.  To pay for the estimated $276 billion cost of a long-term “doc fix,” the proposal would:

  • Modify the sustainable growth rate mechanism with a new system based on value and quality (savings of $24 billion);
  • Restructure Medicare cost-sharing, coupled with a limitation on cost-sharing coverage in Medigap (savings of $135 billion); CBO formerly outlined this proposal in its December 2008 budget options (Option 83);
  • Expand drug rebates to Medicare Part D (savings of $59 billion); and
  • Enact liability reform (savings of $64 billion).

Longer term, the proposal includes suggestions to expand the Independent Payment Advisory Board (IPAB) included in the health care law by strengthening savings targets, allowing the IPAB to submit cost-cutting recommendations in years where spending is BELOW the target, extending the IPAB’s reach to Exchange health plans, and setting a global cap on federal health expenditures equal to GDP plus 1%.  (Budget wonks may recall that it was the Clinton health bill’s global caps on spending, coupled with the individual and employer mandates, that led CBO to designate health insurance as a largely federal function under the measure and place the entire bill on-budget.)  The proposal includes a series of reforms to physician payments and cost-sharing, including a conversion of the Medicaid long-term care program into a capped allotment (i.e., block grant).  The Powerpoint report suggests converting Medicare to a premium support mechanism only if the global caps on spending prove ineffective.

On taxes, there are a variety of options discussed that would reduce or eliminate tax expenditures, potentially limiting, or eliminating entirely, the employee exclusion for group health insurance.  Option 1 also discusses the impact of eliminating all tax expenditures in reducing tax rates across the board; however, it is unclear whether or not this model classifies the $464 billion in insurance subsidies included in the health care law as “tax expenditures.”  The very last slide contains Social Security options that would subject employer-sponsored health insurance to payroll taxes “in the same manner as 401(k) plans” are taxed for FICA benefits currently.

Two final points worth noting: First, the chart on slide 11 of the Powerpoint claims $733 billion in savings over the 2012-2020 period from mandatory spending programs, compared to twice that amount – $1.46 trillion – from the discretionary side of the budget (which includes defense).

Second, the report also included as one of the options (if costs continue to exceed a set target of GDP +1%) legislation to create a “robust” government-run health plan.  You may recall that Rep. Jan Schakowsky, one of the members of the deficit commission, previously admitted that such a plan “will put the private insurance industry out of business and lead to single payer.”

Legislative Bulletin: Key Amendments to H.R. 3200

On July 14, 2009, the Chairmen of the three House Committees with jurisdiction over health care legislation—Education and Labor Chairman George Miller (D-CA), Energy and Commerce Chairman Henry Waxman (D-CA), and Ways and Means Committee Chairman Charlie Rangel (D-NY)—introduced H.R. 3200. On July 17, the Ways and Means Committee approved the bill by a 23-18 vote, and the Education and Labor Committee approved the bill by a 26-22 vote. The Energy and Commerce Committee approved its version of the legislation on July 31 by a 31-28 margin.

During consideration of H.R. 3200 in the three Committees, many amendments changed the bill text from the legislation as originally introduced. The Republican Conference has prepared the summaries below of the key substantive amendments offered by Republicans and Democrats that were adopted during the three markups.

Amendment Summaries

The list below is by no means exhaustive, and should not be construed as indicating that some or all of the amendments adopted in Committee will be incorporated into any manager’s amendment considered by the Rules Committee. Moreover, at the time the Energy and Commerce Committee completed its markup on July 31, there were as many as 60 additional amendments pending to the bill; at that time, Chairman Waxman indicated that he would hold a second markup in September to allow those amendments to be considered (the precise legislative vehicle for doing so still being unclear) before any synthesis of the respective Committee products is brought to the House floor for consideration.

Education and Labor Amendments

Chairman’s Mark: Prohibits group health plans from “reducing the benefits provided under the plan to a retired participant, or beneficiary of such participant” after the worker retires “unless such restriction is also made with respect to active participants.” Some Members may be concerned that this provision, by restricting employers’ flexibility to adjust retiree health coverage, may encourage firms to drop their health plans entirely—undermining the argument that “If you like your current plan, you can keep it.”

The Chairman’s mark also requires health plans to spend at least 85 percent of their premium revenue on medical claims, or offer rebates to their enrollees. Particularly as the Government Accountability Office noted in a report on this issue that “there is no definitive standard for what a medical loss ratio should be,” some Members may be concerned about this attempt by federal bureaucrats to impose arbitrary price controls on private companies. Some Members may also be concerned that such price controls, by requiring plans to pay out most of their premiums in medical claims, would give carriers a strong (and perverse) disincentive not to improve the health of their enrollees—as doing so would reduce the percentage of spending paid on actual claims below the bureaucrat-acceptable limits.

The Chairman’s mark also prohibits the transfer or use of prescription information, except in very limited circumstances. Some Members may be concerned that these new restrictions would prevent patients from receiving information of benefit to them—for instance, materials regarding less costly generic alternatives.

Courtney: Effective six months after the date of enactment, reduces pre-existing limitation exclusions from one year to three months, and shortens the “look-back” window for determining such exclusions from six months before enrollment to 30 days before enrollment. While supporting efforts such as high-risk pools to allow individuals with pre-existing conditions to obtain coverage, some Members may be concerned that these provisions could raise premiums for employers, potentially prompting some to drop coverage entirely. A similar amendment, offered by Rep. Sutton, was adopted at the Energy and Commerce Committee markup.

Titus: Expands eligibility for small employers seeking to purchase coverage on the Exchange. In 2013, employers with 15 or fewer employees would be eligible to join the Exchange (up from 10 in the base bill), in 2014, employers with 25 or fewer employees would be eligible (up from 20 in the base bill), and in 2015, all employers with 50 or fewer employees could join the Exchange (the base bill permits—but does not require—the Health Choices Commissioner to open the Exchange to employers with more than 20 workers). Adopted by a party-line vote of 29-19.

Scott: Expands the definition of the minimum benefits package to include early and periodic screening, diagnostic, and treatment services (as defined in the Medicaid statute) for all children under 21. Some Members may be concerned that this expansive definition—which includes “such other necessary…measures” to treat physical ailments, regardless of “whether or not such services are covered under the State [Medicaid] plan”—would significantly raise costs for businesses required to offer coverage, and the federal funds needed to subsidize Exchange enrollees receiving such rich benefits. Adopted by a 32-17 vote.

Kucinich: Permits States to seek a waiver of the Employee Retirement Income Security Act (ERISA) for a single-payer system that States may wish to adopt. Such a non-profit system—“under which private insurance duplicating the benefits provided in the single payer program is prohibited”—would operate in lieu of the proposed Exchanges, must provide benefits that meet or exceed federal benefit standards in the bill, and may not result in federal costs “neither substantially greater nor substantially less” than those associated with the underlying bill. While supporting the concept of State flexibility over health care regulations, some Members may be concerned by the provision’s prohibitions on private health insurance, which could cause millions of individuals to lose their current coverage. Adopted by a 27-19 vote.

Energy and Commerce Amendments

Capps: With regard to abortion in the government-run health plan, explicitly permits the Secretary to include abortion in the services offered by government-run plan, and—if the “Hyde amendment” restrictions on federal funding for abortion coverage are not renewed every year in the Labor-HHS appropriations bill—requires that the government-run plan cover abortions.

With regard to the subsidies authorized under the bill, referred to as “affordability credits,” the Capps amendment specifically permits taxpayer subsidies to flow to plans that include abortion, but creates an accounting scheme designed to designate private dollars as abortion dollars and public dollars as non-abortion dollars.  The Capps accounting arrangement is rejected by pro-life organizations, which recognize that it is a clear departure from long-standing federal policy against funding health plans that include abortion (e.g., Federal Employee Health Benefits plan, Medicaid, SCHIP, DOD, etc).

Other provisions in the Capps amendment appear to prevent State laws from being overturned and prohibit the Secretary from mandating that all plans include abortion.  Although in apparent conflict with the anti-mandate language, the Capps amendment also requires that a plan that includes abortion be made available in every region—which could in turn lead to mandates that abortion clinics be established to “protect” access to abortions. Adopted by a party-line 30-28 vote, with six Democrats opposing.

Pallone: Includes language intended to serve as a placeholder for introduction of the Community Living Assistance Services and Supports (CLASS) Act (H.R. 1721), much of which lies within the jurisdiction of the Ways and Means Committee (and was therefore not germane to the sections considered by Energy and Commerce). That bill would create a new entitlement to long-term care services, financed by a new “Independence Fund” generated from beneficiary premiums. The Fund would be excluded from the federal budget for purposes of both the President and Congress, and subject to a “lock-box” that would prohibit any legislation from diverting monies from the Fund without the consent of 3/5 of the Senate.

Under H.R. 1721, the plan would have a level monthly premium of $30, provided individuals enroll in the first year they are eligible to join. (Late enrollees would pay age-adjusted premiums.) All individuals over 18 receiving wage or self-employment income would be automatically enrolled in the program; premiums would be automatically deducted from workers’ wages, and firms would be eligible for a tax credit equal to 25 percent of the administrative cost of withholding. Individuals with incomes below 150 percent of the federal poverty level would pay a nominal monthly premium, subject to a self-attestation form verifying their status. Premiums would not increase so long as the individual remained enrolled in the program (or the program had sufficient reserves for a 20-year period of solvency), and under no circumstance could premiums more than double.

Under H.R. 1721, individuals’ eligibility for benefits would vest after five years. The minimum cash benefit would be $50 per day, with amounts scaled for levels of functional ability—and benefits not subject to lifetime or aggregate limits.

Some Members may be concerned by the concept of creating a new, expansive federal entitlement program when Medicare itself is not actuarially sound and the Medicare Hospital Insurance Trust Fund is scheduled to be insolvent by 2017. Moreover, Members may note that the Congressional Budget Office, in analyzing similar provisions included in Section 191 of legislation considered by the Senate HELP Committee, found that “if the Secretary did not modify the program to improve its actuarial soundness, the program would add to future federal budget deficits in a large and growing fashion beginning a few years beyond the 10-year budget window.”

Rogers: Prohibits any federally sponsored comparative effectiveness research from being used by the federal government to deny or otherwise ration access to health care. A second, similar amendment offered by Rep. Gingrey prohibiting the Centers for Medicare and Medicaid Services from using cost-effectiveness criteria to make coverage determinations was also adopted. (However, Ways and Means Committee Democrats blocked a similar amendment, offered by Rep. Herger, in their markup on a party-line vote of 26-15. Anti-rationing language was not offered in the Education and Labor Committee markup, as the issue falls outside the Committee’s jurisdiction.)

Stupak: Codifies the Hyde/Weldon annual appropriations provision, first enacted in FY 2005 and included in Labor, Health and Human Services Appropriations bills since then, providing conscience protection for health care entities by preventing local entities from discriminating against them if they refuse to provide, pay for, or refer for abortion.  The amendment seeks to protect health care entities/workers from discrimination and participating in health care plans.

Eshoo: Establishes a Food and Drug Administration approval process for generic biosimilars, also referred to as follow-on biologics. Grants a period of exclusivity for brand-name products of 12 years, with a six-month extension possible in cases where a manufacturer agrees to an FDA request for pediatric studies. Gives FDA the authority to issue general or specific guidance documents (subject to a notice-and-comment period) regarding product classifications. Adopted by a 47-11 vote.

Ross: Includes placeholder language amending the small business exemption for the employer mandate, which lies within the jurisdiction of the Ways and Means Committee and technically was not germane to the Energy and Commerce markup. The language would increase the exemption level from $250,000 to $500,000 of overall annual payroll, and provide reduced tax penalties to firms with payroll between $500,000 and $750,000; the full 8 percent payroll tax would apply to firms over the latter threshold. Some Members may still be concerned that this provision would impose costly taxes on businesses in the middle of a recession—taxes which the Congressional Budget Office recently notedcould reduce the hiring of low-wage workers, whose wages could not fall by the full cost of…a substantial pay-or-play fee if they were close to the minimum wage.” Members may also note that the underlying bill includes no annual inflation adjustment for the small business exemption threshold—making the “compromise” agreement increasingly irrelevant over time.

Modifies the sliding-scale affordability subsidy levels, such that individuals with incomes equal to four times the federal poverty level ($88,200 for a family of four) would be expected to pay 12 percent of their income on health coverage, as opposed to 11 percent in the underlying bill. Requires States to pay 10 percent of the cost of the bill’s Medicaid expansion, beginning in 2015; according to the preliminary CBO score of H.R. 3200 as introduced, this provision alone would require States to pay an additional $35.8 billion in matching funds over the next decade. Given that Governors in both parties have already voiced significant concerns about what Tennessee Democrat Gov. Phil Bredesen termed “the mother of all unfunded mandates” being imposed upon States, some Members may be concerned that these provisions would have—as the head of Washington State’s Medicaid program recently suggested—States facing severe financial distress saying, “‘I have to get out of the Medicaid program altogether.’”

Requires the Secretary to negotiate payment rates for the government-run plan, and notes that such payment levels should result “in payment levels that are not lower in the aggregate” than those paid under Medicare. Includes other changes intended to create a “level playing field” with respect to the government-run plan; however, Members may agree with CBO Director Elmendorf, who previously testified that it would be “extremely difficult” to create “a system where a public plan could compete on a level playing field” against private coverage. Clarifies that enrollment in the government-run health plan is voluntary; however, Members may note studies by the Lewin Group have found that up to 114 million Americans could lose their current health coverage due to the creation of a government-run plan.

Establishes a Consumer Operated and Oriented Plan (CO-OP) program to provide grants or loans for the establishment of non-profit insurance cooperatives to be offered through the Exchange, but does not require States to establish such cooperatives. Authorizes $5 billion in appropriations for the Commissioner to make start-up loans or grants to help meet state solvency requirements. Some Members may be concerned that cooperatives funded through federal start-up grants would in time require ongoing federal subsidies, and that a co-op would do for health care what Fannie Mae and Freddie Mac have done for the housing sector.

Establishes a Center for Medicare and Medicaid Payment Innovation, intended to develop budget-neutral payment models that “address a defined population for which there are deficits in care leading to poor clinical outcomes.” Requires qualified plans to offer information regarding end-of-life planning, and notes that such entities “shall not promote suicide, assisted suicide, or the active hastening of death.” Contains provisions intended to retain insurance brokers’ role in enrolling individuals in health plans, as well as other provisions related to State-based Exchanges. Adopted by a party-line 33-26 vote, with three Democrats opposing.

Baldwin: Directs the Secretary of Health and Human Services to develop a formulary for the government-run plan, and requires qualified health plans to contract with pharmaceutical benefit managers (PBMs), which shall disclose prices paid for drugs to the Commissioner. Some Members may be concerned that these provisions would require the disclosure of proprietary price information and could lead to additional federal price controls placed on pharmaceutical companies and/or a restrictive formulary in the government-run health plan. Permits States to establish accountable care organizations within their Medicaid programs, and permits a temporary enhanced federal match (up to 90 percent) for same. Includes language regarding administrative simplification of health care transactions, as well as an expansion of electronic funds transfer payments within Medicare.

Requires that any savings generated from the amendment’s provisions be directed towards increasing affordability subsidies provided in the Exchange. The first of two progressive “unity” amendments attempting to mitigate what liberals viewed as the harmful effects of the Blue Dog proposal to reduce federal insurance subsidies. Adopted by a party-line 32-26 vote, with three Blue Dog Democrats opposing.

Schakowsky: Prohibits Exchange plans from increasing premiums at more than 150 percent of medical inflation levels, unless the plan adds extra benefits or the restriction would threaten its financial viability. Some Members may be concerned that this provision would impose a federal price control that would unfairly target plans enrolling sicker individuals with above-average cost increases. Requires the Secretary of Health and Human Services to negotiate drug prices covered under the Medicare Part D program. Requires that any savings generated from the price controls be directed towards increasing affordability subsidies provided in the Exchange. The second of two progressive “unity” amendments attempting to mitigate what liberals viewed as the harmful effects of the Blue Dog proposal to reduce federal insurance subsidies. Adopted by a party-line 32-23 vote, with two Blue Dog Democrats opposing.

Ways and Means Amendments

Chairman’s Mark: Prohibits the reimbursement of over-the-counter pharmaceuticals from Health Savings Accounts (HSAs), Medical Savings Accounts, Flexible Spending Arrangements (FSAs), and Health Reimbursement Arrangements (HRAs), effective in 2010. Because these savings vehicles are tax-preferred, adopting this prohibition would raise taxes by $8.2 billion over ten years, according to the Joint Committee on Taxation.

Members may be concerned that this provision would first raise taxes, and second—by imposing additional restrictions on savings vehicles popular with tens of millions of Americans—undermines the promise that “If you like your current coverage, you can keep it.” At least 8 million individuals hold insurance policies eligible for HSAs, and millions more participate in FSAs. All these individuals would be subject to additional coverage restrictions—and tax increases—under this provision.

In addition, the Chairman’s mark extends current tax benefits for health insurance—including the exclusion from income and payroll taxes for participants in employer-sponsored coverage, the above-the-line deduction for health insurance premiums paid by self-employed individuals, and FSAs and HRAs—to “eligible beneficiaries,” defined as “any individual who is eligible to receive benefits or coverage under an accident or health plan.” Under current law, while employer-sponsored coverage provided to spouses and children is generally excluded from income, domestic partners do not qualify for similar treatment, as the Internal Revenue Code does not classify them as dependents, and the Defense of Marriage Act (P.L. 104-199) prohibits their classification as spouses. This section would effectively expand the current-law health insurance tax benefits to domestic partners and their children, beginning in 2010; the provisions would reduce revenue by $4 billion over ten years, according to the Joint Committee on Taxation.

Weekly Newsletter: May 4, 2009

Leading Democrat Admits Government-Run Health Care Will Rob Americans of their Current Coverage…

Last week, video emerged online of comments made by Democrat Rep. Jan Schakowsky—a senior Member of the Energy and Commerce Committee’s Health Subcommittee—at a “Health Care for America Now” rally in Chicago.  During the speech, Rep. Schakowsky admitted that the so-called “public option” advocated by President Obama and Democrats in Congress will lead to a single-payer health system:

Next to me was a guy from the insurance company, who then argued against the public health insurance option, saying it wouldn’t let private insurance compete—that a public option will put the private insurance industry out of business and lead to single payer [loud cheering]. My single payer friends: He was right. The man was right.

Many Members may be concerned—but not surprised—by Rep. Schakowsky’s comments, as existing data from the non-partisan Lewin Group show that as many as 120 million people will lose their current coverage and end up in a government-run health plan under the Democrat proposal.  Some Members may view Rep. Schakowsky’s speech as further reason to support health reforms that will let all Americans keep the coverage they have and let patients and doctors, not bureaucrats in Washington, make personalized health decisions.

…As the President Admits Government Will Ration Health Care

On Sunday, the New York Times Magazine included a wide-ranging interview with, President Obama.  During the course of the interview, the President was asked about the future he envisioned for the health sector should his proposed reforms be enacted into law, and the role the government may play in slowing the growth of health costs.  The President expressed support for the government serving as “an honest broker in assessing and evaluating treatment options,” particularly in Medicare and Medicaid, “where the taxpayers are footing the bill and we have an obligation to get those costs under control.”  He continued:

The chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here…There is going to have to be a very difficult democratic conversation that takes place.

Some Members may be concerned by the President’s comments, which in his own words mark the start of a “very difficult democratic conversation” about how federal bureaucrats should be empowered to ration health care.  Some Members may also question the veracity of statements by Rep. Schakowsky and others that health care will be a “right” under a government-run health plan, as many Democrats appear intent on giving federal bureaucrats the ability to ration that “right” to meet fiscal, political, or other expediencies.

Medicare’s Fiscal Status Deteriorates; Will a New Bureaucracy Save It?

This Wednesday’s release of the Medicare trustees report is expected to show a significant downturn in the health of the Medicare trust funds.  A sharp slowdown in payroll tax receipts will likely result in a projected insolvency date for the Hospital Insurance (Part A) Trust Fund much sooner than last year’s 2019 prediction.

While Medicare accelerates down the road to fiscal bankruptcy, Senate Finance Committee Chairman Max Baucus took the opportunity to advocate last week for a new bureaucracy outside the Centers for Medicare and Medicaid Services (CMS) to solve the program’s woes.  In a hearing on Thursday, Baucus suggested that creating a separate entity to implement some of the reforms he envisions being enacted into law later this year would help spur change at an agency viewed by some as “hidebound, not very creative, a crank-turning bunch of folks.”

Some Members may agree with Baucus’ statement that “there are some very, very thoughtful people in health care who really, seriously, wonder if CMS is up to the job”—but question whether creating yet another bureaucratic fiefdom will help or hurt patients.  Some Members may also view Baucus’ comments as reason why health reform legislation should be viewed as an opportunity for patients and doctors to retain control of personalized health decisions—not a new government health plan run by Washington bureaucrats.

Weekly Newsletter: March 16, 2009

No Level Playing Field with Government-Run Health Care

Last week’s House Energy and Commerce subcommittee hearing on health reform yielded an important revelation from Congressional Budget Office Director Doug Elmendorf.  Responding to a question from Rep. Jan Schakowsky, the new CBO head stated that “designing a system in which a public plan could compete on a level playing field is extremely difficult.”  He specifically cited the federal government’s power to dictate provider reimbursement rates in programs like Medicare as evidence that a government-run plan could undercut any private health insurer’s costs.

Director Elmendorf’s testimony squares with other independent studies, which have found that cost-shifting from government-run to private health insurance plans would significantly undercut existing insurance coverage.  For instance, actuaries at the Lewin Group, when analyzing President Obama’s campaign proposal to establish a nationalized health insurance plan, found that up to 118 million individuals—nearly 6 of every 10 Americans with private health coverage—would lose access to their current health insurance if a government-run plan were established, and that more than 130 million individuals would enroll in the nationalized insurance plan.  When analyzing a similar proposal from the liberal Commonwealth Fund, the Lewin Group also found that the transition away from employer-sponsored coverage would be far from voluntary; the report projects hundreds of billions in savings for employers, largely “resulting from the shift of employers to the public plan”—in other words, businesses who currently offer coverage “dumping” their insurance plans and placing their employees on the government-run program.

Based on these data, some Members may be concerned by the implications of creating a nationalized health insurance option, particularly the dislocation of existing workers who may well be satisfied with their current coverage.  Members may also be concerned about the budgetary implications of creating such an expansive new entitlement—particularly given Medicare’s nearly $86 trillion in unfunded obligations—and whether this new government program would exercise controls on patient care as the sole means available to slow the growth of costs.

Members may instead support less radical alternatives to the nationalized insurance plan that would focus more on expanding access to care for individuals of limited means.  Providing incentives for low-income individuals to afford coverage, expanding choices for individuals to purchase the plan that best meets their needs, and promoting healthy behaviors would all serve to expand access while slowing the growth of health care costs—alternatives that Members may prefer to a massive new government plan that could harm those happy with their current health insurance options.

What the MedPAC Report Doesn’t Examine

On Tuesday, the Medicare Payment Advisory Commission (MedPAC) will testify on its annual recommendations regarding Medicare payment policy.  An expected point of contention will be MedPAC’s support of “financial neutrality” between traditional Medicare and Medicare Advantage (MA) plans.  However, while the MedPAC report discusses the need for competition between traditional Medicare and MA plans, some Members may believe the Commission’s recommendations focus primarily on squeezing MA plans financially, while doing nothing to address traditional Medicare’s inherent biases:

  • The Commission does not propose to modify traditional Medicare’s built-in monopoly under current law, whereby seniors are automatically enrolled in traditional Medicare unless they choose otherwise—even if a more efficient and affordable MA plan exists.
  • The Commission does not propose that supplemental benefits offered to low-income seniors should be able to “wrap-around” an MA plan offering—to obtain those extra benefits, seniors must enroll in the government-run plan.
  • The Commission does not disclose how much more the federal government will pay—and seniors could pay—for prescription drug coverage if MA plans drop out of Medicare, as low bids by MA plans offering pharmaceutical coverage have helped result in total Part D spending much lower than projected.

Given MedPAC’s consistent focus on cutting MA plan payments—while ignoring the issues addressed above—some Members may question whether the Commission is examining comprehensive solutions for Medicare reform in an unbiased, non-partisan manner.  Some Members may also view the double standards set by the MedPAC Commissioners as further evidence to oppose a nationalized health plan, because supporters of government-run health insurance will never create a truly level playing field for MA plans to compete against government-run Medicare.