Contradictory Messages on SCHIP

When the bill reauthorizing the State Children’s Health Insurance Program (SCHIP) comes to the House floor for an expected vote on Friday, it will feature numerous examples of oxymoronic policy messages from the Republican majority. Call them contradictory, call them hypocritical, but regardless, the lack of coherence sends decidedly mixed messages about what exactly Republicans consider good, conservative health policy.

Voting to Reduce Medicare Spending the Day After Voting to Increase It

On Wednesday, the House Rules Committee finally decided the on-again, off-again question of whether to include provisions expanding Medicare means-testing for the affluent in the bill. The rule the committee reported states that, upon the rule’s adoption by the House, the base bill will be replaced by a substitute amendment—as well as a separate amendment adding the means-testing language back into the bill.

Rewarding States that Expanded Medicaid 

Section 305 of the new substitute amendment would postpone by two years reductions in Obamacare’s Disproportionate Share Hospital (DSH) payments—scheduled to total $4.7 billion in both fiscal years 2018 and 2019—for two years, until 2020. Theoretically the bill would “pay for” this additional spending (i.e., cancelling spending reductions now) by increasing the size of DSH reductions in future years. However, given that Congress has already postponed Obamacare’s DSH reductions three times in as many years, some may view the move as a “can-kicking” exercise and fiscal gimmick that lawmakers do not believe will ever take effect.

More to the point: In undoing the DSH reductions, the bill makes absolutely no distinction between states that expanded Medicaid under Obamacare and those that did not. In 2009 and 2010, Democrats thought the DSH payment reductions would partially offset the increased revenues hospitals would generate as a result of gaining more insured patients under Obamacare. But by failing to target the DSH reductions only toward states that have not expanded Medicaid to the able-bodied, the Republican House would effectively allow expansion states to “double-dip,” gaining both additional revenue from the Medicaid expansion and from the postponement (or the eventual cancellation) of the DSH reductions.

Passing a Not-That-Conservative Bill with Only GOP Votes

As previously noted, the underlying SCHIP reauthorization—separate and distinct from the controversies about how to pay for the spending—deviates from prior legislative proposals designed to return SCHIP towards its original purpose: Covering low-income kids. In addition to the reward for Medicaid expansion states discussed above, the bill:

  • Extends Obamacare’s maintenance of effort requirements, which constrain states’ flexibility in managing their programs, for three years, through 2022;
  • Extends—albeit only for one-year, and at a lower rate as part of a phase-out approach—Obamacare’s enhanced match rate for SCHIP programs;
  • Omits prior language requiring states to focus their programs’ efforts on covering children from low-income households;
  • Omits prior language permitting states to impose waiting periods in SCHIP programs for people who turn down an offer of, or disenroll from, employer-sponsored health coverage, given that studies suggest as many as three in five children enrolled in programs like SCHIP do so after first dropping their prior health coverage (i.e., “crowd-out”).

Even though the bill does not contain any of these conservative proposals, Democrats claim they will not support the legislation, given their objections to the SCHIP “pay-fors.” The Democratic position raises an obvious question: If Republicans will end up passing a SCHIP reauthorization along party lines, why not ensure that the legislation includes solid conservative policies throughout, instead of just conservative offsets? It’s one of several relevant questions given the decidedly mixed messages coming from House Republicans on health care this week.

This post was originally published at The Federalist.

AARP’s Amnesia on “Raiding” Medicare

Based on its statements the past few weeks, if Obamacare extended to non-profit organizations, AARP might need to seek coverage for memory loss. While the seniors’ group opposes House Republicans’ extension of children’s health insurance because it includes provisions means-testing Medicare benefits for wealthy seniors, the Obamacare legislation it endorsed in December 2009 did the very same thing.

Obamacare Included Means-Testing

A letter the AARP sent to the House Energy and Commerce Committee last week objected to the House’s proposals to increase Medicare means-testing, noting that wealthy seniors already pay a greater share of their Part B (outpatient care) and Part D (prescription drug) premiums. That statement is true—in part because of Obamacare, which AARP endorsed.

In addition, Section 3308 of Obamacare applied means-testing for affluent seniors to the Part D prescription drug program for the first time.

Obamacare Used Medicare Savings

Last week’s AARP letter also claimed that “not only is it wrong to continue to ask Medicare beneficiaries to shoulder the burden for non-Medicare expenditures, but it will make it harder to finance actual improvements and address long-term challenges in the Medicare program.” That statement contains no small amount of irony, considering that Obamacare, as House Minority Leader Nancy Pelosi herself admitted, “took half a trillion dollars out of Medicare in [Obamacare], the health care bill”—to spend on new entitlements.

Moreover, by using savings from the Medicare Part A (hospital insurance) trust fund, Obamacare gamed the accounting to make the program’s shortfalls look less severe. When then-Secretary of Health and Human Services Kathleen Sebelius was asked whether the Medicare savings were being used “to save Medicare, or to fund health reform [Obamacare],” Sebelius replied, “Both.”

Some would argue that Obamacare’s financial chicanery has actually undermined Medicare’s solvency by giving lawmakers an excuse to postpone needed reforms. While this year’s Medicare trustees report claimed the Part A trust fund would become insolvent in 2029, the last trustees report released prior to Obamacare measured the program’s insolvency date at 2017—this year.

If it weren’t for the double-counting in Obamacare—a bill that AARP proudly endorsed—lawmakers would likely be confronting Medicare’s structural deficits this year. Instead, comforted by the false hope of Obamacare’s accounting gimmicks, Congress seems unlikely to embark on comprehensive Medicare reform to solve those deficits in the near future, which will only exacerbate the impact of legislative changes when they do take place.

The history of Obamacare lends support to AARP’s current argument that Medicare savings not finance other government spending. But given its own history in supporting Obamacare, AARP seems singularly unqualified to make it.

This post was originally published at The Federalist.

Bernie Sanders’ Single Payer Bill Provides Benefits for Billionaires

On Wednesday, socialist Sen. Bernie Sanders plans to introduce the latest version of his single-payer health-care program. If past practice holds, Sanders will call his plan “Medicare for All.” But if he wants to follow Medicare as his model, then the Sanders plan could easily earn another moniker: Benefits for Billionaires.

An analysis released by the Congressional Budget Office (CBO) in August demonstrates how Medicare currently provides significant financial benefits to seniors at all income levels, including the wealthy. Specifically, the CBO paper analyzed lifetime Medicare taxes paid, and lifetime benefits received, by individuals born in the 1950s who live to age 65.

The CBO analysis confirms prior work by the Urban Institute—no right-wing think tank—that Medicare pays out more in benefits than it receives in taxes at virtually all income levels. For instance, according to Urban’s most recent study, a high-earning male turning 65 in 2020 will pay in an average of $123,000 in Medicare taxes, but receive an average of $222,000 in benefits.

Melinda Gates Doesn’t Need Government Health Care

Some may quibble with the work by CBO and Urban Institute for containing an important oversight. In analyzing only Medicare benefits and Medicare taxes paid, the two papers omit the portion of Medicare’s financing that comes from general revenues—including the income taxes paid primarily by the wealthy. While it’s difficult to draw a precise link between Medicare’s general revenue funding and any one person’s income tax payments, it’s possible that—particularly for one-percenters—income taxes paid will offset the net cost of their Medicare benefits.

But regardless of those important details, the larger point still holds. Even if her taxes do outweigh the Medicare benefits received, why does Melinda Gates need the estimated $300,000 in health care benefits paid to the average high-income woman born in the 1950s? Does that government spending serve a useful purpose?

We Don’t Have Money to Subsidize the Rich

Yes, Medicare currently does include some means testing for wealthy beneficiaries, in both the Part B (physician) and Part D (prescription drug) portions of the program. But common sense should dictate first that wealthy individuals not only should be able to opt-out of Medicare if they so choose—because, strange as it sounds, the federal government currently forbids individuals from renouncing their Medicare benefits—wealthy seniors should not receive a taxpayer subsidy at all. Whether in Medicare or Sanders’ socialist utopia, the idea that Warren Buffett or Bill Gates warrant taxpayer subsidies defies credulity.

Despite this common-sense logic, liberals continue to support providing taxpayer-funded benefits for billionaires. In 2011, then-Rep. Henry Waxman (D-CA) said “if [then-Speaker John] Boehner wants to have the wealthy contribute more to deficit reduction, he should look to the tax code.” Perhaps Waxman views keeping wealthy seniors in Medicare as a form of punishment for the rich. After all, nearly nine in ten seniors have some form of supplemental insurance, and a form of “insurance” one must insure against may not be considered an unalloyed pleasure.

Regardless, Medicare faces its own financial reckoning, and sooner rather than later. In 2009—the last trustees’ report before Obamacare introduced fiscal gimmicks and double-counting into Medicare—the program’s actuaries concluded Medicare’s Hospital Insurance Trust Fund would become functionally insolvent this year. Given that bleak outlook, neither Medicare nor the American people can afford Sanders’ ill-conceived scheme to provide taxpayer-funded health benefits to wealthy 1-percenters.

This post was originally published at The Federalist.

Democrats’ Hypocrisy on the Trump Budget

As expected, the Left had a harsh reaction to President Trump’s first budget on its release Tuesday. Bernie Sanders called the proposed Medicaid reductions “just cruel,” the head of one liberal think-tank dubbed the budget as a whole “radical,” and on and on.

But if liberals object to these “draconian cuts,” there’s one potential solution: Look in the mirror.

And exactly who might be to blame for creating that toxic environment?

Democrats Are Using The ‘Mediscare’ Playbook

Democrats have spent the past several political cycles running election campaigns straight out of the “Mediscare” playbook. In case anyone has forgotten, political ads have portrayed Republicans as literally throwing granny off a cliff.

This rhetoric about Republican attempts to “privatize” Medicare came despite several inconvenient truths:

  1. The “voucher” system Democrats attack for Medicare is based upon the same bidding system included in Obamacare;
  2. The Congressional Budget Office concluded one version of premium support would, by utilizing the forces of competition, actually save money for both seniors and the federal government; and
  3. Democrats—in Nancy Pelosi’s own words—“took half a trillion dollars out of Medicare” to pay for Obamacare.

Given the constant attacks from Democrats against entitlement reform, however, Donald Trump made the political decision during last year’s campaign to oppose any changes to Medicare or Social Security. He reiterated that decision in this week’s budget, by proposing no direct reductions either to Medicare or the Social Security retirement program. Office of Management and Budget Director Mick Mulvaney said the president told him, “I promised people on the campaign trail I would not touch their retirement and I would not touch Medicare.”

That’s an incorrect and faulty assumption, of course, as both programs rapidly spiral toward insolvency. The Medicare hospital insurance trust fund has incurred a collective $132.2 billion in deficits the past eight years. Only the double-counting created by Obamacare continues to keep the Medicare trust fund afloat. The idea that President Trump should not “touch” seniors’ retirement or health care is based on the fallacious premise that they exist beyond the coming decade; on the present trajectory, they do not, at least not in their current form.

Should Bill Gates Get Taxpayer-Funded Healthcare?

That said, the president’s reticence to “touch” Social Security and Medicare comes no doubt from Democrats’ reluctance to support any reductions in entitlement spending, even to the wealthiest Americans. When Republicans first proposed additional means testing for Medicare back in 2011, then-Rep. Henry Waxman (D-CA) opposed it, saying that “if [then-House Speaker John] Boehner wants to have the wealthy contribute more to deficit reduction, he should look to the tax code.”

In other words, liberals like Henry Waxman, and others like him, wish to defend “benefits for billionaires”—the right of people like Bill Gates and Warren Buffett to receive taxpayer-funded health and retirement benefits. Admittedly, Congress passed some additional entitlement means testing as part of a Medicare bill two years ago. But the notion that taxpayers should spend any taxpayer funds on health or retirement payments to “one-percenters” would likely strike most as absurd—yet that’s exactly what current law does.

As the old saying goes, to govern is to choose. If Democrats are so violently opposed to the supposedly “cruel” savings proposals in the president’s budget, then why don’t they put alternative entitlement reforms on the table? From eliminating Medicare and Social Security payments to the highest earners, to a premium support proposal that would save seniors money, there are potential opportunities out there—if liberals can stand to tone down the “Mediscare” demagoguery. It just might yield the reforms that our country needs, to prevent future generations from drowning in a sea of debt.

This post was originally published at The Federalist.

What You Need to Know about Republicans’ Newest “Replace” Legislation

Below please find some quick fast facts on House Republicans’ “repeal-and-replace” legislation, introduced on Monday evening. (The Energy and Commerce title is here, and the Ways and Means title is here.)

What’s changed since the leaked discussion draft, dated February 10?

Several provisions have been revised, updated, deleted, or added in the intervening three weeks:

  • Increase in funding for community health centers, from $285 million to $422 million;
  • Revision to the repeal of Disproportionate Share Hospital (DSH) cuts—the cuts are restored two years sooner for states that have not expanded Medicaid under Obamacare (in the prior draft, the cuts were restored immediately for all states);
  • Several new Medicaid program integrity provisions, including those prohibiting lottery winners from retaining benefits, restricting retroactive eligibility, prohibiting presumptive eligibility for individuals who cannot provide proof of citizenship, and requiring states to make eligibility re-determinations every six months in many cases;
  • A $10 billion pool of funding ($2 billion per year for calendar years 2018 through 2022) for states that did not expand Medicaid under Obamacare;
  • Change to the inflation formula (medical inflation, instead of medical inflation plus one percent) for Medicaid per capita caps when adjusted forward from 2016 to 2019—for years after 2019, the formula remains unchanged at medical inflation plus one percent;
  • Change to the Patient and State Stability Fund, including a change to the title (previously called the State Innovation Grant program), language permitting CMS to intervene in a state if a state declines to apply for grant funding, and change in the formulae and criteria, which generally focus more upon achieving stability (based on insurers’ medical loss ratios)—the funding levels remain unchanged, at $100 billion from 2018 through 2026;
  • Removal of language requiring HHS to verify special enrollment periods, codifying a change proposed by the Department in regulations last month;
  • Removal of language permitting the perpetual offering of “grandmothered” health insurance plans—that is, plans purchased after Obamacare’s enactment, but prior to its major insurance regulations taking effect in 2014;
  • Prohibition on “grandmothered” plans receiving Obamacare subsidies in 2018 and 2019—although individuals in grandfathered plans (i.e., those purchased prior to Obamacare’s enactment) and coverage purchased off of Exchanges could qualify for subsidies;
  • Delayed repeal of Obamacare’s tax increases until 2018, as opposed to 2017 in the leaked discussion document;
  • Repeal of the Obamacare “Cadillac tax” only until 2025;
  • Removal of repeal of Obamacare’s economic substance doctrine tax increase;
  • Means testing to the refundable tax credit—individuals with incomes below $75,000, and families with incomes below $150,000, would qualify for the full credit, while individuals with incomes above $215,000, and families with incomes above $290,000, would not qualify for the credit; and
  • Removal of a cap on the exclusion for employer-provided health insurance.

What’s changed since the reconciliation legislation passed in 2015/2016?

  • Longer transition period (three years, instead of two)
  • Expansion of Obamacare subsidies during the transition period
  • Medicaid expansion remains, albeit at state option and with enhanced funding sunset for beneficiaries who enroll after January 2020
  • Elimination of repeal of risk corridors and reinsurance
  • Delay of repeal of Obamacare taxes (take effect next year, not this year, and “Cadillac tax” repeal sunsets in 2025)
  • Elimination of repeal of economic substance doctrine

What remains since the reconciliation legislation passed in 2015/2016?

  • Repeal of prevention “slush fund”
  • Defunding of certain Medicaid providers, which will eliminate federal funding for Planned Parenthood for one year
  • Repeal of Exchange subsidies (albeit delayed)
  • Repeal of enhanced federal funding for Medicaid expansion (albeit delayed, and with a phase-out/freeze instead of a funding “cliff”)
  • Repeal of DSH cuts (albeit delayed/modified)
  • Elimination of individual and employer mandate penalties
  • Repeal of most of Obamacare tax increases (albeit delayed)

What major parts of Obamacare does the bill repeal?

  • Prevention “slush fund”
  • Exchange subsidies, beginning in 2020
  • Enhanced federal match for states that expanded Medicaid, beginning with individuals enrolled after January 1, 2020
  • The individual and employer mandates (penalties set to zero) effective December 31, 2015—mandates would not apply to 2016 tax filings currently taking place
  • All tax increases, except for 1) the economic substance doctrine (not repealed at all); 2) the “Cadillac tax” on high-cost health plans (repealed only until 2025)

What major parts of Obamacare does the bill NOT repeal?
Entitlements

  • Exchange subsidies revised and expanded (extended to off-Exchange populations) through 2020
  • Exchange subsidies would expire in 2020—one year later than the 2015/2016 reconciliation bill
  • Medicaid expansion available to states as an optional population beginning in 2020—the prior 2015/2016 reconciliation bill repealed categorical eligibility for able-bodied adults entirely

Tax Increases

  • “Cadillac tax”—only repealed until 2025
  • Economic substance doctrine
  • Other tax increases (except the employer and individual mandates) not repealed immediately

Major Insurance Regulations

  • Pre-existing conditions (the bill modifies the existing requirements, by allowing insurers to vary premiums by up to 30 percent for those without continuous coverage)
  • Community rating by age (the bill expands existing rate bands, and permits states to opt-out of the federal standard if they so choose)
  • Under-26 mandate
  • Prohibition on annual and lifetime limits
  • Medical loss ratio requirements
  • Preventive service mandate (including coverage of contraception)
  • Insurance Exchanges
  • Risk corridors and reinsurance

ALL the Medicare savings

One Easy Way to Start Reforming Entitlements

During his election campaign and the subsequent presidential transition, Donald Trump expressed a high degree of discomfort with reducing Medicare benefits. His position ignores the significant financial peril Medicare faces—a whopping $132.2 billion in deficits for the Part A (Hospital Insurance) trust fund over the past eight years.

That said, there is one easy way in which the new administration could advance the cause of entitlement reform: allow individuals—including wealthy individuals, like, say, Donald Trump—to opt out of Medicare.

If you think the government holding benefits hostage to forcibly enroll seniors—even wealthy ones—in taxpayer-funded Medicare sounds more than a little absurd, you wouldn’t be the first one. Several years ago, several conservatives—including former House Majority Leader Dick Armey—filed a lawsuit in federal court, Hall v. Sebelius, seeking to overturn the SSA guidance. The plaintiffs wanted to keep their previous private coverage, and did not wish to lose the benefits of that coverage by being forcibly enrolled in Medicare Part A.

We Have A Roadmap To Remedy This Problem

Unfortunately, both a federal district court and the Court of Appeals for the District of Columbia agreed with the federal government. The majority opinions held that the underlying statute distinguished being “entitled” to Medicare Part A benefits from “enrolling” in Part B, meaning the government was within its rights to deny the plaintiffs an opportunity to opt out of Part A.

However, a dissent at the Court of Appeals by Judge Karen LeCraft Henderson can provide a roadmap for the Trump Administration to remedy the absurd scenario of individuals being forcibly enrolled in a taxpayer-funded program. Judge Henderson held that the Social Security Administration had no statutory authority to prohibit (via its Program Operations Manual System, or POMS) individuals from disclaiming their Medicare Part A benefits. While the law “entitles” individuals to benefits, it does not give SSA authority to force them to claim said benefits. SSA published guidance in its program manual exceeding its statutory grant—without even giving the public the opportunity for notice-and-comment before establishing its policy.

It’s Time To End The SSA’s Kafka-esque Policies

During the Cold War, East German authorities referred to the barriers surrounding West Berlin as the “Anti-Fascist Protective Wall”—implying that the Berlin Wall stood not to keep East Berliners in East Germany, but West Berliners out. One can’t help but notice a similar irony in the Medicare opt-out policies developed by the Social Security Administration. After all, if Medicare is so good, why must SSA hold individuals’ Social Security benefits hostage to keep them enrolled in the program?

The Trump Administration can easily put an end to the Social Security Administration’s Kafka-esque policies—and take one small step towards reforming entitlements—by instructing the new Commissioner of Social Security to work with the Centers for Medicare and Medicaid Services to develop a means for individuals to opt out of the Medicare Part A benefit. The savings from such a policy would likely be modest, but why should the federal government force the expenditure of taxpayer dollars on benefits that the beneficiaries themselves do not wish to receive?

The simple answer: it shouldn’t. Perhaps Bernie Sanders or Elizabeth Warren view forcible enrollment in Medicare as “punishment” for wealthy seniors. But at a time when our nation faces nearly $20 trillion in debt, individuals of significant means—whether Bill Gates, Donald Trump, or even Hillary Clinton—shouldn’t be forced to accept taxpayer-funded benefits. The Trump Administration eliminating this government absurdity would represent a victory for fiscal responsibility—and sheer common sense.

This post was originally published in The Federalist.

Is the “Doc Fix” Bill Fiscally Sustainable?

Last month, in writing about how the president’s budget would forestall changes to entitlements for several years, I said that while the budget “would include some modest changes to Medicare benefits, the overall document postpones most of the fiscal pain until after President Barack Obama leaves office.” The same might be true of bipartisan Medicare legislation that addresses physician payments.

House leaders filed “doc fix” legislation Thursday afternoon, but they have not yet released the legislative language surrounding the parts of the bill that would be paid for. A summary circulating among lobbyists in Washington suggests as one of the “pay-fors” a Medicare Advantage timing shift—a budget gimmick that would shift plan payments into a future fiscal year, masking overall Medicare spending levels.

The document also discusses more substantive changes to the Medicare program: Federal Part B and Part D subsidies would be reduced for individuals with incomes greater than $133,000. And first-dollar coverage for new beneficiaries purchasing supplemental coverage—which studies have shown encourages seniors to over-consume care–would be limited.

These changes may start to address Medicare’s structural shortfalls, but they seem relatively paltry next to some of the Obama administration’s budget proposals. The president’s plan proposed increasing the Medicare Part B deductible and introducing home health co-payments—actions that could reduce incentives for over-consumption of care and crack down on fraud, a particular problem in the home health program. But while the president’s proposed changes would not take effect until 2019, the House proposal would delay them one additional year, until 2020.

Demographics will define our fiscal future for the generation to come. The Congressional Budget Office noted this year that Social Security, health programs, and interest payments represent 84% of the increase in federal spending over the coming decade, largely because an average of 10,000 baby boomers will retire every day. Yet the House legislation could end up exempting from any structural reforms the more than 16 million individuals forecast to join Medicare by 2020.

Unsustainable trends will, at some point, give out. As I wrote last month, putting dessert before spinach by kicking tough choices to future political leaders might lead to short-term political gains but could also produce long-term fiscal and political pain. And when the fiscal reckoning occurs, voters are not likely to look kindly on those who created the problems.

This post was originally published at the Wall Street Journal Think Tank blog.

How Obama’s Budget Delays Fiscal Pain

In its 2016 budget, the Obama administration proposed approximately $400 billion in health-care savings. While this would include some modest changes to Medicare benefits, the overall document postpones most of the fiscal pain until after President Barack Obama leaves office.

The budget proposes additional increases to Medicare means-testing: reducing federal Part B and Part D subsidies to higher-income households. It also would increase the Medicare Part B deductible, introduce a Part B surcharge for beneficiaries who purchase rich supplemental Medigap coverage, and introduce home health co-payments. The latter three changes would apply only to new beneficiaries—and all the changes would take effect in 2019, more than a year after President Obama leaves office.

In its updated economic outlook last month, the Congressional Budget Office made clear that the United States faces an entitlement problem. CBO’s Figure 1-3 (above) shows that Social Security, health programs, and interest represent 84% of the increase in federal spending over the coming decade. With an average of 10,000 baby boomers retiring every day, President Obama’s proposals would permanently exempt approximately 14 million individuals who will join Medicare by January 2019—making the task of bringing entitlement commitments into balance that much more difficult.

President Obama has a history of prioritizing political expediency over fiscal rectitude. His first submission proposing additional Medicare cost-sharing—in September 2011—delayed the implementation until 2017. Obamacare has followed the same course: Two of the law’s biggest long-term “pay-fors”—provisions slowing the growth in insurance exchange subsidies and the law’s “Cadillac tax“—won’t take effect until a new president is in office. A third provision, the controversial Independent Payment Advisory Board, has been left unaddressed by the administration.

This strategy of pursuing dessert before spinach—of kicking tough choices down the road to future political leaders—may lead to short-term political gains but could result in long-term fiscal and political pain. Unsustainable trends will not continue forever—and whenever the fiscal reckoning comes, voters are unlikely to look kindly on those whose actions helped bring about the mess.

This post was originally published at the Wall Street Journal Think Tank blog.

Rep. Stearns Op-Ed: Medicaid for Millionaires

“We shouldn’t have to do that, because they should know better.”

So said President Obama in explaining why the Treasury—quite rightly—forced Citigroup to cancel the purchase of a $50 million corporate jet after the banking firm accepted tens of billions in federal bailout dollars. But he could well have been talking about his Democratic colleagues in Congress, who seem perfectly willing to give the former executives of these firms generous federal health benefits—even though they too should know better.

Consider the case of Henry Waxman, a Democrat who has represented Beverly Hills in Congress for over 30 years. Last fall, as Chairman of the Oversight and Government Reform Committee, he led hearings on the financial crisis, and criticized companies for taking “massive risk. When the bottom fell out, senior management walked away with millions of dollars, while shareholders and taxpayers lost billions.”

Fast forward to this year and a new Congress, where Mr. Waxman assumed the Chairmanship of the Energy and Commerce Committee, on which I sit. As Chairman, Waxman wrote major health-related sections of the economic “stimulus” legislation which Congress is currently considering. The proposal Mr. Waxman presented to the Committee spent more than $100 billion on various health spending projects, and created two new federal entitlements—one expanding Medicaid to individuals receiving unemployment compensation, and the second providing subsidies to individuals who choose continuation coverage from their former employers.

But for the new entitlements, there was a massive loophole. Because the bill explicitly prohibited income or asset tests from being applied to people receiving the new health care entitlements, anyone who recently lost their job—including the former CEOs who Mr. Waxman said last fall “walked away with millions”—could receive free or subsidized health care courtesy of federal taxpayers. At a time when all Americans are struggling to make ends meet, I viewed these uncapped subsidies as a poor use of taxpayers’ hard-earned money—and an unnecessary expansion of government to boot.

So when our Committee met to consider the “stimulus” legislation, I offered an amendment to the legislation to make sure that individuals with income over $1 million who elected continuation coverage from their former employers would not receive federal subsidies to pay for that coverage. Chairman Waxman accepted my amendment, and said he would “try to find a way to structure” the subsidies so that wealthy executives wouldn’t be eligible for subsidies they really shouldn’t need.

But several days later, when Democrat leaders introduced the version of the “stimulus” legislation that the House was actually going to vote on, my amendment was stricken from the bill. The omission wasn’t because a cap on the federal health subsidies was unworkable—Congressional tax advisers told a Senate committee an income-based cap was feasible to implement. No one was able to give me a straight answer as to why my amendment wasn’t included in the final bill—Speaker Pelosi actually put out a press release saying my amendment had been accepted as part of the “bipartisan” debate, when in reality my amendment and those of two of my other Republican colleagues had been unceremoniously dumped behind closed doors.

This incident raises a couple of key questions—one procedural, the other political. First, how bipartisan is it to accept an amendment one week, only to remove it without explanation or cause the next? Second, now that they control Congress and the White House, are Democrats so insistent on expanding the federal government’s role in health care that they want to provide subsidized coverage to the same fired executives they have so recently blamed for causing our current economic crisis?

In the end, the final “stimulus” product included an income cap so that taxpayers’ funds won’t be to subsidize the health insurance of Bernie Madoff and other similar characters. But it begs the same point President Obama raised when talking about Citigroup’s desire for a new corporate jet: We shouldn’t have to tell Democrats not to give federal health benefits to millionaires—because they should know better.

This post was originally published at RedState.

Weekly Newsletter: February 23, 2009

Orszag, Liberal Groups Support Health Care Rationing

Today President Obama will host a “fiscal responsibility summit” at the White House, followed later this week by a submission to Congress of his outline for the federal budget in Fiscal Year 2010 and beyond.  Press reports indicate that health issues will predominate both events, as entitlement spending in Medicare and Medicaid will serve as a focus of the fiscal summit, and health initiatives will be given a prominent place in the President’s budget proposals.

However, some Members may take a skeptical view of comments by Office of Management and Budget Director Peter Orszag and others that health care can be reformed—and the entitlement crisis resolved—primarily through government rationing of health care goods and services.  While head of the Congressional Budget Office, Orszag prepared a report on comparative effectiveness research that advocated rationing’s beneficial effects—while alluding to its potential downsides for patients.  The December 2007 report asserted that such research “could …yield lower health care spending without having adverse effects on health.”  However, the report also admits that “patients who might benefit from more-expensive treatments might be made worse off” as a result of changes in reimbursement patterns.

Orszag’s view of health reform is shared by the left-leaning Commonwealth Fund, which last week released its own report outlining ways to generate savings within the health sector.  The largest chunk of proposed savings—$634 billion over ten years—would come from comparative effectiveness research and subsequent rationing of care.  The report asserts that “merely making information available” about the relative merits of treatments “is unlikely to produce” outcomes yielding sufficient savings—and therefore recommends that the new comparative effectiveness center help “to create financial incentives for patients and physicians to avoid high-cost treatments.”  The Fund proposes that the comparative effectiveness center—similar to the Council established in economic “stimulus” legislation signed into law last week—“make benefit and pricing recommendations to public insurance plans, including Medicare.”

While supporting the need to slow the growth of health spending, and entitlement spending in particular, some Members may be concerned by the implications of these recommendations, which would place government bureaucrats between doctors and patients, leading to denials of critical care.  Some Members may instead support alternatives that would slow the growth of health care costs through additional competition (both inside and outside Medicare), while preserving and enhancing a culture where patients and doctors—not insurance companies or government bureaucrats—determine the appropriate course of medical care.  Some Members may also support means testing for the Medicare Part D benefit—requiring Warren Buffett and George Soros to pay more for their prescription drugs—as an additional way to bring our entitlement obligations in line with projected future revenues.

The Outlook Ahead

The President’s address to Congress Tuesday night, coupled with his submission of a budget outline on Thursday, will commence a six-week period leading up to Congress’ Easter recess where health issues will remain prominent.  As indicated above, the budget may include additional provisions regarding comparative effectiveness research and rationing of health care, as well as proposed cuts to Medicare Advantage plans that have proved popular with seniors—particularly those with low incomes—in recent years.  At this time it remains unclear whether the President will use the budget submission to fulfill his statutory obligation to present Congress with Medicare funding reform legislation, as required by the “trigger” provisions inserted into the Medicare Modernization Act at the behest of House Republicans.

Hearings and other legislative activity are also likely to continue regarding comprehensive health reform; Sen. Ron Wyden (D-OR) introduced his comprehensive bill on February 5, and Senate Finance Chairman Baucus—who pledged to introduce legislation early in the 111th Congress—may follow suit in short order.  The House may also consider legislation related to food and drug safety, as well as a bill (H.R. 1108 in the 110th Congress) giving the Food and Drug Administration (FDA) the authority to regulate tobacco products, funded by “user fees” on tobacco companies.  Particularly as many Democrats have harshly criticized the FDA for lax enforcement related to food safety matters, some Members may believe now is precisely the wrong time to distract the FDA from its current mission in order to have the agency regulate the tobacco industry—and the wrong time to burden working families with the second tobacco tax increase this year, on the heels of the 62 cent tax increase used to fund the State Children’s Health Insurance Program (SCHIP) expansion.