What You Need to Know about President Trump’s Health Care Executive Order

On Thursday morning, President Trump signed an Executive Order regarding health care and health insurance. Here’s what you need to know about his action.

What Actions Did the President Take?

The Executive Order did not change regulations on its own; rather, it instructed Cabinet Departments to propose changes to regulations in the near future:

  1. Within 60 days, the Department of Labor will propose regulatory changes regarding Association Health Plans (AHPs). Regulations here will look to expand the definition of groups that can qualify as an “employer” under the federal Employee Retirement Income Security Act (ERISA). AHPs have two advantages: First, all association health plans regulated by ERISA are federally pre-empted from state benefit mandates; second, self-insured plans regulated by ERISA are exempt from several benefit mandates imposed by Obamacare—such as essential benefits and actuarial value standards.
  2. Within 60 days, the Departments of Treasury, Labor, and Health and Human Services (HHS) will propose regulatory changes regarding short-term health plans. Regulations here will likely revoke rules put into place by the Obama Administration last October. Last year, the Obama Administration limited short-term plans to 90 days in duration (down from 364 days), and prevented renewals of such coverage—because it feared that such plans, which do not have to meet any of Obamacare’s benefit requirements, were drawing people away from Exchange coverage. The Trump Administration regulations will likely modify, or eliminate entirely, those restrictions, allowing people to purchase plans not compliant with the Obamacare mandates. (For more information, see my Tuesday article on this issue.)
  3. Within 120 days, the Departments of Treasury, Labor, and HHS will propose regulatory changes regarding Health Reimbursement Arrangements (HRAs), vehicles where employers can deposit pre-tax dollars for their employees to use for health expenses. A 2013 IRS Notice prevented employers from using HRA dollars to fund employees’ individual health insurance premiums—because the Obama Administration worried that doing so would encourage employers to drop coverage. However, Section 18001 of the 21st Century Cures Act, signed into law last December, allowed employers with under 50 employees to make HRA contributions that workers could use to pay for health insurance premiums on the individual market. The Executive Order may seek to expand this exemption to all employers, by rescinding the prior IRS notice.
  4. Within six months—and every two years thereafter—the Departments of Treasury, Labor, and HHS, along with the Federal Trade Commission, will submit reports on industry consolidation within the health care sector, whether and how it is raising health care costs, and actions to mitigate the same.

How Will the Order Affect the Health Sector?

In general, however, the issues discussed by the Executive Order will:

  • Give individuals more options, and more affordable options. Premiums on the individual market have more than doubled since 2013, due to Obamacare’s regulatory mandates. AHPs would allow workers to circumvent state benefit mandates through ERISA’s federal pre-emption of state laws; self-insured AHPs would also gain exemption from several federal Obamacare mandates, as outlined above. Because virtually all of Obamacare’s mandated benefits do not apply to short-term plans, these would obtain the most regulatory relief.
  • Allow more small businesses to subsidize workers’ coverage—either through Association Health Plans, or by making contributions to HRAs, and allowing employees to use those pre-tax dollars to buy the health coverage of their choosing on the individual market.

When Will the Changes Occur?

The Executive Order directed the Departments to announce regulatory changes within 60-120 days; the Departments could of course move faster than that. If the Departments decide to release interim final rules—that is, rules that take effect prior to a notice-and-comment period—or sub-regulatory guidance, the changes could take effect prior to the 2018 plan year.

However, any changes that go through the usual regulatory process—agencies issuing proposed rules, followed by a notice-and-comment period, prior to the rules taking effect—likely would not take effect until the 2019 plan year. While the Executive Order directed the agencies to “consider and evaluate public comment on any regulations proposed” pursuant to the Order, it did not specify whether the Departments must evaluate said comments before the regulations take effect.

Does the Order Represent a Regulatory Overreach?

However, with respect to Association Health Plans, some conservatives may take a more nuanced view. Conservatives generally support allowing individuals to purchase insurance across state lines, believing that such freedom would allow consumers to buy the plans that best suit their interests.

However, AHPs accomplish this goal not through Congress’ Commerce Clause power—i.e., explicitly allowing, for instance, an individual in Maryland to buy a policy regulated in Virginia—but instead through federal pre-emption—individuals in Maryland and Virginia buying policies regulated by Washington, albeit in a less onerous manner than Obamacare’s Exchange plans. As with medical liability reform, therefore, some conservatives may support a state-based approach to achieve regulatory relief for consumers, rather than an expanded role for the federal government.

Finally, if President Trump wants to overturn his predecessor’s history of executive unilateralism, he should cease funding cost-sharing reduction payments to health insurers. The Obama Administration’s unilateral funding of these payments without an appropriation from Congress brought a sharp rebuke from a federal judge, who called the action unconstitutional. If President Trump wants to end executive overreach, he should abide by the ruling, and halt the unilateral payments to insurers.

This post was originally published at The Federalist.

Summary of Fiscal Year 2018 Budget

Late Monday afternoon, a document briefly appeared on the Department of Health and Human Services website as the Fiscal Year 2018 Budget in Brief. It’s unclear whether the document was a draft of the HHS budget, or merely a case of a staffer posting the official document online too early (our money would be on the latter). It also must be noted that other budget materials—the White House/Office of Management and Budget document, as well as supplemental materials from the Treasury and others—provide more detail and information not present solely within the HHS budget.

That said, based on the review of the document posted, the health budget seems in many respects functionally incoherent:

  • It proposes significant entitlement savings from Medicaid, over and above those included in Obamacare repeal, while proposing no direct savings from Medicare—a program that will spend more than $9 trillion in the coming decade, and which faces insolvency by 2028;
  • It grants states more flexibility with regards to Medicaid reform, while with respect to medical liability reform, it prescribes a solution from Washington—one that conservatives have argued is inconsistent with Tenth Amendment principles; and
  • It assumes $250 billion in savings from Obamacare repeal—more than the most recent estimate of the House legislation—a “magic asterisk” not likely to be achieved, but one on which the budget relies in order to achieve balance within a decade.

A summary of the document follows below.  We will have further information on the budget in the coming days, as more materials get released.

Discretionary Spending
While press reports in recent days have focused on the amount of “cuts” proposed in the President’s budget, it’s worth noting the HHS budget’s overall spending levels. When it comes to budget authority, the budget would spend $1.113 trillion in Fiscal Year 2018, which is a 1.24% reduction compared to the $1.127 trillion preliminary number for the current fiscal year, and a 0.54% reduction compared to the $1.119 trillion for Fiscal Year 2016.

Furthermore, the HHS budget actually increases the number of full-time equivalents (FTEs) within the Department—from 77,499 in FY16, to 79,505 in FY17, to 80,027 in FY18.

When compared to Fiscal Year 2017 amounts, the budget calls for the following changes in discretionary spending by major HHS divisions (tabulated by budget authority):

  • $850 million (31.0%) reduction for the Food and Drug Administration, as the Administration proposes increasing FDA user fees to compensate for reductions in taxpayer funding;
  • $449 million (4.2%) reduction for the Health Services and Resources Administration;
  • $55 million (1.1%) reduction for the Indian Health Service;
  • $1.3 billion (17.2%) reduction for the Centers for Disease Control;
  • $5.78 billion (18.2%) reduction for the National Institutes of Health;
  • $385 million (9.3%) reduction for the Substance Abuse and Mental Health Services Administration; and
  • $379 million (9.6%) reduction for the discretionary portion of the Centers for Medicare and Medicaid Services program management account.

Food and Drug Administration:  As noted above, the budget envisions a “recalibration” of how to pay for FDA pre-market review activities. Specifically, the budget would increase industry user fees “to fund 100 percent of cost for pre-market review and approval activities” for brand and generic prescription drugs and medical devices.

Medicare Proposals (Total savings of $22.6 Billion, including interactions)

Medicare Appeals:  Proposes new mandatory spending of $127 million in Fiscal 2018, and $1.27 billion over a decade, to address the pending backlog of Medicare appeals.

IPAB Repeal:  Repeals Obamacare’s Independent Payment Advisory Board (IPAB), at a cost of $7.6 billion over a decade. While opposing Obamacare’s notion that a board of unelected bureaucrats should be empowered to make rulings lowering Medicare spending nationwide, some conservatives may also oppose efforts to repeal a spending constraint on our nation’s largest health care entitlement without any similar efforts to control the program’s large (and growing) outlays.

Liability Reform:  Achieves Medicare savings of $31.4 billion from medical liability reforms. The reforms would impose caps on non-economic damages, provide safe harbors for physicians based on following clinical guidelines, allow for the creation of health courts, provide for a three-year statute of limitations, eliminate joint and several liability, allow courts to modify contingency arrangements, and provide for periodic payments for large jury awards.

The proposal would yield total savings of $55 billion overall. The largest share of $31.4 billion would come from Medicare—in part because a portion of physician fees are based on medical liability insurance payments. Medicaid savings would total $399 million. Much of the remaining $23.2 billion would come from revenue interactions with the current exclusion from employer-provided health insurance—i.e., a lowering of health insurance costs and premiums resulting in workers receiving slightly less of their compensation as pre-tax health benefits, and slightly more of their compensation as after-tax cash wages.

While supporting the concept of liability reform generally, some conservatives may be concerned that the budget’s proposals violate the principles of federalism. States can enact liability reforms on their own—and many states like Texas have done so, without any mandates from Washington. Some conservatives may therefore view this proposal as an example of “big government conservatism” inconsistent with the Tenth Amendment.

Medicaid and Other Health Proposals (Total savings of $627 Billion)

The HHS document notes that “the budget includes a net savings to Medicaid of $627 billion over 10 years, not including additional savings to Medicaid as a result of the Administration’s plan to repeal and replace Obamacare.”

Medicaid Reform:  Assumes $610 billion in savings (again, over and above Obamacare repeal) from Medicaid reform, giving states the choice between a per capita cap or a block grant beginning in 2020. The document specifically notes that this proposal will allow states to promote solutions that encourage work and promote personal responsibility.

State Children’s Health Insurance Program:  Assumes a two-year reauthorization of the State Children’s Health Insurance Program (SCHIP). The budget also proposes eliminating two Obamacare-related provisions—the increase in the enhanced federal match rate for SCHIP, and the maintenance of effort requirements imposed on states—in both cases at the end of the current fiscal year.

The budget would cap the level at which states could receive the enhanced federal SCHIP match at 250 percent of the federal poverty level ($61,500 for a family of four in 2017). Some conservatives would argue that this provision is one way to ensure federal funds are directed towards the vulnerable populations that need them most; guidance issued by the Bush Administration in 2007 provides other examples of potential policies to include.

Finally, the budget also proposes undoing an Obamacare change that required states to transition certain children off of SCHIP and into expanded Medicaid, allowing states to re-enroll these children into SCHIP.

On net, the SCHIP extension would save the federal government $5.8 billion over ten years, reflecting new costs to the SCHIP program ($13.9 billion), savings to Medicaid ($16.7 billion), and savings to other federal health programs ($3 billion).

Liability Reform:  As noted above, the budget assumes an additional $399 million in Medicaid savings from enacting liability reform.

Repeal of Obamacare
The budget assumes a net of $250 billion in savings from an Obamacare repeal/replace measure, savings accruing to both HHS and Treasury. Some conservatives, noting that the most recent score of Obamacare legislation showed a net savings of only $150 billion—with more new spending added since then—may question whether or not this assumption is realistic.

Gov. Jindal Op-Ed: An Obamacare Debate Worth Having

Repeal is not enough.

Five years later, that much should be clear. The law’s ill effects — higher premiums, cancelled health plans, bureaucratic ensnarements for doctor and patient alike — have all been well documented. This spring, the American people also got to know for the first time how Obamacare has complicated the tax code — raising taxes for many, and causing confusion and headaches for everyone.

But it’s long past time for the American people to get to know what conservatives would do in Obamacare’s stead. Our healthcare system did face a major threat before President Obama took office — rising costs that threaten to overwhelm middle-class families, and the federal budget as well. But while candidate Obama promised in 2008 to tackle costs, and lower premiums by $2,500 for the typical family, President Obama instead focused on expanding government-run health coverage, and missing the mark on his premium promise by over $1 trillion.

So yes, by all means, let’s ask the question: “Obamacare — when have you stood up and fought against it?” But anyone who wants to ask that question should have a detailed answer to this one: “Obamacare — what would you do instead?” Because it’s not particularly courageous for conservatives simply to oppose a law that remains deeply unpopular with voters. We must tell people what we are for, and let the American people know exactly what we will do, and how we will do it.

That’s why I put forward my own plan to replace Obamacare last year. It’s a plan that focuses like a laser beam on slowing the growth of healthcare costs. It offers 16 specific, proven methods that can work to curb health spending — from Health Savings Accounts, to wellness incentives, to lawsuit reforms that can reduce defensive medicine practices, to more insurance options that can spur competition and bring down prices. Just as important, the plan repeals all of Obamacare’s trillion dollars in tax increases and doesn’t replace them with a single penny of revenue hikes.

Thankfully, more Republicans are finally starting to put out specific proposals about how to replace Obamacare. I’m glad — that’s long since overdue. I think this issue is so important to conservatives, to our party, and to the future of our country that I want to lay down a very clear marker. I’m willing to debate anyone with a serious healthcare plan who wants to compare their Obamacare replacement plans with mine.

Obamacare is so harmful to our country — our health system, our economy and jobs, and our freedom — that we simply must repeal it, and put in place good reforms that will undo the damage Obamacare has caused.

It’s become fashionable in Republican circles in Washington to say that the hour is past, and that it is now too late to repeal all of Obamacare, and to say that we will just have to try to change it best we can. That’s nonsense.

After Hillary Clinton’s health plan went down to defeat in 1994, the Left never stopped their fight. I’ll bet Mrs. Clinton even sent a few emails out about it.

We as conservatives must do the same — we must fight until we win, and put forward a good conservative replacement for Obamacare now and challenge the President to do the right thing.

As Sen. Mike Lee recently said in Iowa: “If a presidential candidate tells us that he wants to repeal Obamacare but doesn’t have a healthcare reform proposal of his own, then maybe we should keep looking for another candidate.”

Sen. Lee is exactly right. We have to fight for what we promised the American people. And putting out clear, specific plans to replace Obamacare should comprise a major element of that effort — because repeal is not enough.

This post was originally published at the Washington Examiner.

Gov. Jindal Op-Ed: Your Health Care: Obama’s $18,000 Broken Promise

How would you feel if someone promised to give you a car, and then reneged on that pledge?  That’s how all Americans should feel when it comes to Obamacare — because Barack Obama’s failed and discredited campaign promise to lower health insurance premiums has cost the average American family an amount equal to the price of many new cars.

During his 2008 campaign, one of then-Senator Obama’s most audacious promises was that his health plan would reduce premiums by $2,500 for the average family.  His repeatedly made his pledge on videotape; you can view those promises here.  But health insurance premiums have continued to rise — not just despite Obamacare, but in many cases because of the law’s new regulations and mandates.

A new analysis by the think-tank America Next, where I serve as honorary chairman, quantifies the massive scope of the broken promise.  Compared to 2008 — the year President Obama was elected — Americans have faced a cumulative $6,388 per individual, and $18,610 per family, in higher costs because President Obama’s health plan has failed to achieve its promised premium reductions.  Overall, that amounts to $1.2 trillion in higher premium costs due to Obamacare’s failure to deliver.

The administration has put forth all sorts of excuses about why its law hasn’t met the expectations the president himself set. One of them is that the law’s major provisions only took effect in January, so Obamacare needs more time to achieve savings.

But, in July 2008, Jason Furman—then the Obama campaign’s economic policy director, and now the Chairman of President Obama’s Council of Economic Advisors—told the New York Times that “we think we could get to $2,500 in savings by the end of the first term, or be very close to it.”

The fact that Democrats delayed full Obamacare implementation until 2014 to hide the legislation’s true cost shouldn’t absolve President Obama for failing to deliver on his promise one whit.

The administration also now claims that Obamacare is working, because premiums are “only” rising by 6 or 8 percent per year.  But that’s not what then-candidate Obama himself promised in 2008; he spoke frequently of “cutting,” “reducing,” and “lowering” premium costs.  Whether premiums go up by 1 percent or 101 percent, any increase represents a promise broken.

In August 2012, Politifact nicely summed up Obamacare’s discredited premium pledge: “An author of the $2,500 figure has disavowed its use as it relates to premiums alone.  An independent health care analyst projects that premiums will go up for the typical family.  The federal agency implementing [Obamacare] did not provide evidence that premiums will go down for the typical family.  We rate this a Promise Broken.”

Even as Obamacare has failed to deliver, there is a better way.  The America Next health plan can provide the relief from rising costs that Americans need and deserve.  Rather than focusing on a massive expansion and restructuring of the health care system, the America Next plan focuses like a laser beam on reducing health costs. The plan creates incentives for states to reform their insurance markets, thereby reducing plan premiums. It also includes other reforms with a proven track record of lowering costs, including tax equity between employer-based and individually-purchased insurance plans, lawsuit reforms, and new incentives for Health Savings Accounts.

Analysis by independent, non-partisan experts confirm the plan’s effectiveness.  When considering proposals similar to those in the America Next plan, the Congressional Budget Office concluded in 2009 that they would lower small business health insurance premiums by 7 to 10 percent, and reduce individual health insurance premiums by 5 to 8 percent.  Compared to the premium increases projected under Obamacare, the reforms in the America Next plan could provide thousands of dollars in real relief for families struggling from high insurance premiums.

The America Next report confirms that the average American family has paid a price equal to the sum of many new cars because Obamacare has failed to meet the president’s commitments. And, as with any balky automobile, it’s time for the American people to trade in this Obamacare lemon, and replace it with something that works. Coupled with Obamacare’s full repeal, the America Next health plan can provide what the American people need—real relief from skyrocketing health costs.

This post was originally published at Fox News.

Summary of the Freedom and Empowerment Plan

A PDF of the full health care plan is available on the America Next website.

Four years after being enacted into law, Obamacare’s massive government overreach and higher taxes continue to wreak havoc on the American economy and health care system.  The unpopular, unworkable, and misguided law should be repealed in its entirety.

It is now becoming obvious to all that Obamacare is not merely bad policy, but it is also constructed ineptly, and was deceptively sold to the American people with the now infamous “lie of the year.”  Without the president’s repeated acts of deception, his disastrous health regime would never have become law.

Today, costs to consumers are rising, people are losing their health coverage and access to their doctors, struggling families are being forced to buy coverage they do not want, and the Congressional Budget Office has acknowledged that the law incentivizes Americans not to work–which the President now insists is a good thing.

The American people are in favor of repealing Obamacare.  But conventional wisdom in Washington holds that the law cannot be fully repealed.  I couldn’t disagree more.  A country that won two world wars and landed a man on the moon can surely eradicate this attack on our health care system.

Repealing all of Obamacare is a good and necessary step–but not one sufficient by itself to achieve the real health reform America needs.  The President was right about one thing: American health care did need reform. But Obamacare did not “reform” American health care, so much as it took a dysfunctional system and made it dramatically worse.

Rather than focusing on the liberal shibboleth of “universal coverage”—forcing individuals to buy a plan under pain of taxation, and raising health spending through new mandates and taxes—the American health system should be focused on containing the rising tide of health costs.  To quote none other than Barack Obama: “I believe the problem is not that folks are trying to avoid getting health care.  The problem is they can’t afford it.”

True reform would also preserve what Americans like about their health care—its high quality, its innovation, the relationship of patients and doctors–while changing what they don’t.  Giving more control to the states, controlling and slowing the growth in health costs, protecting the most vulnerable in our society, and enhancing portability and choice are the keys to achieving real reform that will improve America’s health care system, and Americans’ health.

Principle #1: Lowering Health Costs

Tax Equity:  Giving all individuals the same standard deduction for health insurance, regardless of whether they obtain that health insurance from an employer or on their own, will remedy a major inequity in the tax code.  Moreover, linking the growth in the deduction to price inflation (after an appropriate phase-in) would give medical providers and insurers an incentive to become more efficient, slowing the growth of rising costs.

State Health Insurance Program:  While Congress does have a role to play in reforming health care, the states have often led the way by introducing new and exciting reforms.  Providing states with a grant pool of over $100 billion over ten years, along with a few simple restrictions—notably, guaranteed access for individuals with pre-existing conditions, coupled with reductions in health insurance premiums that make coverage more affordable—would give states both the flexibility and resources to innovate.  States could use these funds to subsidize insurance coverage for low-income individuals who would not receive tax savings from a health insurance deduction, and individuals with pre-existing conditions.

Health Savings Accounts:  Additional incentives associated with health savings accounts—allowing individuals to use HSA funds to pay health insurance premiums, and allowing for additional flexibility in benefit design—would further increase participation in this innovative insurance model, and enhance its ability to contain the growth of health costs.

Greater Incentives for Wellness:  Providing insurers and employers with additional flexibility to offer incentives for healthy behaviors—and the ability to provide those incentives on a tax-free basis—would accelerate efforts at changing behaviors in a way that can slow health cost growth.

Crack Down on Fraud:  Our current record deficits and debt highlight the need to spend taxpayer resources wisely.  Reforms should move away from the existing “pay and chase” model, while targeting those who profit from or traffic in personal health information.

Price and Quality Transparency:  Health care remains one of the few industries where consumers struggle to find information on price and quality.  Online posting of price and quality data can empower patients with trusted information and provide providers a greater incentive to improve their quality practices.

Principle #2: Protect the Most Vulnerable

Guaranteed Access for Pre-Existing Conditions:  As a condition of participation in the new $100 billion innovation pool, states will be required to guarantee access for individuals with pre-existing conditions—through a high-risk pool, reinsurance, or some other method ensuring those with chronic conditions can obtain needed care.

Premium Support:  A bipartisan concept since its introduction nearly two decades ago, premium support can provide seniors with more health insurance choices, while making Medicare more financially solvent and sustainable for future generations.

Medicaid Reforms:  While some states have already implemented innovative reforms to their Medicaid programs, the federal government can and should do more to assist their efforts.  Specifically, Washington should empower Medicaid reform through a global grant program, which gives states additional flexibility to design solutions that meet their needs, in exchange for a fixed funding allotment from the federal government and accountability standards.

Pro-Life Protections:  Unlike Obamacare—which sees federal funds flowing to plans that cover abortion—true reform would make permanent in law the pro-life protections enacted by Congress annually since 1976, as well as strengthening conscience protections for businesses and medical providers.

Principle #3: Portability and Choice

State Reforms to Expand Access:  By reforming laws that govern medical licensure and construction of new medical facilities, states can dramatically increase the supply of medical providers—including new options that could lower health care costs.

Better Access for Individuals Changing Employers:  Individuals leaving their employers should not be required to exhaust COBRA continuation coverage before gaining access to the individual health insurance market.  Removing this requirement would alleviate a costly mandate on businesses, and ease the transition into individual health coverage for those changing jobs.

Pooling Mechanisms:  Allowing small businesses, fraternal organizations, civic groups, alumni associations, and other similar organizations to band together and offer health insurance to their members will provide new options for individuals to purchase coverage that goes with them from job to job.

Cross-State Insurance Purchasing:  Empowering individuals to purchase health insurance across state lines—a power most currently do not have—would allow Americans to buy the customized plan that best meets their needs.

Lawsuit Reform:  Enacting common-sense tort reforms to crack down on frivolous lawsuits—some of which have successfully been implemented in Texas and other states—would expand patient access and lower costs by reducing the incidence of defensive medicine practices among physicians.

Freedom for Seniors to Choose:  Enhancing choice and competition involves eliminating the arbitrary restrictions on seniors’ choice of medical providers imposed by bureaucratic mandates.  Congress should restore the doctor-patient relationship by repealing these onerous requirements.

Gov. Jindal Op-Ed: Real Health Care Reform: Give States the Tools, and Let Them Do the Job

They’re practically the first words out of one’s mouth the second a Washington reporter hears about a new health reform proposal: “How many people does your plan cover?”

The basic premise of the America Next health plan I’m endorsing today is simple: “I believe the problem is not that folks are trying to avoid getting health care. The problem is they can’t afford it.”

In short, I agree with Barack Obama.

Of course, Barack Obama circa January 2008—when he uttered those words in opposition to a health insurance mandate — represents a far cry from the Barack Obama who signed Obamacare into law in March 2010.

The president backtracked on nearly every single promise he made: on an individual mandate, keeping your plan, cutting premiums by $2,500 per year, and even on taxing health benefits — all in the name of achieving the left’s utopia of “universal coverage.” And in return, America has been left with shredded promises, cancelled insurance plans, and a major-league case of buyer’s remorse.

So no, I won’t endorse a plan that sees tens of millions of Americans forced to buy health insurance under pain of taxation.

I won’t endorse a plan that sees millions of other Americans forced out of the insurance they like, simply because it doesn’t meet some Washington bureaucrat’s standards. And I won’t endorse a plan that sees Americans extended the promise of insurance, only to find out that the “coverage” provided doesn’t guarantee they’ll receive the care they need.

We already have all that — it’s called Obamacare, and it needs to be fully repealed, because it’s the problem.

Here’s the solution.

First, we need to focus like a laser beam on the health care issue Americans care most about: rising costs. 

The plan I’m endorsing includes an innovative $100 billion grant program that incentivizes our “laboratories of democracy”—the states—to come up with insurance reforms and other solutions that can stem the rising tide of health costs. States’ eligibility for the grants would be tied to their ability to lower insurance premiums for their citizens.

We include other reforms in our plan too — tax equity between employer and individually-purchased health plans, lawsuit reform, wellness incentives, and new incentives for Health Savings Accounts.

These reforms have proven track records of success — and analysis from top economists to back them up.

In fact, the Congressional Budget Office, analyzing a similar state-based approach in 2009, concluded that the kinds of ideas included in our plan would lower premiums on the individual health insurance market by $5,000 per year when compared to current projections. That, and not Obamacare “rate shock,” is true change America can believe in.

Second, we need to protect the safety net for the most vulnerable. As someone whose mother arrived on these shores pregnant with me, I’m well aware of the plight of Americans with pre-existing conditions. I was one — from birth.

My son Shaan’s desperate fight for survival from a childhood heart defect reinforced my belief in making sure those with major illnesses don’t get left out in the cold. But we didn’t need to give up all the good things in the system to fix the bad. Extending coverage to Americans with pre-existing conditions didn’t require throwing millions of Americans off their current plans, or turning the IRS into the health insurance police.

Here’s a better solution. Our plan’s state grant program requires states applying for grants to guarantee access for individuals with pre-existing conditions. A state could guarantee access through a high-risk pool, through reinsurance, or through some other mechanism. But our plan ensures that the most vulnerable won’t fall through the cracks, and provides $100 billion in resources that states can use to subsidize that coverage.

Third, we should make insurance more portable, to enhance personal choice. Rather than taking away choices by regulatory fiat, we should give Americans more insurance options, so they can purchase plans they will own, hold, and keep. But if people like their existing plan, they won’t have to worry about it getting taken away by some government bureaucrat saying it doesn’t comply with a new mandate.

As someone who studied public policy in college, and worked in health policy all my adult life, I know Obamacare is bad policy.

The law may have been sold as a solution to the problem of pre-existing conditions. But it solidifies government — through taxes, mandates, regulations, and your friendly bureaucrats at the IRS — as a pre-existing condition in our health care system, and in the lives of all Americans.

That’s not reform.

As a governor, I know states can do better. We need solutions, but not Washington-centric bureaucracy disguised as “reform”—we’ve done that already, and it hasn’t worked.

By contrast, conservative governors throughout the country have implemented successful health reforms — from the Hoosier State’s Healthy Indiana Plan, to Rhode Island’s innovative Medicaid waiver, to the Bayou Health program we’ve created right here in Louisiana. These reforms have lowered costs — in some cases dramatically — improved the quality of care, and received widespread public support.

But in many states, including Louisiana, we would go further with our reforms, if only Washington bureaucrats would get out of the way. At the risk of echoing Churchill, that’s the better way forward on health care — give states the tools, and let them do the job.

This post was originally published at Fox News.

After Repeal of Obamacare: Moving to Patient-Centered, Market-Based Health Care

A PDF of this Backgrounder is available on the Heritage Foundation website.

For a better life, Americans need a health care system that they, not the government, control. Consumers should have the ability to choose how to meet their health insurance needs in a free market for insurance. Taxpayers should benefit from a more efficient and affordable system for helping those who need health care but cannot afford it. Above all, patients, with their doctors, should make their own health care decisions free from government interference.

The important first step is to repeal the Obamacare statute that puts the government in charge of health care. The second step is to let the country move to a patient-centered, market-based system that focuses on citizens and not on the government.

Principles for Reform

To allow Americans to reclaim control of their own health care and benefit from competition in a free market for insurance and health care, Congress should repeal the Obamacare statute and enact patient-centered, market-based reforms based on five principles:

  • Choose, control, and carry your own health insurance;
  • Let free markets provide the insurance and health care services that people want;
  • Encourage employers to provide a portable health insurance benefit to employees;
  • Assist those who need help through civil society, the free market, and the states; and
  • Protect the right of conscience and unborn children.

The Patient Protection and Affordable Care Act (Obamacare) moves health care in the wrong direction. It puts government, not patients, in charge of individual health care decisions. Moreover, it fails to meet the promises laid out by President Barack Obama. With each passing day, it becomes clearer that Obamacare will not reduce premiums for average American families, bend the cost curve in health care spending, or bring down the deficit. For these reasons, among others, Obamacare must be repealed.

However, a return to the status quo before Obamacare is not the final step. Policymakers should pursue reforms based on five basic principles. Adopting such reforms would move American health care in the right direction: toward a patient-centered, market-based health care system.

Principle #1: Choose, control, and carry your own health insurance.

True health reform should promote personal ownership of health insurance. While Obamacare uses government-run insurance exchanges to limit individual choice, real reforms would focus on encouraging Americans to purchase insurance policies that they can take with them from job to job and into retirement in a competitive, free market. Policymakers should enact several key changes for this culture of personal health care ownership to take root.

Portability. Most Americans obtain coverage through their place of work. This allows employers to provide tax-free health benefits to their employees, while individuals purchasing health insurance on their own must use after-tax dollars. As a result, most individuals with private health insurance obtain that coverage from their employer.[1]

Rather than following Obamacare’s example of forcing Americans into government-run health insurance exchanges, true patient-centered reform of health care would make insurance more portable. Individuals should be able to purchase an insurance policy when they are young and carry that policy with them throughout their working lives into retirement.

Equal Tax Relief. While Obamacare alters the tax treatment of health insurance, it does so in a way that increases burdens on taxpayers. Its 40 percent tax on so-called Cadillac health insurance plans is but one of 18 separate tax increases included in the law,[2] which, according to the Congressional Budget Office and the Joint Committee on Taxation, will raise $771 billion in revenue from 2013 to 2022.[3]

A better approach would equalize the tax treatment of health insurance without raising new revenues. The Heritage Foundation has previously proposed replacing the existing deduction for employer-provided health coverage with a flat tax credit that individuals could use to purchase a health insurance policy of their own.[4] Another idea, first proposed by then-President George W. Bush, would give all Americans purchasing health coverage—whether through an employer or on their own—the same standard deduction for health insurance.[5] Both proposals assume revenue neutrality over 10 years. Unlike Obamacare, they do not propose using reform to increase net tax revenues.

Both of these proposals would accomplish two important objectives.

First, they would equalize the tax treatment between health coverage provided through an employer and health coverage purchased by an individual. Providing equal tax treatment would remove a major obstacle that discourages individuals from buying and holding their own health insurance policy for years and taking that coverage from job to job. Tax equity would also encourage firms either to provide direct contributions toward their workers’ health coverage or to increase wages in place of health benefits.

Second, limiting the amount of the tax benefit provided, either with a tax credit or with a standard deduction, would encourage individuals to become smarter purchasers of health insurance coverage. Studies have demonstrated that the current uncapped tax benefit for employer-provided health insurance encourages firms to offer richer health plans and individuals to overconsume health care. According to the Congressional Budget Office, reforming the tax treatment of health insurance “would provide stronger incentives for enrollees to weigh the expected benefits and costs of policies” when buying insurance, thus helping to reduce costs.[6]

Choice of Providers. Through its new system of government control, Obamacare restricts choice and access for many patients. The nonpartisan Medicare actuary concluded that the Medicare reimbursement reductions in Obamacare could make 40 percent of all hospitals unprofitable in the long term, thus restricting beneficiary access to care.[7] Moreover, preliminary reports suggest that Obamacare’s insurance exchanges will feature limited provider networks in an attempt to mitigate premium increases for individuals purchasing exchange coverage.[8]

The most important element of any health care system is the trusted relationship between doctor and patient. Any system of truly patient-centered health care should work to preserve those important bonds and to repair the damage to those bonds caused by Obamacare.

Encouraging Personal Savings. Since their creation in 2004, health savings accounts (HSAs) have become a popular way for millions of families to build savings for needed health care expenses. HSA plans combine a health insurance option featuring a slightly higher deductible—but catastrophic protection in the event of significant medical expenses—with a tax-free savings account. As one of several new consumer-driven health options, HSAs encourage patients to take control of their own health care, providing financial incentives for consumers to serve as wise health care purchasers.

Over the past several years, millions of families have taken advantage of the innovative tools that HSA plans offer. The number of people enrolled in HSA-eligible policies has skyrocketed from 1 million in March 2005 to 15.5 million in January 2013.[9] Numerous studies have also shown that individuals with HSA plans have used tools provided by their health insurer to become more involved with their health care—for example, by using online support tools, inquiring about provider cost and quality, and seeking preventive care.[10] As a result, individuals had saved at least $12.4 billion in their HSAs by the end of 2011.[11]

However, HSA holders still face obstacles to building their personal savings. For instance, under current law, funds contributed to an HSA may not be used to pay for insurance premiums, except under very limited circumstances.[12] Changing this restriction and increasing HSA contribution limits would enhance both personal savings and personal ownership of health insurance.

Coverage for Pre-Existing Conditions. The problem of providing access to individuals with pre-existing conditions, while very real, did not necessitate the massive changes in America’s health care system included in Obamacare. In 2011, the Obama Administration suggested that as many as 129 million Americans with pre-existing conditions were “at risk” and “could be denied coverage” without Obamacare’s massive changes in America’s insurance markets.[13]

That claim was wildly untrue. Under prior law, individuals with employer-sponsored coverage (90 percent of the private market) could not be subjected to pre-existing condition exclusions.[14] In fact, prior to Obamacare, the number of individuals with pre-existing conditions who truly could not obtain health coverage was vastly smaller, and the problem existed only in the individual market. It is therefore not surprising that, according to the most recent data, only an estimated 134,708 individuals have enrolled in the supplemental federal high-risk pool program since it was created under Obamacare to cover individuals with pre-existing conditions[15]—still less than the 200,000 individuals originally projected to enroll.[16]

States could use a variety of approaches to provide coverage to individuals who are unable to purchase insurance. For instance, 35 states already operate high-risk pools with a collective current enrollment of 227,000 individuals to ensure access to coverage for individuals with pre-existing conditions.[17] Alternatively, states could establish reinsurance or risk transfer mechanisms under which insurance companies would reimburse each other for the cost of treating individuals with high medical expenses without added funding from state or federal taxpayers. Either approach would be far preferable to the massive amounts of regulation, taxation, and government spending under Obamacare.

Principle #2: Let free markets provide the insurance and health care services that people want.

Many individuals have already learned that, due in part to Obamacare, with its government-run health exchanges, new bureaucracies, and other forms of government control, they will not be able to retain their current health insurance.[18] There is a better way, and it involves providing more choice through market incentives rather than undermining markets through centralized bureaucracy.

Cross-State Purchasing. Currently, state insurance markets suffer from two flaws: Many markets are uncompetitive, with up to 70 percent of metropolitan areas considered “highly concentrated,”[19] and costly benefit mandates raise health insurance premiums. A prior Heritage Foundation analysis found that each benefit mandate raises costs by an average of approximately $0.75 per month.[20] Another study found that states have imposed a total of 2,271 benefit mandates—or approximately 45 per state.[21] Taken together, these two studies suggest that the cumulative effect of these mandates could raise premiums by $20–$40 per month, or hundreds of dollars per year.

Congress can help to mitigate these problems by removing federal barriers to interstate commerce in health insurance products. Individuals should have the ability to purchase insurance products across state lines, choosing the health plan that best meets their needs regardless of the location of its issuer.

Pooling Mechanisms. Another way to improve patient choice and make insurance markets more competitive would involve new purchasing arrangements and pooling mechanisms. Small businesses, individual membership associations, religious groups, and fraternal organizations should be able to sell health insurance policies through new group purchasing arrangements. The federal government’s role should be to remove the barriers to such arrangements.

By extending the benefits of group coverage beyond the place of work, these new purchasing arrangements would also encourage portability of health insurance coverage. These reforms would allow individuals to obtain their health plan from a trusted source—one with which they would be likely to have a longer association than they have with their employer—thereby creating a form of health coverage that Americans could truly own.

Medicare Private Contracting. Seniors could also benefit from patient-centered Medicare reforms, one of which should help to restore the doctor–patient relationship. Congress should eliminate the anti-competitive restrictions that prevent doctors and patients from contracting privately for medical services outside of traditional Medicare.[22] Congress can also restructure the Medicare benefit, modernizing the design of a program that has remained largely unchanged since its creation nearly 50 years ago.[23] These changes would enhance patient choice while preserving the program’s solvency for future generations of Americans.

Medicare Reform. Regrettably, Obamacare imposes many its most harmful effects on senior citizens.[24] According to the Medicare actuary, the Medicare reimbursement reductions in Obamacare will make 15 percent of all hospitals unprofitable within the decade and 40 percent unprofitable by 2050.[25] As a result, seniors may face significant obstacles to obtaining health care in the future.

There is a better way. Specifically, Congress should provide seniors with a generous subsidy to purchase a Medicare plan of their choosing. Seniors who choose a plan costing less than the subsidy would pay less, while seniors who choose a plan costing more than the subsidy would pay the difference in price.[26 ]

Consumer Choice and Competition. As part of its system of government control, Obamacare hinders patients’ ability to choose their own health plan. One survey found that the mandates and requirements in the law mean that more than half of all insurance policies purchased directly by individuals will not qualify as “government-approved” under Obamacare.[27] As a result, many Americans are finding that they will not be able to keep the health plan they have and like[28]—despite President Obama’s repeated promises.[29]

True patient-centered reform would bolster HSAs and other consumer-directed health products—such as health reimbursement arrangements and flexible spending accounts—that have the ability to transform American health care. One study published in the prestigious journal Health Affairs in 2012 found that expanding market penetration of consumer-driven health plans from 13 percent to 50 percent of all employers could reduce health costs by as much as $73.6 billion per year—a reduction in health spending of 9.1 percent.[30]

In other words, expanding consumer choice and competition could reduce health care costs and spending—the opposite of Obamacare, which restricts consumer choice and increases health costs and spending.

Principle #3: Encourage employers to provide a portable health insurance benefit.

Because most Americans traditionally have received health insurance from their employers, many individuals have few, if any, choices when selecting a health plan. According to the broadest survey of employer plans, nearly nine in 10 firms (87 percent) offer only one plan type, and only 2 percent offer three or more plan types.[31] As a result, employees have only a very limited ability to choose the plan that best meets their needs.

Defined Contribution. An ideal solution would convert the traditional system of employer-provided health insurance from a defined benefit model to a defined contribution model. Rather than providing health insurance directly, employers instead would offer cash contributions to their workers, enabling them to buy the plans of their own choosing. Combined with changes in the tax treatment of health insurance and regulatory improvements to enhance portability, moving to a defined contribution model for health insurance would allow workers to buy a health insurance policy in their youth and take that policy with them from job to job into retirement. These changes would also enable workers and families to negotiate contributions from multiple employers rather than having just one employer foot the bill.

Principle #4: Assist those who need help through civil society, the free market, and states.

While some health reforms—such as changing the tax treatment of health insurance and reforming the Medicare program—remain fully within the purview of the federal government, states also play a critical role in enacting reforms that can lower costs, improve access to care, and modernize state Medicaid programs. By serving as the “laboratories of democracy,” states can provide examples for other states—and the federal government—to follow. Because many state-based reforms do not rely on Washington’s involvement or approval, states can move ahead with innovative market-based solutions even as federal bureaucrats attempt to implement Obamacare’s government-centric approach.

State Innovation. If given proper time and space by an all-too-intrusive federal government, states can act on their own to open their insurance markets. A few states have already acted to open their insurance markets. In 2011, Georgia enacted legislation allowing interstate purchasing of health insurance, and Maine passed legislation allowing carriers from other New England states to offer insurance products to its citizens.[32] Just before Obamacare was enacted in 2010, Wyoming acted to permit out-of-state insurers to offer products.[33] While it may take some time before a critical mass of states creates a true interstate market for insurance, these nascent efforts demonstrate the nationwide interest in expanding health insurance choice and competition.

Medicaid Premium Assistance. Among various forms of health coverage, the Medicaid program is known for its poor quality and outcomes for patients. Numerous studies have found that Medicaid patients suffer worse outcomes than other patients suffer.[34] A recent study from Oregon concluded that after two years, patients in Medicaid did not achieve measurable health benefits from their insurance coverage.[35] Even participants—recognizing that many physicians, because of the program’s low reimbursement rates, will not treat Medicaid patients—complain that the program is not “real insurance.”[36]

Obamacare makes Medicaid’s problems worse, consigning millions more Americans to this poor government-run program. True reform would instead subsidize private health insurance for low-income Medicaid beneficiaries. The Heritage Foundation has previously promoted such a solution as part of its comprehensive reform of the Medicaid program.[37] Congress should take steps to encourage states to provide premium assistance. Such programs would promote health care ownership and provide beneficiaries with better access to care than the traditional Medicaid program does.

Medicaid Reforms. Despite the looming presence of Obamacare, states should continue wherever possible to seek opportunities to reform their Medicaid programs, moving toward more personalized care and including strong incentives for personal responsibility. States can also seek additional flexibility from Washington to modernize care; many governors have already made such requests.[38]

Congress also should act to reform and modernize Medicaid. Efforts in this vein would include comprehensive reforms—such as a block grant or per capita spending caps—that trade additional flexibility for states in exchange for a fixed spending allotment from Washington.[39] Other reforms could incentivize and subsidize Medicaid beneficiaries to move to private insurance policies that they can own and keep. All of these reforms would focus on modernizing Medicaid to provide better quality care, reduce costs, and promote personal responsibility and ownership.

Reducing Fraud. Regrettably, many government health programs are riddled with fraud. Some estimates suggest that as much as $60 billion in Medicare spending may involve fraud.[40] Similar problems plague many state Medicaid programs. A 2005 New York Times exposé on Medicaid fraud quoted James Mehmet, a former chief investigator in New York State, as saying that 10 percent of the state’s Medicaid spending constituted outright fraud, with another 20 percent to 30 percent comprising “unnecessary spending that might not be criminal.” Overall, Mehmet estimated that “questionable” Medicaid spending totaled $18 billion in New York State alone.[41]

Congress and the states should do more to crack down on the waste, fraud, and abuse that plague America’s health entitlements. Reforms should end the current “pay and chase” model, under which investigators must attempt to track down fraudulent claims and providers after they have already received reimbursement. Other solutions would enhance penalties for those who engage in fraudulent activity—for instance, buying or selling personal patient information, which is often used to perpetrate fraud schemes. These and other reforms would save taxpayer dollars, helping to preserve Medicare and Medicaid for future generations.

Removing Barriers to Care. With studies indicating that America faces a doctor shortage in future years, policymakers should focus on removing barriers that discourage institutions from assisting those who need health care.[42] Regrettably, America’s litigious culture has resulted in the widespread practice of defensive medicine by doctors and other health practitioners. In response, some states have changed their medical liability laws to discourage frivolous lawsuits, prompting doctors to move to those states to practice medicine. Were other states to adopt such reforms, this would encourage doctors—a majority of whom believe the practice of medicine is in jeopardy[43]—to remain in practice and would encourage students to join the profession.

In addition, reforms that improve the liability system could reduce the prevalence of defensive medicine practices and thereby help to reduce health costs. One government estimate found that reasonable limits on non-economic damages could reduce total health spending by as much as $126 billion per year by reducing the amount of defensive medicine practiced by physicians.[44] More recently, the Congressional Budget Office concluded that enacting comprehensive liability reform would reduce health care spending by tens of billions of dollars per year, reducing the federal budget deficit by tens of billions over the next decade.[45]

To help to eliminate barriers to care and reduce health costs, states should reform their liability systems, capping non-economic damages and taking other steps to reduce the incidence of frivolous lawsuits and ensure proper legal protections for health care providers.[46] However, because liability reform and torts in general are properly a state issue, Congress should not impose liability reforms except where the federal government has a clear, constitutionally based federal interest. Examples might include liability reforms with respect to medical products approved by the federal Food and Drug Administration or when the federal government is a payer of health care services, as it is with Medicare and Medicaid.[47]

Reforming Scope-of-Practice and Certificate of Need. State governments control the licensure of both medical professionals and medical practices. By removing artificial obstacles that restrict the supply of medical providers, states can expand access to health services across populations while unleashing new competition that can work to reduce costs.

States can reform their health care systems by re-examining scope-of-practice laws, which frequently limit the ability of nurse practitioners and other health professionals to care for patients. In 2010, the Institute of Medicine concluded that “state regulations often restrict the ability of nurses to provide care legally” and that policymakers should remove “barriers that limit the ability of nurses to practice to the full extent of their education, training, and competence.”[48] Many states have begun to reform their scope-of-practice laws to allow physician assistants, nurse practitioners, and others to treat more patients even as entrenched interests have fought to preserve their preferential treatment.[49] States should follow the recommendations of the Institute of Medicine in reforming their scope-of-practice laws to allow all medical professionals to practice to the full extent of their training.

A total of 36 states also impose certificate-of-need requirements, which impede the introduction of new hospitals and medical facilities. These laws require organizations seeking to build new medical facilities to obtain a certificate from a state board that the facility is “needed” in a particular area.[50] As with scope-of-practice requirements, reforming or eliminating certificate-of-need restrictions would encourage the development of new medical facilities, expanding access to care and giving patients more choices.

Principle #5: Protect the right of conscience and unborn children.

Government should not compel individuals to undertake actions that violate their deeply held religious beliefs. Regrettably, Obamacare imposes just such a requirement on Americans, forcing many employers to offer, and individuals to purchase, health coverage that violates the core tenets of their faith regarding the protection of life.[51]

Congress should ensure that individuals never again are required to violate their religious beliefs to meet a government diktat.

Rights of Conscience. Congress should protect the rights of consumers, insurers, employers, and medical personnel to refrain from facilitating, participating in, funding, or providing services contrary to their consciences or the tenets of their religious faith. Enacting these protections would prevent Americans from facing the moral dilemma presented by Obamacare, which has forced individuals, employers, and religious organizations to choose between violating the law and violating their faith or consciences.

Permanent Prohibition on Taxpayer-Funded Abortion. Congress should make permanent in law the existing annually enacted prohibitions on the use of federal taxpayer funds to finance abortions or health insurance coverage that includes elective abortions. These protections, enacted as the “Hyde Amendment” every year since 1976, prevent the use of taxpayer dollars to fund elective abortions.[52] After nearly 40 years of renewing these protections on an annual basis, Congress should finally make them permanent in law.

A New Vision for Health Reform

Obamacare moves American health care in the wrong direction. Not only does the law raise health costs rather than lowering them, but it creates new bureaucracies that will erode the doctor–patient relationship.[53] The trillions of dollars in new spending for Obamacare will place a massive fiscal burden on future generations of taxpayers.[54] For these reasons and more, Congress should repeal the law in its entirety.

Once this has been done, policymakers should then advance health reforms that move toward patient-centered, market-based health care. Such reforms would promote personal choice and ownership of health insurance; enable the free market to respond to consumer demands; encourage portability of coverage for workers; help civil society, the free markets, and the states to assist those in need; and protect the rights of faith, conscience, and life.

 

 


[1] According to the most recent census data, 86.2 percent of Americans with private health insurance coverage obtained that coverage through an employer. Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2011, U.S. Census Bureau, September 2012, p. 65, Table C-1, http://www.census.gov/prod/2012pubs/p60-243.pdf (accessed September 20, 2013).

[2] Alyene Senger, “Obamacare’s Impact on Today’s and Tomorrow’s Taxpayers: An Update,” Heritage Foundation Issue Brief No. 4022, August 21, 2013, http://www.heritage.org/research/reports/2013/08/obamacares-impact-on-todays-and-tomorrows-taxpayers-an-update.

[3] Joint Committee on Taxation, “Estimated Revenue Effects of a Proposal to Repeal Certain Tax Provisions Contained in the ‘Affordable Care Act (“ACA”)’,” June 15, 2012, and Congressional Budget Office, “Table 2: CBO’s May 2013 Estimate of the Budgetary Effects of the Insurance Coverage Provisions Contained in the Affordable Care Act,” http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf. The total amount of tax revenue collected from the individual mandate, employer mandate, and 40 percent excise tax on high-cost health plans comes from the CBO’s May 2013 estimate. For all other taxes, the amount of tax revenue totaled comes from the Joint Committee on Taxation’s June 2012 estimation.

[4] Nina Owcharenko, “Saving the American Dream: A Blueprint for Putting Patients First,” Heritage Foundation Issue Brief No. 3628, June 6, 2012, http://www.heritage.org/research/reports/2012/06/saving-the-american-dream-a-blueprint-for-putting-patients-first.

[5] The White House, “Affordable, Accessible, and Flexible Health Coverage,” 2007, http://georgewbush-whitehouse.archives.gov/stateoftheunion/2007/initiatives/healthcare.html (accessed September 20, 2013). Recently, the House Republican Study Committee included a standard deduction in its proposal for health reform. See U.S. House of Representatives, Republican Study Committee, “The American Health Care Reform Act,” September 18, 2013, http://rsc.scalise.house.gov/solutions/rsc-betterway.htm (accessed September 25, 2013).

[6] Congressional Budget Office, Key Issues in Analyzing Major Health Insurance Proposals, December 2008, pp. 84–87, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/99xx/doc9924/12-18-keyissues.pdf (accessed September 20, 2013).

[7] John D. Shatto and M. Kent Clemens, “Projected Medicare Expenditures Under Illustrative Scenarios with Alternative Payment Updates to Medicare Providers,” Centers for Medicare and Medicaid Services, Office of the Actuary, May 31, 2013, pp. 8–10, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2013TRAlternativeScenario.pdf (accessed September 20, 2013).

[8] Anna Wilde Mathews, “Many Health Insurers to Limit Choices of Doctors, Hospitals,” The Wall Street Journal, August 15, 2013, http://online.wsj.com/article/SB10001424127887323446404579010800462478682.html (accessed September 20, 2013; subscription required).

[9] America’s Health Insurance Plans, Center for Policy and Research, “January 2013 Census Shows 15.5 Million People Covered by Health Savings Account/High-Deductible Health Plans (HSA/HDHPs),” June 2013, http://www.ahip.org/HSACensus2013PDF/ (accessed September 20, 2013).

[10] America’s Health Insurance Plans, Center for Policy and Research, “Health Savings Accounts and Account-Based Health Plans: Research Highlights,” July 2012, http://www.ahip.org/HSAHighlightsReport072012/ (accessed September 20, 2013).

[11] Devenir, “Health Savings Accounts Surpass $12.4 Billion in 2011,” January 31, 2012, http://www.devenir.com/2012/devenir2011yearendsurvey (accessed September 20, 2013).

[12] For the definition of “qualified medical expenses,” see 26 U.S. Code § 223(d)(2). HSA funds can be used to purchase health insurance only for COBRA continuation health coverage, health insurance purchased during periods of unemployment, Medigap supplemental coverage, or long-term care insurance (within certain limits).

[13] U.S. Department of Health and Human Services, Office of Planning and Evaluation, “At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans,” November 2011, http://aspe.hhs.gov/health/reports/2012/pre-existing/index.shtml (accessed September 20, 2013).

[14] Edmund Haislmaier, “HHS Report on Obamacare’s Preexisting Conditions Impact: Say What???” The Heritage Foundation, The Foundry, January 19, 2011, http://blog.heritage.org/2011/01/19/hhs-report-on-obamacare’s-preexisting-conditions-impact-say-what/.

[15] Centers for Medicare and Medicaid Services, Center for Consumer Information and Insurance Oversight, “Covering People with Pre-Existing Conditions: Report on the Implementation and Operation of the Pre-Existing Condition Insurance Plan Program,” January 31, 2013, http://www.cms.gov/CCIIO/Resources/Files/Downloads/pcip_annual_report_01312013.pdf (accessed September 24, 2013).

[16] Douglas W. Elmendorf, letter to Senator Mike Enzi (R–WY), June 21, 2010, http://cbo.gov/sites/default/files/cbofiles/ftpdocs/115xx/doc11572/06-21-high-risk_insurance_pools.pdf (accessed September 20, 2013).

[17] National Association of State Comprehensive Health Insurance Plans, “Pool Membership—2011,” September 2012, http://naschip.org/2012/Quick%20Checks/Pool%20Membership%202011.pdf (accessed September 20, 2013).

[18] Chris Jacobs, “Obamacare: Taking Away Americans’ Health Coverage,” The Heritage Foundation, The Foundry, August 6, 2013, http://blog.heritage.org/2013/08/06/obamacare-taking-away-americans-health-coverage/.

[19] Press release, “New AMA Study Finds Anticompetitive Market Conditions Are Common Across Managed Care Plans,” American Medical Association, November 28, 2012, http://www.ama-assn.org/ama/pub/news/news/2012-11-28-study-finds-anticompetitive-market-conditions-common.page (accessed September 20, 2013).

[20] Michael J. New, “The Effect of State Regulations on Health Insurance Premiums: A Revised Analysis,” Heritage Foundation Center for Data Analysis Report No. 06-04, July 25, 2006, p. 5, http://www.heritage.org/research/reports/2006/07/the-effect-of-state-regulations-on-health-insurance-premiums-a-revised-analysis.

[21] Council for Affordable Health Insurance, “Health Insurance Mandates in the States 2012: Executive Summary,” April 9, 2013, http://www.cahi.org/cahi_contents/resources/pdf/Mandatesinthestates2012Execsumm.pdf (accessed September 24, 2013).

[22] Chris Jacobs, “Medicare’s Sustainable Growth Rate: Principles for Reform,” Heritage Foundation Backgrounder No. 2827, July 18, 2013, http://www.heritage.org/research/reports/2013/07/medicares-sustainable-growth-rate-principles-for-reform.

[23] Robert E. Moffit and Rea S. Hederman, Jr., “Medicare Savings: Five Steps to a Down Payment on Medicare Reform,” Heritage Foundation Issue Brief No. 3908, April 11, 2013, http://www.heritage.org/research/reports/2013/04/medicare-savings-5-steps-to-a-downpayment-on-structural-reform.

[24] Alyene Senger, “Obamacare’s Impact on Seniors: An Update,” Heritage Foundation Issue Brief No. 4019, August 20, 2013, http://www.heritage.org/research/reports/2013/08/obamacares-impact-on-seniors-an-update.

[25] Shatto and Clemens, “Projected Medicare Expenditures Under Illustrative Scenarios,” pp. 8–10.

[26] Owcharenko, “Saving the American Dream: A Blueprint for Putting Patients First.”

[27] Jon R. Gabel, Ryan Lore, Roland D. McDevitt, Jeremy D. Pickreign, Heidi Whitmore, Michael Slover, and Ethan Levy-Forsythe, “More Than Half of Individual Health Plans Offer Coverage That Falls Short of What Can Be Sold Through Exchanges as of 2014,” Health Affairs, May 2012, http://content.healthaffairs.org/content/early/2012/05/22/hlthaff.2011.1082 (accessed September 20, 2013; subscription required).

[28] Jacobs, “Obamacare: Taking Away Americans’ Health Coverage.”

[29] For instance, see a 2008 campaign document answering the question “Will I have to change plans?” under the Obama proposal: “No, you will not have to change plans. For those who have insurance now, nothing will change under the Obama plan—except that you will pay less.” Obama for America, “Background Questions and Answers on Health Care Plan,” 2008, http://www.scribd.com/doc/191306/barack-obama-08-healthcare-faq (accessed September 20, 2013).

[30] Amelia M. Haviland, M. Susan Marquis, Roland D. McDevitt, and Neeraj Sood, “Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually,” Health Affairs, May 2012, http://content.healthaffairs.org/content/31/5/1009.abstract (accessed September 20, 2013; subscription required).

[31] Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2013 Annual Survey, August 2013, p. 56, Exhibit 4.1, http://kaiserfamilyfoundation.files.wordpress.com/2013/08/8465-employer-health-benefits-20131.pdf (accessed September 23, 2013).

[32] National Council of State Legislatures, “Out-of-State Health Insurance—Allowing the Purchase (State Implementation Report),” updated September 2012, http://www.ncsl.org/issues-research/health/out-of-state-health-insurance-purchases.aspx (accessed September 23, 2013).

[33] Ibid.

[34] For a summary of many of these studies, see Kevin D. Dayaratna, “Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured,” Heritage Foundation Backgrounder No. 2740, November 7, 2012, http://www.heritage.org/research/reports/2012/11/studies-show-medicaid-patients-have-worse-access-and-outcomes-than-the-privately-insured. See also Scott Gottlieb, “Medicaid Is Worse Than No Coverage at All,” The Wall Street Journal, March 10, 2011, http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html (accessed September 23, 2013).

[35] Annie Lowrey, “Study Finds Health Care Use Rises with Expanded Medicaid,” The New York Times, May 2, 2013, http://www.nytimes.com/2013/05/02/business/study-finds-health-care-use-rises-with-expanded-medicaid.html (accessed September 23, 2013).

[36] Vanessa Fuhrmans, “Note to Medicaid Patients: The Doctor Won’t See You,” The Wall Street Journal, July 19, 2007, http://online.wsj.com/article/SB118480165648770935.html (accessed September 23, 2013; subscription required).

[37] Nina Owcharenko, “Medicaid Reform: More Than a Block Grant Is Needed,” Heritage Foundation Issue Brief No. 3590, May 4, 2012, http://www.heritage.org/research/reports/2012/05/three-steps-to-medicaid-reform.

[38] Republican Governors Public Policy Committee, Health Care Task Force, “A New Medicaid: A Flexible, Innovative, and Accountable Future,” August 30, 2011, http://www.rga.org/homepage/gop-govs-release-medicaid-reform-report/ (accessed September 23, 2013).

[39] Owcharenko, “Medicaid Reform: More Than a Block Grant Is Needed.”

[40] CBS News, “Medicare Fraud: A $60 Billion Crime,” 60 Minutes, September 5, 2010, http://www.cbsnews.com/8301-18560_162-5414390.html (accessed September 23, 2013).

[41] Clifford Levy and Michael Luo, “New York Medicaid Fraud May Reach into Billions,” The New York Times, July 18, 2005, http://www.nytimes.com/2005/07/18/nyregion/18medicaid.html (accessed September 23, 2013).

[42] Nisha Nathan, “Doctor Shortage Could Cause Health Care Crash,” ABC News, November 13, 2012, http://abcnews.go.com/Health/doctor-shortage-health-care-crash/story?id=17708473 (accessed September 23, 2013).

[43] Deloitte, “Deloitte 2013 Survey of U.S. Physicians: Physician Perspectives About Health Care Reform and the Future of the Medical Profession,” 2013, p. 3, http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_chs_2013SurveyofUSPhysicians_031813.pdf (accessed September 23, 2013).

[44] U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care,” March 2003, p. 16, http://aspe.hhs.gov/daltcp/reports/medliab.pdf (accessed September 23, 2013).

[45] Douglas W. Elmendorf, letter to Senator Orrin Hatch (R–UT), October 9, 2009, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/106xx/doc10641/10-09-tort_reform.pdf (accessed September 23, 2013).

[46] Randolph W. Pate and Derek Hunter, “Code Blue: The Case for Serious State Medical Liability Reform,” Heritage Foundation Backgrounder No. 1908, January 17, 2006, http://www.heritage.org/research/reports/2006/01/code-blue-the-case-for-serious-state-medical-liability-reform.

[47] Hans von Spakovsky, “Medical Malpractice Reform: States vs. the Federal Government,” The Heritage Foundation, The Foundry, March 19, 2012, http://blog.heritage.org/2012/03/19/medical-malpractice-reform-states-vs-the-federal-government/.

[48] Institute of Medicine, “The Future of Nursing: Focus on Scope of Practice,” Report Brief, October 2010, http://www.iom.edu/~/media/Files/Report%20Files/2010/The-Future-of-Nursing/Nursing%20Scope%20of%20Practice%202010%20Brief.pdf (accessed September 23, 2013).

[49] Melinda Beck, “Battles Erupt over Filling Doctors’ Shoes,” The Wall Street Journal, February 5, 2013, http://online.wsj.com/article/SB10001424127887323644904578271872578661246.html (accessed September 23, 2013), and Melinda Beck, “Nurse Practitioners Seek Right to Treat Patients on Their Own,” The Wall Street Journal, August 15, 2013, http://online.wsj.com/article/SB10001424127887323455104579013193992224008.html (accessed September 23, 2013; subscription required).

[50] National Conference of State Legislatures, “Certificate of Need: State Laws and Programs,” updated March 2012, http://www.ncsl.org/issues-research/health/con-certificate-of-need-state-laws.aspx (accessed September 23, 2013).

[51] The Heritage Foundation “Obamacare Anti-Conscience Mandate: An Assault on the Constitution,” Fact Sheet No. 103, February 17, 2012, http://www.heritage.org/research/factsheets/2012/02/obamacare-anti-conscience-mandate-an-assault-on-the-constitution.

[52] Chuck Donovan, “Obamacare: Impact on Taxpayer Funding of Abortion,” Heritage Foundation WebMemo No. 2872, April 19, 2010, http://www.heritage.org/research/reports/2010/04/obamacare-impact-on-taxpayer-funding-of-abortion.

[53] Alyene Senger, “Obamacare’s Impact on Doctors—An Update,” Heritage Foundation Issue Brief No. 4024, August 23, 2013, http://www.heritage.org/research/reports/2013/08/obamacares-impact-on-doctors-an-update.

[54] Alyene Senger, “Obamacare’s Impact on Today’s and Tomorrow’s Taxpayers: An Update,” Heritage Foundation Issue Brief No. 4022, August 21, 2013, http://www.heritage.org/research/reports/2013/08/obamacares-impact-on-todays-and-tomorrows-taxpayers-an-update.

Health Provisions in This Afternoon’s Votes on Jobs Package

A quick reminder/update to staff about the health care provisions to be voted on as part of the vote series beginning circa 2 PM.  H.R. 674, the three-percent withholding bill, has as its primary pay-for provisions including Social Security benefits in the definition of income with respect to Obamacare’s new subsidy regime (a provision unchanged by the Reid amendment filed earlier this week).  The change would have the effect of reducing the number of early retirees eligible for Medicaid benefits, and lowering the amount of subsidies received by other early retirees, as their Social Security retirement benefits would now be counted as income when determining their eligibility for taxpayer-funded health benefits.  A CBO score of this provision, which was added to H.R. 674 in the House, can be found here, and an AP article explaining the issue can be found here.

In addition, the McCain amendment (i.e., the Republican jobs alternative) to H.R. 674 includes two health related provisions.  The first would repeal Obamacare, including the changes made to the health care law under reconciliation. (The bill would NOT repeal the student loan provisions included in last year’s reconciliation measure.)  Text is identical to H.R. 2, on which the Senate voted earlier this year.  The second provision is medical liability reform, including limits on punitive and non-economic damages, restrictions on attorney contingency fees, time limits on filing suits, and related provisions.  This legislative language echoes H.R. 5, the most recent CBO cost estimate of which can be found here.

The President’s Shrinking Entitlement Savings

The President’s deficit proposal released this morning claims to achieve $320 billion in deficit savings.  As we’ve previously noted, given the size of our entitlement programs, that’s a comparatively insignificant amount – barely enough to finance a long-term “doc fix,” let alone make Medicare and Medicaid solvent for the long term.  But what’s interesting is how the size of the health care savings put forward by the President has actually SHRUNK over time.  The White House’s April “deficit framework” (i.e., a speech) claimed to achieve $340 billion in savings – $20 billion MORE than this morning’s proposal.

So what exactly prompted the President to LOWER his sights for entitlement savings over the last five months?  Was it the unprecedented downgrade of America’s debt rating?  The stock market swoon that quickly followed?  The chaos in Europe as that continent struggles to achieve fiscal discipline and avert a sovereign default crisis?  Or was it the event that happens on the Tuesday after the first Monday in November every fourth year?  You be the judge…

All that said, a detailed summary of the President’s (new) proposal follows below.  Keep in mind that Administration/OMB estimates may vary significantly from CBO scores, so remember that your budgetary mileage may vary.  (All scores are over a ten-year period unless otherwise indicated.)

 

Medicare Proposals (Total savings of $248 Billion)

Bad Debts:  Reduces bad debt payments to providers – for unpaid cost-sharing owed by beneficiaries – from 70 percent down to 25 percent over three years, beginning in 2013.  The Fiscal Commission had made similar recommendations in its final report.  Saves $20.2 billion.

Medical Education Payments:  Reduces the Indirect Medical Education adjustment paid to teaching hospitals by 10 percent beginning in 2013, saving $9.1 billion.  Previous studies by the Medicare Payment Advisory Committee (MedPAC) have indicated that IME payments to teaching hospitals may be greater than the actual costs the hospitals incur.

Rural Payments:  Ends add-on payments for providers in frontier states, saving $2.1 billion.  Reduces critical access hospital payments from 101% of costs to 100% of costs, saving $1 billion, and prohibits hospitals fewer than 10 miles away from the nearest hospital from receiving a critical access hospital designation, saving $3 billion.

Post-Acute Care:  Reduces various acute-care payment updates (details not specified) during the years 2014 through 2021, saving $32.5 billion.  Equalizes payment rates between skilled nursing facilities and inpatient rehabilitation facilities, saving $4.5 billion.  Increases the minimum percentage of inpatient rehabilitation facility patients that require intensive rehabilitation from 60 percent to 75 percent, saving $2.6 billion.  Reduces skilled nursing facility payments by up to 3%, beginning in 2015, for preventable readmissions, saving $2 billion.

Pharmaceutical Price Controls:  Expands Medicaid price controls to dual eligible and low-income subsidy beneficiaries participating in Part D, saving $135 billion according to OMB.  However, according to the Congressional Budget Office’s March 2011 Budget Options (Option 25), this proposal would generate smaller savings ($112 billion).  Some have expressed concerns that further expanding government-imposed price controls to prescription drugs could harm innovation and the release of new therapies that could help cure diseases.

MA Repayment Provisions:  Recovers payments to insurers participating in the Medicare Advantage (MA) program.  MA plans are currently paid on a prospective basis, with those payments adjusted according to the severity of beneficiaries’ ill health.  Some sample audits have discovered instances where plans could not retrospectively produce the necessary documentation to warrant the prospective coding adjustment that some beneficiaries received.  The deficit plan would apply this adjustment, currently contemplated for some beneficiaries based on the sample audit, to ALL beneficiaries.  OMB now scores this proposal as saving $2.3 billion; when included in the President’s budget back in February, these changes were scored as saving $6.2 billion.

Anti-Fraud Provisions:  Assumes $600 million in savings from various anti-fraud provisions, including limiting the discharge of debt in bankruptcy proceedings associated with fraudulent activities.

EHR Penalties:  Re-directs Medicare reimbursement penalties against physicians who do not engage in electronic prescribing beginning in 2020 back into the Medicare program.  The “stimulus” legislation that enacted the health IT provisions had originally required that penalties to providers be placed into the Medicare Improvement Fund; the budget would instead re-direct those revenues into the general fund, to finance the “doc fix” and related provisions.  OMB now scores this proposal as saving $500 million; when included in the President’s budget back in February, these changes were scored as saving $3.2 billion.

Imaging:  Reduces imaging payments by assuming a higher level of utilization for certain types of equipment, saving $400 million.  Also imposes prior authorization requirements for advanced imaging, saving $900 million.

Additional Means Testing:  Increases means tested premiums under Parts B and D by 15%, beginning in 2017.  Freezes the income thresholds at which means testing applies until 25 percent of beneficiaries are subject to such premiums.  Saves $20 billion over ten years, and presumably more thereafter, as additional seniors would hit the means testing threshold, subject them to higher premiums.

Medicare Deductible Increase:  Increases Medicare Part B deductible by $25 in 2017, 2019, and 2021 – but for new beneficiaries only; “current beneficiaries or near retirees [not defined] would not be subject to the revised deductible.”  Saves $1 billion.

Home Health Co-Payment:  Introduces a home health co-payment of $100 per episode for new beneficiaries only, in cases where an episode lasts five or more visits and is NOT proceeded by a hospital stay.  MedPAC has previously recommended introducing home health co-payments as a way to ensure appropriate utilization.  Saves $400 million.

Medigap Surcharge:  Imposes a Part B premium surcharge equal to about 15 percent of the average Medigap premium – or about 30 percent of the Part B premium – for seniors with Medigap supplemental insurance that provides first dollar coverage.  Applies beginning in 2017 to new beneficiaries only.  A study commissioned by MedPAC previously concluded that first dollar Medigap coverage induces beneficiaries to consume more medical services, thus increasing costs for the Medicare program and federal taxpayers.  Saves $2.5 billion.

Lower Caps on Medicare Spending:  Section 3403 of the health care law established an Independent Payment Advisory Board tasked with limiting Medicare spending to the growth of the economy plus one percentage point (GDP+1) in 2018 and succeeding years.  The White House proposal would reduce this target to GDP+0.5 percent.  This approach has two potential problems:

  • First, under the Congressional Budget Office’s most recent baseline, IPAB recommendations would not be triggered at all – so it’s unclear whether the new, lower target level would actually generate measurable budgetary savings.  (In August 2010, CBO concluded an IPAB with an overall cap of GDP+1 would yield $13.8 billion in savings through 2020 – not enough to make a measurable impact on a program spending $500 billion per year.)
  • Second, the Medicare actuary has previously written that the spending adjustments contemplated by IPAB and the health care law “are unlikely to be sustainable on a permanent annual basis” and “very challenging” – problems that would be exacerbated by utilizing a slower target rate for Medicare spending growth.

According to the Administration document, this proposal would NOT achieve additional deficit savings.

Medicaid and Other Health Proposals (Total savings of $72 Billion)

Medicaid Provider Taxes:  Reduces limits on Medicaid provider tax thresholds, beginning in 2015; the tax threshold would be reduced over a three year period, to 3.5 percent in 2017 and future years.  State provider taxes are a financing method whereby states impose taxes on medical providers, and use these provider tax revenues to obtain additional federal Medicaid matching funds, thereby increasing the federal share of Medicaid expenses paid while decreasing the state share of expenses.  The Tax Relief and Health Care Act of 2006, enacted by a Republican Congress, capped the level of Medicaid provider taxes, and the Bush Administration proposed additional rules to reform Medicaid funding rules – rules that were blocked by the Democrat-run 110th Congress.  However, there is bipartisan support for addressing ways in which states attempt to “game” the Medicaid system, through provider taxes and other related methods, to obtain unwarranted federal matching funds – the liberal Center for Budget and Policy Priorities previously wrote about a series of “Rube Goldberg-like accounting arrangements” that “do not improve the quality of health care provided” and “frequently operate in a manner that siphons extra federal money to state coffers without affecting the provision of health care.”  This issue was also addressed in the fiscal commission’s report, although the commission exceeded the budget proposals by suggesting that Congress enact legislation “restricting and eventually eliminating” provider taxes, saving $44 billion.  OMB now scores this proposal as saving $26.3 billion; when included in the President’s budget back in February, these changes were scored as saving $18.4 billion.

Blended Rate:  Proposes “replac[ing]…complicated federal matching formulas” in Medicaid “with a single matching rate specific to each state that automatically increases if a recession forces enrollment and state costs to rise.”  Details are unclear, but the Administration claims $14.9 billion in savings from this proposal – much less than the $100 billion figure bandied about in previous reports this summer.  It is also worth noting that the proposal could actually INCREASE the deficit, if a prolonged recession triggers the automatic increases in the federal Medicaid match referenced in the proposal.  On a related note, the deficit plan once again ignored the governors’ multiple requests for flexibility from the mandates included in the health care law – unfunded mandates on states totaling at least $118 billion.

Limit Durable Medical Equipment Reimbursement:  Caps Medicaid reimbursements for durable medical equipment (DME) at Medicare rates, beginning in 2013.  The health care law extended and expanded a previous Medicare competitive bidding demonstration project included in the Medicare Modernization Act, resulting in savings to the Medicare program.  This proposal, by capping Medicaid reimbursements for DME at Medicare levels, would attempt to extend those savings to the Medicaid program.  OMB now scores this proposal as saving $4.2 billion; when included in the President’s budget back in February, these changes were scored as saving $6.4 billion.

Third Party Liability:  Removes exceptions to the requirement that Medicaid must reject payments when another party is liable for a medical claim, saving $1.3 billion.

Rebase Medicaid Disproportionate Share Hospital Payments:  In 2021, reallocates Medicaid DSH payments to hospitals treating low-income patients, based on states’ actual 2020 allotments (as amended and reduced by the health care law).  Saves $4.1 billion.

Medicaid Anti-Fraud Savings:  Assumes $110 million in savings from a variety of Medicaid anti-fraud provisions, largely through tracking and enforcement of various provisions related to pharmaceuticals.

Amend MAGI Definition:  Amends the health care law to include Social Security benefits in the new definition of Modified Adjusted Gross Income used to determine eligibility for Medicaid benefits.  As previously reported, this “glitch” in the law would make millions of early retirees – who receive a large portion of their income from Social Security – eligible for free taxpayer-funded benefits, and would discourage work by providing greater subsidies to those relying on Social Security, as opposed to wage earnings, for their income.  Saves $14.6 billion.

Flexibility on Benchmark Plans:  Proposes some new flexibility for states to require Medicaid “benchmark” plan coverage for non-elderly, non-disabled adults – but ONLY those with incomes above 133 percent of the federal poverty level (i.e., NOT the new Medicaid population obtaining coverage under the health care law).  No savings assumed.

“Pay-for-Delay:”  Prohibits brand-name pharmaceutical manufacturers from entering into arrangements that would delay the availability of new generic drugs.  Some Members have previously expressed concerns that these provisions would harm innovation, and actually impede the incentives to generic manufacturers to bring cost-saving generic drugs on the market.  OMB now scores this proposal as saving $2.7 billion; when included in the President’s budget back in February, these changes were scored as saving $8.8 billion.

Follow-on Biologics:  Reduces to seven years the period of exclusivity for follow-on biologics.  Current law provides for a twelve-year period of exclusivity, based upon an amendment to the health care law that was adopted on a bipartisan basis in both the House and Senate (one of the few substantive bipartisan amendments adopted).  Some Members have expressed concern that reducing the period of exclusivity would harm innovation and discourage companies from developing life-saving treatments.  OMB now scores this proposal as saving $3.5 billion; when included in the President’s budget back in February, these changes were scored as saving $2.3 billion.

FEHB Contracting:  Proposes streamlining pharmacy benefit contracting within the Federal Employee Health Benefits program, by centralizing pharmaceutical benefit contracting within the Office of Personnel Management (OPM).  Some individuals, noting that OPM is also empowered to create “multi-state plans” as part of the health care overhaul, may be concerned that these provisions could be part of a larger plan to make OPM the head of a de facto government-run health plan.  OMB now scores this proposal as saving $1.6 billion; when included in the President’s budget back in February, these changes were scored as saving $1.8 billion.

Prevention “Slush Fund:”  Reduces spending by $3.5 billion on the Prevention and Public Health Fund created in the health care law.  Some Members have previously expressed concern that this fund would be used to fund projects like jungle gyms and bike paths, questionable priorities for the use of federal taxpayer dollars in a time of trillion-dollar deficits.

State Waivers:  Accelerates from 2017 to 2014 the date under which states can submit request for waivers of SOME of the health care law’s requirements to HHS.  While supposedly designed to increase flexibility, even liberal commentators have agreed that under the law’s state waiver programcritics of Obama’s proposal have a point: It wouldn’t allow to enact the sorts of health care reforms they would prefer” and thatconservatives can’t do any better – at least not under these rules.”  The proposal states that “the Administration is committed to the budget neutrality of these waivers;” however, the plan allocates $4 billion in new spending “to account for the possibility that CBO will estimate costs for this proposal.”

Implementation “Slush Fund:”  Proposes $400 million in new spending for HHS to implement the proposals listed above.

Questions for Secretary Sebelius on IPAB

Today begins a double-header of IPAB-related hearings in the House; Secretary Sebelius will be testifying before the House Budget Committee this morning, and before the Energy and Commerce Committee tomorrow morning.  In advance of these hearings, we’ve prepared a list of possible questions surrounding IPAB – Obamacare’s board of unelected bureaucrats – that the Secretary’s testimony may help resolve:

Fiscal Impact

  1. Both the Congressional Budget Office and the Medicare trustees agree that the Medicare program is running permanent deficits and will never come into balance absent reform.  Given this dire fiscal situation, exactly how long will IPAB extend the solvency of the Medicare program?

Transparency

  1. You recently wrote in a Politico op-ed that “contrary to critics’ contentions, the board’s work will be transparent, independent, and accountable to Congress and the President.”  Where in the statute is the requirement that IPAB’s bureaucrats conduct a public process, and solicit public comment, prior to issuing its recommendations?  Put another way, is there anything prohibiting IPAB members from negotiating backroom deals regarding their recommendations, similar to the “rock-solid deal” the Administration struck behind closed doors with Big Pharma?
  2. In May the Administration proposed requiring state Medicaid programs to obtain public comments before reducing provider reimbursement levels.  Why is the Obama Administration imposing public comment requirements on state Medicaid programs, but not imposing a similar requirement on its controversial IPAB?

Membership

  1. Your Politico op-ed notes that “economists” will comprise some of the “health experts” appointed to IPAB.  Why do you believe economists are qualified to pass judgment on health care treatments?
  2. According to the statute, a majority of IPAB members must not be “individuals who are directly involved in the provision” of health care services.  Do you believe it’s appropriate that a majority of IPAB’s members must be bureaucrats rather than doctors and nurses who treat patients firsthand?
  3. Why hasn’t the President nominated his appointees to IPAB yet?  The statute gives the board $15 million in mandatory funding, beginning in October.  If the President believes IPAB is such a good thing, why hasn’t he nominated members promptly, so the board can be up and running in short order?

Rationing

  1. You have claimed that IPAB “is expressly prohibited from making recommendations that ration care.”  Where exactly in the statute is the term “rationing” defined?
  2. Where in the statute is there a prohibition on IPAB making recommendations that could reduce access to breast cancer treatments – say, mammograms?  What about diabetes treatment and prostate cancer screenings – are there any provisions in the law that explicitly state IPAB cannot reduce access to those treatments?
  3. Last week the New York Times editorial board wrote that “A prime driver of our escalating health care costs is the advance of medical technology and the understandable desire of patients and doctors to adopt the latest treatment.  Sooner or later, as the nation struggles to contain health care spending, we may need to devise measures to determine whether very high-priced drugs provide enough medical benefit to warrant paying the bill.”  Do you agree?

Judicial Review

  1. If someone believes that IPAB has in fact rationed care, what redress does that person have to challenge the board’s decisions, seeing as how the board’s recommendations are exempt from judicial or administrative review?
  2. For nine years you served as Executive Director of the Kansas Association of Trial Lawyers, whose mission statement is “to uphold and advocate for the right of the individual for redress of grievances and access to the courts.”  How is your support for IPAB – which blocks access to the courts for any beneficiaries harmed by the board’s recommendations – consistent with the mission statement of the organization you headed for nearly a decade?
  3. In 2009 President Obama stated that he was “not advocating caps on malpractice awards…which I personally believe can be unfair to people who’ve been wrongfully harmed.”  If that’s still the President’s position, why does IPAB cap damages for people wrongfully harmed at ZERO – by never allowing them to file legal action at all?
  4. If the IPAB will not harm seniors and Medicare beneficiaries, why does the statute prohibit lawsuits against its recommendations in the first place?
  5. Would the Administration support repealing the provision prohibiting judicial review of IPAB’s recommendations?  Why or why not?

Other “Expert” Recommendations

  1. Your Administration has defended the IPAB on the grounds that independent experts should be called upon to make recommendations “to help Medicare provide better care at lower costs.”  The Medicare Payment Advisory Commission – a panel of experts similar to IPAB – recently came out in support of requiring co-pays for home health visits, on the grounds that a modest co-pay would encourage appropriate use of home health care.  Does the Administration agree with the recommendations of the MedPAC “experts?”
  2. Likewise, the President’s own Fiscal Commission supported restructuring Medigap insurance to “constrain over-utilization and reduce overall spending.”  Does the Administration agree with this recommendation of the “expert” panel the President himself appointed?

Broader Applicability

  1. Do you believe Members of Congress should follow, and/or be subject to, IPAB’s recommendations?  Will you do so yourself?
  2. Do you believe IPAB supporters who claim to support “experts” making health care choices should use their own independent resources to buy out of a rationing regime if IPAB restricts access to needed services and treatments?
  3. Does the Administration plan on running ads featuring Andy Griffith informing Medicare beneficiaries that their health care will be determined in part on the recommendations of a board of unelected bureaucrats?  If not, why not?

House Republican Budget

  1. You recently received Three Pinocchios from the Washington Post for making “outrageous” assertions and “ present[ing] a highly inflammable comment as a statement of fact” about the House-passed budget, comments for which the Post said you “should be ashamed.”  Do you agree with the Post’s characterization of your allegation that “there’s no question” patients would “die sooner” under the House-passed budget?  If not, why not?  Do you still stand by your original comments?
  2. You’ve previously testified before Congress that you have in fact read all of Obamacare.  Therefore, can you please explain the language on page 111 of the statute regarding the inflation adjustment mechanism for Obamacare premium subsidies in the years after 2018, and explain how exactly this inflation adjustment mechanism differs from the inflation adjustment mechanism for Medicare premium support payments included in the House-passed budget, which you said would cause seniors to “die sooner?”