Barack Obama’s Health “Reform:” Bureaucrats Choose, Patients Lose

“The decision is not whether or not we will ration care—the decision is whether we will ration with our eyes open.”

— Dr. Donald Berwick, now Medicare Administrator, June 2009[i]

 

The President’s recent deficit reduction “plan” has put renewed focus on the Independent Payment Advisory Board (IPAB), a 15-person board of bureaucrats appointed by the President and granted dramatic powers over Medicare. Created in Obamacare to enforce a cap on overall Medicare spending, the IPAB would be required to lower the Medicare cap even further under the President’s deficit reduction outline.[ii] However, serious policy and political concerns remain regarding a grant of virtually carte blanche power over seniors’ health care to a board of unelected bureaucrats:

  • Section 3403 of Obamacare grants the IPAB the power to make rulings designed to reduce costs in Medicare. However, the board will be forced to hold Medicare spending to a growth level that the non-partisan Medicare actuary previously called “difficult to achieve in practice.”[iii] The Medicare actuary also believes the IPAB will not meet its spending targets because Obamacare includes assumptions that “are unlikely to be sustainable”—yet the President’s deficit plan would make those assumptions even more unsustainable and unrealistic.[iv]
  • Even Democrats have raised concerns about whether the spending targets established by the IPAB will be achievable. Rep. Pete Stark—a self-described San Francisco liberal—admitted that a voucher program for Medicare could actually be superior to the President’s approach: “In theory at least, you could set [Medicare] vouchers at an adequate level…But, in its effort to limit the growth of Medicare spending, the board is likely to set inadequate payment rates for health care providers, which could endanger patient care.”[v]
  • IPAB’s decisions reducing Medicare spending would automatically go into effect unless overridden by Congress. Politicians from across the political spectrum have expressed opposition to the idea of unaccountable bureaucrats deciding Medicare payment policy. For instance, Rep. Allyson Schwartz (D-PA) called the IPAB mechanism an abdication of Congress’ constitutional duty.[vi]
  • A recent article in the New York Times noted that “in general, federal courts could not review actions to carry out the board’s recommendations.”[vii] That prohibition on judicial review is one of 14 separate instances where Obamacare blocks patient lawsuits against bureaucrat decisions.[viii]  Some may question why the President OPPOSES enacting reasonable limits on private-sector lawsuits,[ix] but SUPPORTS banning patients from suing government bureaucrats outright.
  • A recent Wall Street Journal editorial observed that “decades of government faith in omniscient miracle workers”—government bureaucrats micro-managing prices for a $500 billion program—“has left Medicare in its present shambles.”[x] Specifically, after 45 years of management by federal bureaucrats, the Congressional Budget Office found that Medicare is adding to federal deficits by tens of billions of dollars—and will become insolvent within a decade.[xi]  While the Administration claims that giving unelected bureaucrats even more power over Medicare will “improve” the program, given Medicare’s past track record, it is reasonable to wonder how much more of this kind of “improvement” the program can stand.[xii]

Obamacare’s passage has led as many as two-thirds of physicians to drop out of government-run health programs; some locations have already reported doctors dropping out of Medicare “at an alarming rate.”[xiii] The Medicare actuary and other experts agree that the unrealistic spending targets placed on the IPAB will likely lead to reductions in reimbursement levels that will harm seniors’ access to care. Rather than relying on a board of unelected and unaccountable bureaucrats to ration seniors’ care arbitrarily, President Obama should instead rely on a better approach to deficit reduction—one that maintains seniors’ choice of options by putting patients, not government bureaucrats, at the center of health care.

 

[i] “Rethinking Comparative Effectiveness Research,” An Interview with Dr. Donald Berwick, Biotechnology Healthcare June 2009, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799075/pdf/bth06_2p035.pdf

[ii] http://www.whitehouse.gov/the-press-office/2011/04/13/fact-sheet-presidents-framework-shared-prosperity-and-shared-fiscal-resp

[iii] Memo on Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended by Richard Foster, April 22, 2010, http://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf.

[iv] Ibid.

[v] “Obama Panel to Curb Medicare Finds Foes in Both Parties” by Robert Pear, New York Times April 20, 2011, http://www.nytimes.com/2011/04/20/us/politics/20health.html

[vi] Ibid.

[vii] Ibid.

[viii] Patient Protection and Affordable Care Act, P.L. 111-148; amended version available at http://docs.house.gov/energycommerce/ppacacon.pdf

[ix] Speech to American Medical Association annual meeting, June 15, 2009, http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-the-Annual-Conference-of-the-American-Medical-Association/

[x] “The Other Medicare Cutters,” Wall Street Journal April 20, 2011, http://online.wsj.com/article/SB10001424052748704613504576269582048771132.html

[xi] Congressional Budget Office March 2011 Medicare baseline, http://cbo.gov/budget/factsheets/2011b/medicare.pdf. CBO found the Medicare Part A (Hospital Insurance) Trust Fund is cash-flow negative, and will be until its exhaustion in 2020; redemption of the federal bonds held in the trust fund thus adds to federal deficits.

[xii] “The Facts About the Independent Payment Advisory Board” by Nancy-Ann DeParle, White House blog posting, April 20, 2011, http://www.whitehouse.gov/blog/2011/04/20/facts-about-independent-payment-advisory-board

[xiii] “Why Physicians Oppose the Health Care Reform Bill” by Daniel Palestrant, Forbes April 28, 2010, http://www.forbes.com/2010/04/28/health-care-reform-physicians-opinions-contributors-daniel-palestrant.html; “Texas Doctors Opting Out of Medicare at Alarming Rate” by Todd Ackerman, Houston Chronicle May 17, 2010, http://www.chron.com/disp/story.mpl/metropolitan/7009807.html.

Who Decides: Bureaucrats or Patients?

The New York Times this morning has a good article  and the Wall Street Journal an editorial highlighting the bipartisan opposition to the Independent Payment Advisory Board.  The board was created in the health care law to enforce an cap on overall Medicare spending; President Obama’s deficit plan proposed lowering the cap even further.  The Times piece features quotes from lawmakers in both parties expressing concern to the idea of unelected bureaucrats micro-managing the Medicare program.  Perhaps the definitive quote came from (of all people) Rep. Pete Stark, a self-described San Francisco liberal:  “In theory at least, you could set [Medicare] vouchers at an adequate level…But, in its effort to limit the growth of Medicare spending, the board is likely to set inadequate payment rates for health care providers, which could endanger patient care.”

Apart from the fact that even liberals won’t defend the IPAB – and believe a Medicare “voucher” may be superior to a Medicare program subject to payment cuts imposed by bureaucrats – other important questions remain:

  • The Times piece notes that “in general, federal courts could not review actions to carry out the board’s recommendations.”  That prohibition on judicial review is one of 14 separate instances in the health care law where Democrats acted to block patient lawsuits against bureaucrat decisions.  Why do Democrats OPPOSE enacting reasonable limits on private-sector lawsuits, but SUPPORT banning patients from suing government bureaucrats outright?  And if the IPAB will not harm Medicare beneficiaries, why did Democrats feel the need to prohibit patients from filing lawsuits against these bureaucrats’ proposals?
  • The Times also notes that the Administration “has yet to submit any nominations” for the IPAB.  If the IPAB will be so positive for Medicare and for seniors, why has the President failed to put forth his choices for the board he finds so important?  Last year President Obama nominated to head the Medicare program an appointee so controversial that Democrats refused to hold a confirmation hearingIs the President now deferring his IPAB selections until after his re-election – and if so, what does that say about the board’s unpopularity?
  • The Wall Street Journal editorial correctly points out that “decades of government faith in omniscient miracle workers” – aka government bureaucrats micro-managing prices for a $500 billion program – “has left Medicare in its present shambles.”  President Obama says he wants to “improve” Medicare, but with the Medicare program adding to the deficit by tens of billions of dollars – and scheduled to become insolvent entirely within the coming decade – how much more “improvement” by unelected bureaucrats can the program stand?

One of the fundamental questions surrounding entitlement reform involves the extent to which patients will control their health care choices, as opposed to unelected bureaucrats.  The fact that one of the House’s most prominent liberals suggested a Medicare voucher program could be preferable to the President’s approach should provide a cautionary tale to those who believe a panel of unelected officials can and should be allowed to manage the health care choices of millions of American seniors.

Pete Stark Admits Health Care Law Will INCREASE the Deficit

Pete Stark’s office yesterday used a memo from Medicare actuary Rick Foster to allege that repealing the health care law will accelerate the insolvency date of the Medicare Part A Trust Fund.  There’s only one problem with Chairman Stark’s allegation: Medicare actuary Foster has also written that the Medicare provisions in the law “cannot be simultaneously used to finance other Federal outlays (such as the coverage expansions under the PPACA) and to extend the [Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.”

If Rep. Stark wants to use the Medicare savings provisions to extend the life of the Medicare trust fund – and not to fund the new entitlements created by the law – the Congressional Budget Office previously estimated what the fiscal impact would be:  “A net increase in federal deficits of $260 billion” through 2019.

With numbers like that as a result of the law’s double-counting, it’s perhaps appropriate that the House’s repeal vote comes in the middle of Chinese President Hu’s state visit – because if the law is not repealed, future American Presidents will have to borrow yet more money from China to cover the costs of Democrats’ health care gimmickry.

The Return of the Government-Run Health Plan…

You may have seen word that Progressive Caucus Co-Chair Lynn Woolsey and several other Democrats released a stand-alone bill (H.R. 5808) that would amend PPACA to create a government-run health plan in the new health insurance exchanges.  The language very closely mirrors the original government-run plan written into Subtitle B of Title II of the legislation (H.R. 3200) that House Democrats introduced last July.  There are a few technical changes, and a new requirement that any innovative payment models in the government-run plan must be certified by the Medicare actuary not to increase costs, but overall the legislation is nearly identical to the “robust” government-run plan advocated by liberal Democrats last year.

There’s a noteworthy element of the updated CBO estimate about a government-run health plan’s impact.  Today’s CBO letter to Rep. Stark about H.R. 5808 stated that the government-run plan’s “premiums would be 5 percent to 7 percent lower, on average, than the premiums of private plans offered in the exchanges.”  Yet one year ago, CBO told Rep. Camp that premiums in the nearly identical government-run plan included in H.R. 3200 “would, on average, be about 10 percent lower than that of a typical private plan offered in the insurance exchanges.”  As yet it’s unclear why the premium impact is lower for the government-run plan in H.R. 5808 when it’s nearly identical to that in H.R. 3200, but it’s worth remembering that if premiums aren’t lower in the government-run plan, there’s no point in creating it in the first place – unless its advocates have an ideological agenda to create a single-payer health care system.

In case you need a reminder on what was in H.R. 3200, a lightly edited/revised version of the government-run plan section from my original summary of that bill follows below.

 

Government-Run Health Plan:  The bill states that the Department of Health and Human Services “shall provide for the offering through Exchanges” a “public health insurance option” that “shall only be made available through Exchanges established” under PPACA.  The bill states the plan shall comply with requirements related to other Exchange plans, and offer basic, enhanced, and premium plan options.  However, the bill does not give the Exchanges the authority to reject, sanction, or terminate the government-run plan; therefore, some Members may be concerned that the bill’s headings regarding a “level playing field” belie the reality of the plain text.

The government-run plan would be empowered to collect individuals’ personal health information, posting a significant privacy risk to all Americans.  The government-run plan would have access to federal courts for enforcement actions—a significant advantage over private insurance plans, whose enrollees may sue in State courts.

The bill gives the government-run health plans $2 billion in “start-up funds”—as well as 90 days’ worth of premiums as “reserves”—from the Treasury, with repayment—not including interest—to be made over a 10-year period.  The bill requires the Secretary to establish premium rates that can fully finance the cost of benefits, administrative costs, and “an appropriate amount for a contingency margin” as developed by the Secretary.  Some Members may be concerned that this provision would allow the Secretary to determine the plan’s own capital reserve requirements, which could be significantly less than those imposed on private insurance carriers under State law, and question why Democrats who criticized banks for maintaining insufficient reserves are now permitting a government-run health plan to do the exact same thing—unless their motive is to give the government-run health plan a built-in bias.

The bill provides that the government-run plan shall pay Medicare rates for at least its first three years of operation. Physicians also participating in Medicare as well as the government-run plan would receive a 5 percent bonus for its first three years. Reimbursement rates for pharmaceuticals within the government-run plan would be “negotiated” by the Secretary-a provision which, with respect to Medicare Part D, the Congressional Budget Office has stated would not result in any appreciable savings when compared to negotiations undertaken by private health plans.
While the bill states that the Secretary “may utilize innovative payment mechanisms” to improve health outcomes and achieve other objectives, it also states that the Secretary must set payment rates “consistent with” provisions pointing to Medicare payment rates as the benchmark.  Given estimates from the Lewin Group that as many as 114 million individuals could lose access to their current coverage under a government-run plan—and that a government-run plan reimbursing at the rates contemplated by the legislation would actually result in a net $16,207 decrease in reimbursements per physician per year, even after accounting for the newly insured—many Members may oppose any effort to include a government-run plan in any health reform legislation.
The bill requires Medicare providers, including physicians, to participate in the government-run plan unless they opt-out of said participation, and provides that all providers who accept the government-run plan’s reimbursement rates shall be considered “preferred physicians”—regardless of their quality or expertise—and creates a new category of “participating, non-preferred physicians” who agree to abide by balance billing requirements similar to those in Medicare.  Other providers may participate in the government-run plan only if they agree to accept the plan’s reimbursement rates as payment in full. Some Members may be concerned that these provisions would therefore compel providers to accept Medicare-level reimbursements, which the Congressional Budget Office has noted are 20-30 percent below private health insurance payment levels.

The bill requires the Secretary to “establish conditions of participation for health care providers” under the government-run plan—however it includes no guidance or conditions under which the Secretary must establish those conditions.  Many Members may be concerned that the bill would allow the Secretary to prohibit doctors from participating in other health plans as a condition of participation in the government-run plan—a way to co-opt existing provider networks and subvert private health coverage.

Finally, the bill also allows the Secretary to apply Medicare anti-fraud provisions to the government-run plan.  Some Members, noting that Medicare has been placed on the Government Accountability Office’s high-risk list since 1990 due to fraud payments totaling more than $10 billion annually, may question whether these provisions would be sufficient to prevent similar massive amounts of fraud from the government-run plan.

Democrats Ask HHS: Protect Us from the Law We Passed…

Yesterday a series of senior House and Senate Democrats wrote a letter to Secretary Sebelius asking CMS to “undertake a robust and thorough review” of Medicare Advantage plan bids for 2011.  The letter further noted that “any effort by MA plans to increase beneficiary premiums or reduce benefits next year should be carefully evaluated.”

This letter is curious on several levels.  First, the Administration just spent 18 million taxpayer dollars sending out leaflets talking about the new health law’s “Improvements to Medicare Advantage.”  If Medicare Advantage is so improved, why do Democrats think that plans may need to increase premiums or reduce benefits?

The answer is readily apparent in data from non-partisan actuaries in both the Congressional Budget Office and CMS itself.  First, CBO confirmed that the health law will cut more than $200 billion from the MA program.  Then CMS actuaries estimated that those cuts would slash beneficiary participation in half – from an estimated 14.8 million all the way down to 7.4 million.  The actuaries also found that the law’s “provisions will generally reduce MA rebates to plans and thereby result in less generous benefit packages.”

In other words, Democrats are criticizing reduced MA benefits to seniors, even though they passed a law that non-partisan experts agreed would do just that.  Might they have suddenly changed their position because they had to pass the bill to find out what was in it?

 

June 3, 2010

The Honorable Kathleen Sebelius
Secretary
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201

Dear Secretary Sebelius:

As you know, the statutory deadline for Medicare Advantage (MA) plans to submit their bids that outline benefits and premiums for 2011 is June 7th. We are writing to urge you to ensure that the Centers for Medicare and Medicaid Services (CMS) undertake a robust and thorough review of their bid submissions to justify changes in the premiums or benefits that plans may propose for next year. To promote stability in the program, the health reform legislation protected 2011 plan payment rates and took care to phase in future payment changes to minimize disruption. Any effort by MA plans to increase beneficiary premiums or reduce benefits next year should be carefully evaluated in light of these payment protections.

Substantial errors made by WellPoint in projecting medical cost trends in California for 2011—uncovered and corrected only after a rigorous assessment of the company’s rate filing documents—are an example of the kind of review that would protect Medicare beneficiaries and the program from unjustified premium increases or benefit changes. The Office of the Actuary at CMS already collects detailed actuarial information in the bid submissions and has statutory authority to request additional documents as needed during the bid reviews.
In addition, according to a Government Accountability Office (GAO) report requested by the House Committees on Ways and Means and Energy and Commerce, lower beneficiary premiums for certain MA plans in 2008 attracted healthier enrollees, but if those enrollees became ill they faced considerable and unexpected out-of-pocket expenditures that often exceeded Medicare fee-for-service limits by significant amounts.

The Affordable Care Act provides additional authority to protect beneficiaries from MA plans that offer discriminatory benefit packages. In particular, it limits the ability of these plans to charge higher cost-sharing than fee-for-service Medicare in three specific categories where abuses are well-documented and provides the Secretary with authority to extend this protection to additional services as needed. The Affordable Care Act also removes unwarranted overpayments that have caused Medicare Advantage to cost more than Medicare fee-for-service, shortened the solvency of the Medicare trust fund, and led to higher premiums for the more than three-quarters of beneficiaries in traditional Medicare. In phasing out these overpayments, CMS must ensure that plans work to trim administrative costs and other overhead, rather than merely shifting additional costs onto beneficiaries to preserve their bottom line.

The Affordable Care Act increases the authority vested in the Secretary to hold MA plans accountable for their bid submissions. Using this authority, we expect the Secretary and officials at CMS to ensure that the bid proposals are accurate, merit approval and are not discriminatory in benefit design or relative to plan payments.

We look forward to continuing to work together to ensure appropriate implementation of the Affordable Care Act. Thank you for your attention to this important matter.

Issues to Be Resolved Between Pelosi and Reid Health Care Bills

The New Year has seen Democrats once again retreat behind closed doors to finalize a single version of their government takeover of health care (H.R. 3962; H.R. 3590). The Republican Conference has compiled background on several of the major issues that must be reconciled between the two versions.

Taxes: The Pelosi bill includes over $700 billion in job-killing tax increases, including nearly half a trillion dollars from a surtax on high-income filers—many of whom are small businesses—that would, according to a model developed by Christina Romer, the Chair of President Obama’s Council of Economic Advisers, demolish or destroy up to 5 million jobs. Conversely, the Reid bill is funded largely through an increase in the Medicare payroll tax on individuals with incomes over $200,000 and couples with incomes over $250,000—a “marriage penalty” that could prove cumbersome to administer—and taxes imposed on the health sector, most notably a 40 percent tax on “high-cost” health plans (those above $8,500 for an individual and $23,000 for a family). The Administration has expressed support for the Senate approach, even though the excise tax would break two central Obama campaign promises—not to raise taxes on those with incomes under $250,000, and not to tax employer-provided health insurance policies.

Government-Run Health Plan: The Pelosi bill includes a government-run health plan that independent actuaries at the Lewin Group found could cause as many as 114 million individuals to lose their current coverage, as many employers would drop their current plan offerings. On the other hand, the Reid bill contains $6 billion in federal funding for new co-op insurance plans, and requires the Office of Personnel Management (OPM) to “offer at least two multi-State qualified plans” in each State. Despite press reports implying that “moderate” Democrats managed to eliminate a government-run health plan from the Senate bill, many may be concerned that both the OPM federally sanctioned plans and cooperatives funded through federal start-up grants would in time require ongoing federal subsidies, and that a “Fannie Med” co-op would do for health care what Fannie Mae and Freddie Mac have done for the housing sector.

Abortion Coverage: Thanks to an amendment adopted on the House floor by the strong bipartisan vote of 240-194, the Pelosi bill would not allow federal funds to flow to private insurance plans that cover elective abortion, nor fund elective abortion in the proposed new government-run health plan. However, provisions in the Reid bill would undermine both protections inserted into the House bill—the Senate measure would permit funds to flow to private plans that cover elective abortion, and create new national health plans administered by the Office of Personnel Management (OPM) that would cover elective abortions. Such provisions violate the long-standing policy of the insurance coverage offered to Members of Congress—which provides a choice of private plans, none of which may cover elective abortions.

Undocumented Immigrants: The Pelosi bill would permit undocumented immigrants to buy health coverage through the insurance Exchange; such individuals may not receive federal insurance subsidies, but would purchase their policies through a federally-funded Exchange mechanism. The Reid bill includes a nominal prohibition on the undocumented accessing the Exchanges. However, as both the Pelosi and Reid bills do not require applicants to verify their identity when confirming eligibility for subsidies, some may be concerned that both bill’s inadequate verification provisions could result in the undocumented accessing taxpayer-subsidized benefits, regardless of the specific provisions.

Affordability: In exchange for removing the government-run health plan, House Democrats have discussed further increasing subsidies above the levels in the Senate bill, particularly for those just above the threshold for Medicaid eligibility. These rises would come after changes made during Senate consideration that increased the level of subsidies provided from $93 billion in 2019 under the original Finance Committee mark to $109 billion under the Reid bill—an increase of more than 17 percent.

Exchanges/Insurance Regulations: The Reid bill would force States to establish insurance Exchanges, and includes a variety of new mandates on health plans—that will according to CBO raise the cost of individual health insurance by up to $2,100 per year. The Pelosi bill would go even further, creating a single, national, government-run Exchange that eliminates State flexibility—and abolishing the private market for individual health insurance entirely. Regardless of the specific details adopted, many may view these provisions—along with myriad other federal regulations, bureaucracies, and price controls included in both bills—as indicative of the true nature of the government takeover of health care proposed in the legislation.

Medicare Advantage Cuts: Both bills would cut well over $100 billion from Medicare Advantage (MA) plans; however, the two bills would impose those cuts in significantly different ways. The Pelosi bill would reduce MA benchmarks to traditional Medicare fee-for-service levels over a three year period; MA plans in rural areas with low Medicare costs would be most affected by this change, whereas plans in urban areas like New York and Miami would be somewhat less impacted. Conversely, the Reid bill would phase in over three years a new system whereby MA plans would bid against each other—but not against government-run Medicare—to offer services to seniors; this change would have less of an impact on rural areas than it would in urban centers with many MA plans and higher costs. (Florida seniors would be exempt from many of the changes under an agreement Sen. Bill Nelson (D-FL) negotiated with Reid.)

Federal Health Board: The Reid bill, unlike the Pelosi bill, contains provisions to create a new board of unelected bureaucrats required to submit recommendations to Congress to keep Medicare spending below targeted levels—and such recommendations would be legally binding absent legislative action by Congress. The White House has expressed support for this concept. However, several senior House Democrats have expressed concerns about unelected bureaucrats deciding Medicare policy; Ways and Means Health Subcommittee Chairman Pete Stark called the concept “stupid at best, childish, unworkable, idiotic.” Moreover, many may be concerned the commission could lead to government-imposed rationing of life-saving treatments solely on cost grounds.

Medicaid and Related Earmarks: Democrats will work to determine whether to shackle States with more than $20 billion in unfunded mandates associated with the Medicaid expansion—or to preserve or expand the special earmark provided to Nebraska under the Senate bill, which exempts that State alone from any increased Medicaid costs in perpetuity.

Medicare Prescription Drugs: Despite protestations by industry leaders to the contrary, multiple press reports indicate that the “rock-solid deal” negotiated by the pharmaceutical industry this summer will be changed, so that the industry can “voluntarily” contribute more towards the cost of lowering the Medicare prescription drug doughnut hole—a change which the Congressional Budget Office previously estimated could raise seniors’ Part D premiums by 50 percent.

Effective Date: While the Congressional Budget Office estimated that the coverage provisions of the Reid bill spent “only” $871 billion within the 10-year budget window, this score was only achieved by delaying the implementation date to January 2014. By contrast, the Pelosi bill—which according to CBO spent $1.055 trillion on coverage expansions, and nearly $1.3 trillion overall—would begin imposing government-run health care one year earlier, in January 2013. Given this dynamic, any bill starting “only” three years from now would cost over $1 trillion—well above the President’s promised price tag of $900 billion, despite the various budgetary gimmicks deployed in both bills to minimize the bill’s true costs.

The Last Senate Debate on Health Reform

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

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

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

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

Weekly Newsletter: June 15, 2009

Senior Obama Administration Official Admits: Government-Run Health Plan Will Ration Care

As President Obama travels to Chicago to address the annual convention of the American Medical Association, the writings of one of his senior policy advisors confirm that the government-run health plan he supports will result in doctors being unable to treat their patients.  President Obama recently nominated Sherry Glied to the post of Assistant Secretary for Planning and Evaluation within the Department of Health and Human Services to serve as the chief policy advisor to Secretary Sebelius and the President regarding implementation of health reform.  Dr. Glied has previously stated that government-directed efforts to reduce costs will be ineffective, and that a government-run system will lead to under-funding and a two-tiered health system.  Dr. Glied has also written in support of waiting lines for health care treatments as an acceptable trade-off to save costs, admitting that waiting lines “will in some cases lead to worse health for patients,” but this harm is an acceptable outcome because “on average” most patients won’t suffer.

Coupled with one of President Obama’s recent proposals, to allow a board of federal bureaucrats to make “recommendations on cost reductions” that would have the force of law, some Members may be concerned that Dr. Glied’s position on waiting lines and rationing of health care could lead to exactly the type of approach Tom Daschle proposed—“getting into the nitty-gritty of which treatments are the most…cost-effective.”  While supporting health reform that lowers the growth of health care costs, some Members may believe that the American people want a board of unelected bureaucrats making health decisions for American patients based upon what will cost least “on average”—they should make health decisions based on the advice they receive from their doctors about what works best for them.

A new Policy Brief on this issue can be found here.

Shooting the Messenger

This past week saw the introduction of the first major Democrat health reform bill—albeit one not paid for—and reports that Democrats do not want to achieve the savings necessary to finance their expansion of government-run health care.  The major bill, introduced by Senate HELP Committee Chairman Kennedy, could cost as much as $2 trillion over ten years, according to press reports, but the bill’s only proposal to finance this new government spending is a tax on individuals who do not purchase health insurance that meets federal bureaucrats’ standards.

The effort to avoid paying the full cost of health reform legislation comes from other press reports indicating many Democrats want to rely on scores from the White House’s Office of Management and Budget (OMB), rather than the Congressional Budget Office (CBO), as the arbiter of whether reform legislation is fully paid for over ten years.  The Democrat hope—and expectation—is that White House political officials leading OMB will direct the agency to produce a more favorable score for a health reform bill than the non-partisan CBO.

Many Members may be concerned by this transparent budgetary gimmick, as well as the longer-term implications of subverting CBO’s independence—because the agency’s apolitical appointees dare to speak inconvenient truths—to enact an expansion of government-run health insurance.  However, if Democrats insist on looking to other entities for information about their bill’s implications, some Members may point them to a study by independent actuaries at the Lewin Group, which found that Democrat proposals to create a government-run health plan would cause as many as 120 million Americans to lose their current coverage.

Of Fish and Bureaucrats

Even as some Democrats were advocating budgetary gimmicks to avoid financing the full cost of health reform, others were proposing massive new tax increases to finance government-run care.  House Ways and Means Health Subcommittee Chairman Pete Stark (D-CA) on Thursday called for a two percent income tax surcharge to finance health reform.  Stark also endorsed Congress’ swift timetable to enact a government takeover of health insurance, noting that reform legislation “is like fish without a refrigerator.”  Also on Thursday, Stark commented on the implementation timeline for any legislation that may be enacted—“How quickly can a bureaucracy get going?”

Some Members may view Chairman Stark’s second comment—indicating the bureaucratic, mandate-driven approach to government-run health care—as prompting the need for his seafood-related quip.  Members may agree that, like a fish left out of the refrigerator, the more the American people become exposed to the true implications of Democrat health reform plans—higher taxes, government-run health care, delays for care, and outright denials of life-saving treatment at the hands of government bureaucrats—the more the attractiveness of the legislation will disintegrate and decay.

Dean Screams for Government-Run Health Care

This past week saw a verbal altercation involving former Vermont Governor Howard Dean that demonstrated the problems associated with government-run health care.  Appearing on C-SPAN, Rep. Phil Gingrey (R-GA) pointed out that while Governor Dean is organizing an online petition demanding a government-run health plan be incorporated into any health reform legislation, his family’s own record on government-run health care is mixed—the Governor’s own wife, Dr. Judith Steinberg, dropped out of Vermont’s largest Medicaid managed care program while Dean himself was Governor.  On Wednesday, Dean angrily responded that his wife does accept Medicaid patients, but did not directly answer as to whether she dropped Medicaid patients while Dean was Governor—perhaps because an article from the May 17, 1998 Rutland Herald entitled “Governor’s Wife Cuts Ties with HMO” provides all the evidence necessary to confirm Dr. Gingrey’s allegation.

While not blaming Dr. Steinberg for dropping out of Medicaid managed care due to the many bureaucratic hassles and low reimbursement, Members may note that these very same problems are likely to plague any government-run health care system.  Some Members may therefore agree with Dr. Gingrey’s rebuttal to Governor Dean:

Under socialized medicine, patients will suffer … they’re going to suffer in New Hampshire, South Carolina and Oklahoma and Arizona and North Dakota and New Mexico, and they’re going to suffer in California and Texas and New York. And they’ll suffer in South Dakota and Oregon and Washington and Michigan … and then they’ll suffer in Washington D.C.

On Saving Medicare, Democrats Stand as the “Party of No”

Today’s release of the annual Medicare trustees report paints a stark picture of the entitlement “time bomb” facing American seniors—the trustees project total unfunded liabilities of nearly $38 trillion, and project that the Hospital Insurance (Part A) Trust Fund will be exhausted in 2017, two years earlier than last year’s estimate.  But while President Obama speaks of reforming entitlement programs, the actions of the President and Democrats in Congress have not solved Medicare’s shortfalls—and could increase them.

No to Spending Restraint:  President Obama’s budget actually proposed an overall increase in Medicare spending—by failing to find any offsets for increases in physician reimbursement levels that Congress has frequently paid for in the past.  Particularly given the program’s unfunded obligations, Members may agree with Senate Budget Committee Chairman Conrad that “It’s very hard for me to understand why the answer is to put more money into the system.”

No to Saving Medicare First:  While the President’s budget did propose some reforms to the Medicare program, every penny of these savings—much of which are derived from cuts to Medicare Advantage plans popular with seniors—are re-directed into a “reserve fund” designed to pay for expanded entitlement coverage for younger Americans.  Some Members may question both the wisdom and fairness of re-directing money designed to bolster Medicare—including the use of a fund designed specifically “to make improvements under the original Medicare fee-for-service program”—to create new federal entitlements of undetermined cost.

No to Solving the Problem:  President Obama’s full budget submission to Congress did not include legislative proposals on how to address Medicare’s funding shortfalls—even though according to the Medicare Modernization Act, the President is required to submit such legislation every year the Medicare trustees have issued a funding warning for the program.  Some Members may question the level of the President’s commitment to Medicare reform if he failed to comply with a law designed to accomplish that very purpose.

No to Letting Others Solve the Problem:  The first action taken by Speaker Pelosi and the Democrat majority in the 111th Congress was a procedural vote turning off the expedited procedures under which a Medicare reform bill could be considered in the House of Representatives.  Some Members may be concerned that the Democrat leadership’s inaction not only does not fix Medicare’s funding shortfalls, it hinders those Members of both parties who wish to make a serious effort at entitlement reform from doing so.

No to Admitting the Scope of the Problem:  Although President Obama has paid lip service to the idea of reforming entitlements like Medicare, many Democrats in Congress have made statements indicating that the program does not need changes.  Responding to last year’s Medicare trustees report, Ways and Means Health Subcommittee Chairman Pete Stark asserted that “I don’t think it makes any difference what [the trustees] say” and that “Medicare is not in crisis.”  Similarly, last July Rep. Alcee Hastings (D-FL) noted that “the perceived problem with Medicare funding has already been addressed.”  Given these and other similar statements, some Members may question how high Medicare’s unfunded obligations must rise before Democrats in Congress begin to take them seriously.

While Republicans have offered a budget alternative that fully resolved Medicare’s long-term funding shortfalls, Democrat proposals for “entitlement reform” have thus far focused around spending over $1 trillion to create a new government-run health plan.  Given this record, and the warning issued by the Medicare trustees today, some Members may therefore believe that Democrats should spend more time solving America’s current health entitlements rather than creating a new entitlement that will cause as many as 120 million Americans to lose their current health coverage.

Important Points on the Medicare Trigger

Virtually all independent experts have confirmed what most of the public already knows: Rising health care costs and the retirement of the Baby Boomers make Medicare’s financial future precarious. Yet while Republicans have advanced plans to improve this important program’s solvency, Democrats seem intent on ignoring the looming entitlement crisis until it is too late.

Medicare Comprises a Large—and Growing—Share of Government Spending

In 2006, the Centers for Medicare and Medicaid Services reports that Medicare outlays were $408.3 billion. Comparable 2006 data from other government agencies demonstrates the relative size of Medicare’s budget:

  • If Medicare were its own country, it would have the 20th largest economy of the 180 national economies ranked by the World Bank.
  • Federal Medicare spending exceeds the total national GDP of Israel, Peru, and New Zealand combined.
  • The federal government spends more money on Medicare than the Departments of Agriculture, Education, Energy, Homeland Security, Transportation, and Veterans Affairs spend combined.
  • The Medicare actuaries predict that over the next decade, Medicare spending will rise by an average 7.4% per year—more if scheduled reductions in physician payments do not take effect.

Medicare Faces a Bleak Financial Future

Projections from the Congressional Budget Office (CBO) and the annual report issued by the Medicare trustees provide some indication of the scope of the fiscal problems facing Medicare in the future:

  • The Medicare trustees report released in March projected that the Medicare Hospital Insurance Trust Fund will be exhausted in 2019—just over a decade from now.
  • The trustees also project that overall spending on Medicare will rise from its 2006 level of 3.1% of GDP to reach 7.0% of GDP by 2035 and 10.8% GDP by 2082—nearly twice the size of Social Security, and more than one dollar out of every ten spent (public or private) nationwide.
  • CBO estimates—which, unlike the trustees’ report, presume that health costs will continue to rise at a pace consistent with past trends—that Medicare alone will constitute 17% of GDP by 2082—a nearly sixfold increase from 2006 and equal to all health care spending (private and public) today.
  • A former Medicare trustee found that, in order to solve the program’s funding shortfall, Part B premiums would need to rise to over $3,000-$5,000 per month in today’s money if the share of general revenue Medicare funding remains constant.

Democrats Have No Plan to Restore Medicare’s Solvency

While the Congressional Budget Office has concluded that “the main message [from both reports] is that health care spending is projected to rise significantly and that changes in federal law will be necessary to avoid or mitigate a substantial increase in federal spending on Medicare,” Democrats have not acted to fix the problem:

  • When the Medicare trustees released their report noting that Medicare faces nearly $86 trillion in unfunded obligations, Ways and Means Health Subcommittee Chairman Pete Stark responded by saying, “I don’t think it makes any difference what [the trustees] say” about the precarious state of Medicare’s funding.
  • Last July, Rep. Alcee Hastings (D-FL) asserted that “The perceived problem with Medicare funding has already been addressed”—yet former Comptroller General David Walker has noted that each year Congress does not act to reform its entitlement obligations, the size of the debt the next generation of Americans face grows by $2 trillion.
  • Republicans have put forth several proposals to close the size of the Medicare funding gap—but Democrats would rather grow the federal debt than take reasonable steps to slow the growth of America’s massive government programs.