Democrats


Budget Danger Ahead

I have a new article up at National Review Online on why danger lurks for Republicans, and the nation, in the debt-ceiling showdown:

Democrats want a deal that doesn’t give an inch on what really matters to their voting base — which is the entitlement status quo....

To further that goal, the president and his allies are playing a familiar card. It’s not that they are against entitlement “reform,” they say, it’s just that they want to protect the beneficiaries from any financial sacrifice. And so we learn in recent days (see here and here) that Democrats are willing to put sizeable Medicare and Medicaid “cuts” on the table....

These kinds of changes in Medicare and Medicaid are nothing new. Various versions of them have been included in every budget deal going back 30 years, and most especially in the bipartisan deals of 1990 and 1997. They do not constitute genuine entitlement reform. They will not fix Medicare and Medicaid. And they will not solve the nation’s budget problem....

Read the whole article here.

posted by James C. Capretta | 5:09 pm
Tags: budget, debt ceiling, Medicare, Medicaid, Republicans, Democrats
File As: Health Care

Is There a Republican Plan for Health Care?

The New York Times invited several conservative and libertarian analysts to comment on the Republican approach to health care. Here's my contribution:

House Republicans have already offered an alternative to what the Democratic majority was pushing in 2009. They, and their counterparts in the Senate, would suffer no political consequences if they chose not to go any further than what’s already been proposed. Republicans didn’t drive the legislative process into the political ditch; the Democrats did, and voters know it.

Moreover, the public has been unnerved by what’s taken place over the last year. The administration and Congress were using every lever at their disposal to try to pass a sweeping reform program that was plainly at odds with what the public wanted. Quite understandably, they do not trust that the political process is capable of producing a sensible, consensus-driven reform program that can garner broad bipartisan support. Consequently, for the time being, they would rather see the whole subject go away and move on to other more pressing topics.

But it does seem unlikely that the Democratic majority will be able to walk away from the effort that easily. It is quite possible that Congressional leaders will reach out to Republicans to try and forge a compromise around a more targeted measure. If that call does come, Republican leaders should insist on three things.

First, states must be given the lead role in reform, not the federal government. And they should have the flexibility to implement programs without having to jump over bureaucratic hurdles put up by federal agencies. Second, state-based high-risk pools, not cumbersome insurance regulation, should be enlarged and reformed to help those with pre-existing conditions get affordable private insurance. And third, to begin to control costs, there must be meaningful medical malpractice reform nationwide.

Anything much beyond these ideas will begin to weigh down the effort, and lead to its collapse as well.

The entire mini-symposium, which includes a contribution from Keith Hennessey, is on the NYT website here.

posted by James C. Capretta | 8:18 pm
Tags: Republicans, Democrats
File As: Health Care

Itís $1.5 Trillion, Not $900 Billion

The health-care bill unveiled yesterday by House Speaker Nancy Pelosi is being advertised as costing “only” $894 billion over a decade. But that is highly misleading.

For starters, the gross cost of expanded Medicaid coverage and a new entitlement to subsidies for health insurance is much higher than Democrats are suggesting, according to the cost estimate released yesterday by the Congressional Budget Office (CBO). The Democrats report a lower number by netting out the taxes some individuals pay when they don’t enroll in insurance, as well as the tax payments from employers who choose to “pay” rather than “play.” But that accounting confuses tax increases with spending reduction. The gross spending increase from the entitlement expansions in the revised House bill is $1.055 trillion over ten years, not $894 billion.

In addition, as I noted previously, House Democrats have conveniently decided to take the so-called “doc fix” out of the larger health-care bill and pass it as a standalone measure, at a cost of $250 billion over ten years. The House health-care bill is bursting with other Medicare-related provisions. What could possibly justify separate accounting for the physician fee fix? In fact, there is no justification, other than budgetary smoke and mirrors. House leaders are splitting the costs of their scheme into two bills and pretending that this maneuver somehow brings down the overall cost to taxpayers. It doesn’t. In reality, House Democrats are still planning to spend $250 billion on Medicare physician fees, and that should be made clear in any honest accounting of what’s afoot here.

Finally, there’s the other spending in the health-care plan. There’s loads of it. Higher Medicaid matching funds to buy off selected governors. A new program aimed at encouraging more physicians to enter primary care. Prevention spending. And apparently just about anything else House Democrats could think of to spend taxpayers’ money on. When it’s all racked up, these programs cost $230 billion over a decade. And that’s not even including the extra spending on Medicare drug coverage, which is obscured in CBO’s accounting by provisions which allow the government to set payment rates for certain products.

All totaled, then, Democratic leaders are planning to ram a $1.5 trillion spending program through the House in coming days, far exceeding the $900 billion threshold that President Obama supposedly established in his speech to a joint session of Congress.

How are House leaders planning to cover these costs? Well, for starters, they aren’t. The cost of the physician fee fix will simply get added to the ballooning debt President Obama is planning to run up during his presidency. The rest will supposedly be covered by a whopping tax increase and implausible price-controls in Medicare and Medicaid.

On the tax side, Democrats are planning to saddle those with annual incomes exceeding $500,000 with a new 5.4 percent surtax. That would raise $461 billion over a decade, according to the Joint Tax Committee. But there’s also the penalty tax imposed on individuals who don’t sign up for health insurance. That raises $33 billion. There’s also the employer “pay or play” mandate, which brings in $135 billion. And finally, there are the taxes on medical device manufacturers and many others. These provisions raise an additional $100 billion over a decade. In all, therefore, House Democrats want to raise taxes on Americans by $725 billion over the period 2010 to 2019 to partially pay for their health-care scheme.

The Democrats close the remaining gap (excluding the physician fee spending) by cutting Medicare and Medicaid spending by about $550 billion over ten years and starting up a new, budget-busting long-term care program that brings in $72 billion in excess premiums in its early years.

President Obama has claimed all year that he would work with Congress to put in place reforms that would make health-care delivery more efficient. But that’s not what House Democrats are proposing with their changes to Medicare. Their plan is for payment rate reductions, indiscriminately applied to all providers without regard to any measure of quality. All hospitals would get basically the same percentage cut in their payments, no matter how well or badly they treat their patients. As the Washington Post noted this morning, these cuts imply that House Democrats have found the magic formula for slowing Medicare per capita spending from a 7 percent average over the past two decades to just 4 percent for the coming twenty years. That is beyond implausible. Congress and the Medicare bureaucracy have been trying to slow the pace of entitlement spending with price controls for nearly half a century, and it has never worked. CBO has to score the provisions as they are written. But common sense indicates that these Medicare payment rate reductions will never finance the massive entitlement spending House leaders are planning.

In sum, then, the House plan is not a $900 billion program. It’s a $725 billion tax increase and a $1.5 trillion spending program. Tax and spend, indeed.

posted by James C. Capretta | 8:16 pm
Tags: House bill, Democrats, CBO, budget, tax increases, Pelosi, Obama
File As: Health Care