House bill


The Democratsí Tangled Web

In 2009, Democrats chose to proceed with a health-care bill under the regular order — that is, they sought to pass the legislation under normal House and Senate rules. They did not put together a budget reconciliation bill with health care in it, something that could have passed the Senate with a simple majority vote. They conceded that such an approach would likely produce a flawed product, as many non-budgetary provisions in a health-care plan would not survive the reconciliation process. And so they decided to try and pass a bill without resorting to reconciliation, even though they knew they would need sixty votes in the Senate to succeed. It worked. They passed a bill in the House in November, and a somewhat different version in the Senate in December.

Then came Scott Brown. His stunning election to the Senate on January 19 upended the Democrats’ end-game. They were going to work out the differences between the House and Senate-passed bills in January and proceed to pass an agreed-upon version in both chambers as expeditiously as possible. But that plan was contingent on getting sixty votes again in the Senate. With Brown’s election, Senate Republicans increased their numbers from forty to forty-one, thus forcing Democrats to find at least one Republican Senator to support their final bill.

For the past two months, the White House and Democrats in Congress have been weaving ever-more complicated legislative webs all with the express intent of avoiding at all costs any need to negotiate with the now slightly enlarged Senate minority. In effect, what Democratic leaders want to do is — at the very end of the legislative process — switch from regular order to a reconciliation process in order to avoid having to deal seriously with any elected Republicans.

But it’s become increasingly clear that the Democratic scheming and maneuvering necessary to pull off such a high-wire act has created a web of entanglements that could very well doom passage of the entire effort.

In particular, there now appear to be two huge hurdles standing directly in the way of a plan to jam a bill through in the coming days.

First, there is the matter of the liberal abortion provisions in the Senate bill. As the Catholic Bishops conference has noted, the Senate-passed bill includes several provisions that would allow taxpayer funding of elective abortions. Consequently, the Bishops opposed passage of that bill when it was considered in the Senate, and now oppose its passage by the House. The problem for House Democrats is that every version of the end-game they are now considering is predicated on having the House take up the Senate bill and pass it unchanged for presidential signature.

That is entirely unacceptable to the Catholic Bishops. They oppose House passage of the Senate’s pro-abortion health bill. Period. And their opposition hasn’t come with procedural loopholes that would let members off the hook if they promised to pass a fix separately. That would be fool’s bargain, and the Bishops know it. So pro-life House Democrats, led by Congressman Bart Stupak, really have no choice here. They can’t support the Senate bill unless they want to be known for supporting the most pro-abortion bill ever considered in Congress. Their only real option is to force House leaders to amend the Senate bill before passing it to include strong restrictions on funding of abortion. Yes, that would mean the bill would have to go back through the Senate again before going to the president, but so be it. That’s not the Bishops’ problem. It would mean the president and the Democrats would have to really negotiate to get some Republican support, which is of course the norm for sweeping and important legislation.

The Democrats’ problems don’t end with abortion, though. Today, the Senate parliamentarian confirmed to Republican members that the Senate health-care plan must first be signed into law by the president before the Senate can take up a reconciliation bill making changes to it. This is the House Democrats’ worst nightmare. That means they can’t pass and hold the Senate health bill pending clearance by the Senate of a reconciliation bill making fixes. If the House votes to approve the Senate bill, that’s it.  The Senate bill will become law, signing ceremony and all.  Congress may or may not follow through by amending it later. In the meantime, House members will have voted to approve the Cornhusker Kickback, the Louisiana Purchase, the special treatment for Florida seniors, countless special deals for hospitals, a new tax on many collectively bargained health plans, not to mention a massive tax increase, Medicare cut, and job-killing mandates.

In short, if congressional Democrats are bound and determined to pass a sweeping government takeover of American health care on an entirely partisan basis, their only way forward is for the House to accept without change the highly unpopular Senate bill, and suffer the consequences. That will be a very bitter pill for many rank-and-file members to swallow.

There is an alternative, however. The White House and House and Senate Democrats could abandon reconciliation, fix the problems in the Senate bill, and then work with some Senate Republicans to produce a plan that can get a supermajority in the Senate. No doubt it would require more than cosmetic changes to the government-heavy plan Democrats have drafted. But it is not impossible. It has been done countless times before on major legislation. And it is certainly what the public is telling their elected leaders they want to see happen.

If, however, the Democrats continue to insist it’s their bill or no bill, the odds are increasing by the day that it will be no bill.

posted by James C. Capretta | 5:53 pm
Tags: reconciliation, Senate bill, House bill, U.S. Conference of Catholic Bishops
File As: Health Care

After the House Vote

Conservatives need to hammer home four points to shift indepedent voters and moderate Democrats even more decisively against enactment of Obamacare.

One, Obamacare will impose substantial new costs on the already insured middle class. The bill approved by the House establishes one-size-fits-all insurance rules which will drive up premiums and raise taxes on the health-care sector which will be passed onto middle-class health-care consumers.

Two, Obamacare will destroy jobs. The House bill would impose an 8 percent payroll tax on all but the smallest employers who do not offer health insurance and a 5.4 percent income tax surcharge on higher income individuals who also own small businesses. These taxes will discourage hiring and force layoffs when the number one concern of most American voters is job creation.

Three, Obamacare will ration care. The House bill relies almost exclusively on arbitrary, across-the-board payment rate reductions for health-care providers to achieve savings. If passed, that would just be the beginning of it. Despite all of the talk of painless efficiency measures, the Democratic sponsors really have no plan to control costs except with price-setting. Always and everywhere, price controls drive out willing suppliers of services, leading to queues and waiting lists.

Fourth, Obamacare is entirely unnecessary. We can fix the problems in U.S. health care without a government takeover by pursuing sensible, targeted reforms. With properly structured high-risk pools and insurance regulation, pre-existing conditions could be insured at reasonable costs. With tax credits and small-business reforms (such as those implemented in Utah), most of the uninsured would have access to coverage. And the competitive model used to deliver Medicare drug coverage should serve as the basis for controlling costs.

posted by James C. Capretta | 4:22 pm
Tags: Obamacare, House bill, tax hikes, rationing
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

The Insanity of the House Bill

At the beginning of this year, there was great hope in some circles that Congress would enact significant health-care reform that would address the central, vexing problem of today’s arrangements, which is rapidly escalating costs. That hope has waned considerably as the Democrats controlling the process have made a series of decisions revealing that their only real ambition is to get to a signing ceremony for something called “universal coverage.”

Still, there have been some true believers in the business, health, and policy communities who have thought it better to keep their powder dry and not criticize the emerging legislation based on the hope that some level of constructive engagement might improve matters. Fat chance. The bill unveiled today by House Speaker Nancy Pelosi should put to rest for good the thought that this year’s legislative process will produce anything other than a total fiscal and health policy disaster.

To sum it up, the House bill is nothing but a massive, uncontrolled federal entitlement expansion — at a time when the central, looming threat to the nation’s long-term prosperity is the unaffordable health-care entitlements already on the federal books. To create the impression of fiscal responsibility, the bill is jury-rigged with budget gimmicks, implausible eligibility rules, and arbitrary, government-dictated price controls — that have been tried repeatedly without success — to make it look like it costs “only” $900 billion over a decade.

Let’s start with the much ballyhooed effort to bring the costs of the bill down from the $1.5 trillion budget-buster which was introduced by House leaders in July. There are two significant changes from that earlier version. First, the bill simply drops altogether the repeal of the so-called “sustainable growth rate,” or SGR, formula. The SGR, ironically, is a product of just the kind of central planning that is at the heart of Obamacare. It was designed by the Medicare bureaucracy to control costs, but all it has done is cut doctors’ fees while volume soars. The scheduled cut in 2010 is for more than 20 percent. Everyone knows it must be fixed, but the full, ten-year costs of repeal approaches $250 billion. The Democratic solution? Repeal it separately from Obamacare — and borrow more. Presto. The House bill now “costs less.” The Congressional Budget Office (CBO) projects that the Obama budget will push the nation’s debt to more than $17 trillion in 2019, up from $5.8 trillion at the end of 2008. It’s only a matter of time before that level of borrowing precipitates a crisis. The last thing our country needs is more unfinanced Medicare spending.

The second major change is a massive expansion of Medicaid, raising the upper income cutoff from 133 percent of the federal poverty line in the July bill to 150 percent in today’s version. According to CBO’s estimate of the plan released today, the total, ten-year cost of the higher Medicaid enrollment will be $425 billion. By 2019, some 50 million Americans will be enrolled in the program (and its companion program for children’s coverage), compared to 35 million under current law. Even before this massive expansion, CBO projected that the combined costs for Medicare and Medicaid would increase from 5.3 percent of GDP in 2009 to 9.7 percent in 2035. Adding more enrollment to Medicaid will only make matters much worse. Indeed, CBO acknowledges that the additional spending on Medicaid in the House bill is likely to increase at an annual rate of about 8 percent indefinitely. That’s not surprising. Medicaid spending has been escalating rapidly for nearly half a century, and the House bill does nothing to change the trajectory. It is true that Medicaid expansions appear to cost less than private insurance coverage, but that’s only because Medicaid shifts costs to private payers by underpaying doctors and hospitals.

Still, CBO’s cost estimate shows neutrality, at least on paper. How? There’s a new, nearly $500 billion income-tax increase, aimed at high-income households. Of course, many of these households own businesses, and so the Democrats are planning a heavy new tax on just the individuals who may be in a position to do some hiring in a recession.

Then there are the payment-rate reductions in Medicare and Medicaid, totaling more than $400 billion over a decade. The president and many other Democrats have claimed for months that they were going to make health-care delivery more efficient, thus painlessly finding new money to pay for more coverage. Nothing of the kind is in the House bill. Instead, there are scores of provisions that are essentially more of the same price-setting payment regulations that have failed so miserably in the past. They get scored by CBO, but that doesn’t mean they will happen. In fact, they have been tried countless times over the past quarter century, and have never worked to permanently slow the pace of rising costs. All they ever really do is shift more costs onto middle-class enrollees in private insurance.

There’s much else in this bill that would do great damage to the health sector and the American economy. Heavy payroll taxes that will reduce low-wage employment. Mandates on employers that will drive up costs and reduce wages. Intrusive federal bureaucracies that will come between patients and doctors. They can do a lot of damage in nearly 2,000 pages.

Fortunately, there remains one very powerful opponent to what House and Senate Democrats are considering — the public. Most Americans want no part of this massive liberal overreach. And there’s still time to put a halt to the madness. But the window is closing.

posted by James C. Capretta | 6:28 pm
Tags: Obamacare, Nancy Pelosi, House bill, Medicare, Medicaid, tax increase, small businesses
File As: Health Care

HHS Actuary Says House Bill Will Increase Health Spending

Yesterday, the Chief Actuary at the Department of Health and Human Services, Rick Foster, issued a lengthy memorandum (available here in PDF format) analyzing the House version of health-care reform. The memo makes several devastating points about the House, not the least of which is that it would increase overall national health spending, not reduce it. I will have much more to say about this memo shortly.

posted by James C. Capretta | 1:08 pm
Tags: Rick Foster, HHS, increased spending, House bill
File As: Health Care

The House Bill: A $10 Trillion Unfunded Liability

Amid all the flurry of news in the hectic last days before the House recessed for the August break, something important went largely unnoticed — a development that should be the knockout blow to the kind of sweeping health-care bill the Obama administration is pushing, at least as it has been cobbled together in the House.

In a July 26 letter to the Ranking Republicans on four key committees (Ways and Means, Energy and Commerce, Education and Labor, and Budget), the Director of the Congressional Budget Office (CBO), Doug Elmendorf, made it clearer than he ever had before that the bill, in its original July 14 form, would dramatically widen the already large gap between long-term government revenue and spending. Here’s the key paragraph:

Looking ahead to the decade beyond 2019, CBO tries to evaluate the rate at which the budgetary impact of each of those broad categories would be likely to change over time. The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade. The reductions in direct spending would also be larger in the second decade than in the first, and they would represent an increasing share of spending on Medicare over that period; however, they would be much smaller at the end of the 10-year budget window than the cost of the coverage provisions, so they would not be likely to keep pace in dollar terms with the rising cost of the coverage expansion. Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade. In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year budget window.

In other words, CBO expects the spending in the bill would grow at a rate of least 8 percent annually into the indefinite future, while the revenue to pay for it will only grow at about 5 per cent per year. Hence the “substantial increases” in federal budget deficits beyond 2019.

Although CBO declined to specify any actual deficit numbers beyond 2019, they can be easily calculated, in rough terms, from the information provided in Elmendorf’s letter.

By 2030, if the spending associated with the coverage provisions rises 8 percent per year after 2019 and the revenue rises by 5 percent, the bill would add more than $200 billion per year to currently projected budget deficits. By 2048, the annual deficit increase would top $1 trillion — and only go up from there.

Of course, the federal government is already in a deep hole due to the projected rapid cost increases in Social Security and Medicare. The trustees for those programs reported earlier this year (see here and here) that Social Security’s seventy-five year unfunded liability stands at $5 trillion, while Medicare’s has reached at an astounding $36 trillion.

It is possible to do a similar “unfunded liability” calculation for the new entitlement spending in the House bill. Assuming a discount rate of 5.7 percent per year, the bill would add more than $10 trillion over seventy-five years in new unfunded government obligations.

Of course, some amendments were adopted to assuage the Blue Dogs in the Energy and Commerce Committee. The fate of those amendments is uncertain at best, however, as Speaker Pelosi has indicated the contents of the yet-to-be-written merged bill from the three committees will be decided later (to attract votes of course). But even if the Blue Dog amendments survive, they would do very little to change the basic direction of the bill’s long-term costs.

CBO recently projected that the federal budget deficit is already on track to reach nearly 15 percent of GDP in 2035, well above the historical average of about 2 to 2.5 percent. The last thing Congress should be doing is making the problem worse with new runaway costs. Indeed, the president himself has said he won’t accept a bill that makes our long-term budget problem worse. How he squares that with full support for the emerging House bill is anybody’s guess.

posted by James C. Capretta | 5:44 pm
Tags: House bill, projected costs, Doug Elmendorf, CBO, spending, deficit, Medicare, social security, Blue Dogs, Nancy Pelosi
File As: Health Care

The Baucus Planís Regressive Employer Mandate

Let’s give the bipartisan “group of six” senators — Finance Committee Chairman Max Baucus and five of his committee colleagues — their due. More than any others, they are responsible for the likely derailment of the House’s massive health care overreach.

Rank-and-file House Democrats — and not just the Blue Dogs — are loathe to vote for a $1.5 trillion spending increase, $800 billion in tax increases, costly mandates on businesses and individuals, and an increase in the federal budget deficit of $239 billion over the first decade (and much more in the years following) if Senate Democrats are going to go in an entirely different direction. Especially not after the “cap and tax” vote, which is going to haunt House Democrats all the way until November 2010. House Speaker Nancy Pelosi as much as admitted that many in her caucus are not going to stick their necks out again when she said Monday night, “We’re waiting to see what the Senate will do.”

While putting up a major roadblock to further proceedings in the House is certainly a praiseworthy accomplishment, that’s about the only good thing that’s likely to come out of what is being worked on by the bipartisan group behind closed doors in the Senate, at least as understood from press accounts of the emerging “Baucus plan.”

On the surface, there is a sense that Sen. Baucus and his colleagues are pursuing a more sensible approach, sensitive to economic concerns and more aggressive on “bending the cost-curve.” But that’s really a false impression. At its core, the Baucus plan contains the same elements that make the House bill flawed and the first step toward a full governmental takeover of American health care.

It all starts with the Democratic insistence on “universal coverage.” With that as the non-negotiable goal, the Baucus plan goes down the very same road as the House bill, with costly and regressive employer and individual mandates which essentially force tens of millions of people to sign up with a plan offered at the workplace, whether they want to or not.

Today’s news coverage is filled with stories indicating that the group of six has apparently agreed not to impose a mandate on employers, opting instead to impose a “free rider tax” on firms whose workers end up getting subsidized coverage in the so-called “exchanges.”

But this is a distinction without a difference. Businesses not offering insurance today would still be forced to pay a hefty fine for all of their workers who got newly subsidized insurance through the so-called “exchanges.” That’s the exact same concept behind the House’s “pay or play” employer mandate. Employers either get their workers into job-based plans — or else. How is that not a mandate? Yes, there may be more flexibility for firms regarding what they actually have to provide in the Baucus plan. And because workers above 300 percent of the poverty line won’t be eligible for subsidization, their employers may not have to pay a fine for not offering insurance to them. But the reality is that just about every firm has some low wage workers on their payroll, which means the vast majority of employers will have to organize and pay for insurance for all of their employees to avoid getting fined for those who might end up in the federal subsidy program.

Of course, what has not been mentioned enough is how regressive this all is. Employers don’t “pay for” health insurance. In competitive labor markets, they reduce what they pay out in cash by the premiums they must pay for health insurance. In other words, it’s always the workers who pay for a job-based health plan. In both the House bill and the Baucus plan, tens of millions of low- and middle-income workers will be forced to sign up for employer-organized insurance, with no additional help from the government. That will mean large pay cuts as uninsured families are forced to pay expensive premiums they don’t today. That’s the way the authors of these bills are able to say they are “covering everybody” for “only” $1 trillion. Indeed, the health care bills under consideration in Congress — including the Baucus plan — would cost much, much more if the Democratic sponsors of them weren’t so willing to make the very workers they say they represent pay massive and regressive hidden taxes.

posted by James C. Capretta | 10:37 am
Tags: Max Baucus, Blue Dogs, mandate, deficit, cap and tax, Nancy Pelosi, House bill, universal coverage, mandate, free rider tax, pay or play
File As: Health Care

The Prognosis for ObamaCare

The House bill would add $239 billion to the federal budget deficit over the coming decade, according to Congressional Budget Office (CBO) projections. That’s bad enough, coming as it would on top of the $11 trillion in deficits that are already expected to occur over the period 2009 to 2019 under the Obama budget plan.

But that’s really just the beginning of it.

Yesterday, CBO confirmed that the House bill would do even more fiscal damage in its second ten years. Here’s the crucial paragraph, from a letter sent by CBO director Doug Elmendorf to the four Ranking Republicans on the key House committees:

The net cost of the coverage provisions would be growing at a rate of more than 8 percent per year in nominal terms between 2017 and 2019; we would anticipate a similar trend in the subsequent decade. The reductions in direct spending would also be larger in the second decade than in the first, and they would represent an increasing share of spending on Medicare over that period; however, they would be much smaller at the end of the 10-year budget window than the cost of the coverage provisions, so they would not be likely to keep pace in dollar terms with the rising cost of the coverage expansion. Revenue from the surcharge on high-income individuals would be growing at about 5 percent per year in nominal terms between 2017 and 2019; that component would continue to grow at a slower rate than the cost of the coverage expansion in the following decade. In sum, relative to current law, the proposal would probably generate substantial increases in federal budget deficits during the decade beyond the current 10-year-budget window.

That really should do it. The Blue Dogs are in this fight, in part, because of their stated concerns over growing budget deficits and unaffordable entitlements. The president reiterated again last week that he is determined to sign a bill that slows the pace of rising costs and improves our long-term fiscal outlook.

Well, here’s a bill that would go in exactly the opposite direction from what the authors say is their objective, according to CBO. It would add a third runaway health care entitlement program to the two already on the books (Medicare and Medicaid) with no prospect in sight that spending on any of them will ever come in line with the government’s revenue base. A back-of-the-envelope estimate indicates the House bill would run up a cumulative federal budget deficit of at least $700 billion in its second ten years, and possibly much more. That’s on top of budget deficits that are already unsustainable and that will put the American economy at considerable risk of crippling interest rates or hyper-inflation.

This is not a close call. The Democrats have no choice. For the sake of the country, they have to go back to the drawing board and work with Republicans on something much more sensible.

[To read the NRO symposium on ObamaCare in which this post originally appeared, with Newt Gingrich, David Gratzer, and Amy Menefee, click here.]

posted by James C. Capretta | 12:50 pm
Tags: CBO, deficit, ObamaCare, House Bill, Doug Elmendorf, Blue Dogs, projected costs
File As: Health Care

The House Bill Costs Far More than $1 Trillion

The health care bill under consideration in the House will cost at least $1.5 trillion over a decade, not $1 trillion as advertised, and raise taxes by $800 billion over the same period. Moreover, the bill is likely to cost even more than that because of built-in pressure for further legislative expansion. These are some of the points I make in this new piece, up at Kaiser Health News today.

posted by James C. Capretta | 12:21 pm
Tags: House bill, projected costs
File As: Health Care

On-the-Fly Audacity

Yesterday, the Director of the Congressional Budget Office (CBO) did everyone a favor and spoke some serious truth to power: The health care bills under consideration in Congress will make our long-term budget outlook worse, not better, Elmendorf said, and that would be very bad for our economic future.

Elmendorf’s assessment, welcome as it certainly was, shouldn’t have been a surprise to anyone, especially the Democratic authors of the bills now under consideration. They more than anyone else should know that the bills moving through their committees would add massive new entitlement spending to the federal budget while making only the most marginal of changes to the prevailing financial incentives which are pushing costs up rapidly every year. What did they think Elmendorf would say?

Still, Elmendorf’s assessment seems to have caught some Democrats by surprise, starting with the president. Just days earlier he told a gathering of skeptical Blue Dog Democrats that they should get behind the House bill because it would deliver savings beyond the ten-year window. That wasn’t a credible assertion even then (see this post from Tuesday), but, in the wake of Elmendorf’s testimony, it really has no standing.

So what’s the administration next move? Desperate times apparently call for some serious audacity.

Today, the Obama administration delivered one of the more remarkable presidential power grabs seen in recent memory (the transmittal letter is here, and a section-by-section description of the proposal is available here).

The president has decided — just days before the deadline he himself set for passage of health care bills in both chambers of Congress — that he wants to create a new and very powerful executive branch agency, the Independent Medicare Advisory Council (IMAC), which would be accountable only to him and have the authority to re-write the Medicare program from top to bottom by executive memo. Now that’s audacious.

The council would be made up of five members, all selected by the president and confirmed by the Senate. The president could fire any one of them for cause. They would have two jobs. First, each year, the council would make recommendations to the president regarding inflation updates to Medicare’s payment rates for hospitals, doctors, and other suppliers of services. Those recommendations, if approved by the president, would automatically go into effect in thirty days unless Congress passed a resolution disapproving them — which the president would also have to sign into law. Of course, if the president approved the council’s original package of recommendations, it is unlikely he would sign a congressional disapproval resolution overturning them. So, as a practical matter, the proposal would force Congress to find a two-thirds supermajority to stop presidentially-approved IMAC recommendations from going into effect.

That would be a remarkable shift of power on its own, but the president’s proposal doesn’t stop there. Not only would the council make recommendations on payment updates, it would also have the authority to propose other “Medicare reforms” which would go into effect unless Congress could muster veto override majorities in opposition. What are “Medicare reforms”? From the write-up, it seems they could be just about anything. Changes in beneficiary cost-sharing. New rules for establishing qualified hospitals and doctors. Penalties for physicians who don’t follow government guidelines. Pretty much anything except for the payroll tax and premium structure. The only parameters are that the “reforms” must improve the quality of medical care and the efficiency of Medicare operations.

The administration is touting this as a belated cost-control idea. It’s not. By itself, it doesn’t change anything, as there are no hard targets that must be hit. So it doesn’t answer the Elmendorf critique that the bills now moving in Congress, even if such a provision were added to them, don’t bend the cost-curve of governmental health spending.

Still, the fact that the administration is pushing this bill at all speaks volumes. Here’s a Democratic president telling a Democratic Congress that it can’t be trusted to run Medicare anymore. That’s stunning, especially so because Democrats, including the president, are working feverishly to exert additional governmental control over health insurance for working age Americans. If Congress can’t run Medicare well, what possible rationale is there for standing up another government-run insurance plan?

Nonetheless, the audacity is something to behold. Certainly unilateral executive branch authority to re-write entitlement programs from scratch would have come in awful handy during the Reagan and Bush years. But that may dawn on others as well. Like Medicare beneficiaries, physicians, hospitals, labs, nursing homes, and, of course, House and Senate members too. Good luck, Mr. President.

posted by James C. Capretta | 11:55 am
Tags: CBO, Doug Elmendorf, Blue Dogs, House bill, IMAC, Medicare, cost control
File As: Health Care

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