Nancy Pelosi


Voters Arenít NaÔve

The New York Times invited me to participate in an online symposium with Robert Reich, Gail Wilensky, and others to debate the odds on whether the Democrats' health care plan will pass into law. Here's an excerpt from my contribution:

Despite the enormous pressure from the White House, the odds remain against passage, Democratic catastrophe and all.

The votes Speaker Pelosi must get would mainly come from moderates and conservative members elected in highly competitive districts. Their constituents are trending solidly toward opposition to the bill, primarily for cost reasons....

The public is not naïve. They know government entitlement programs have a strong tendency to grow rapidly once put in place. What they see coming down the pike is another under-financed program, at a time when the federal government is already running up the nation’s debt at an unprecedented pace because previous commitments are now unaffordable.

Their concern is well placed, and should be enough to force Congress to come back later with a plan that is less risky for the country’s economic future.

You can find my contribution to the NYT symposium online here.

posted by James C. Capretta | 3:53 pm
Tags: Nancy Pelosi, Obamacare, voters
File As: Health Care

Debating Cost-Control

In my latest column for Kaiser Health News, I examine competing claims about the health care legislation now in Congress:

In recent days, a growing chorus of voices has expressed alarm that the health care legislation emerging in Congress does not come close to “bending the cost-curve” as President Obama has promised it would. David Broder and Robert Samuelson in the Washington Post, David Leonhardt in the New York Times and Harvard Medical School Dean Jeffrey Flier on the editorial page of the Wall Street Journal have all, to varying degrees, said the health care plans being developed by Congressional Democrats would vastly expand governmental health care commitments without fundamentally altering the arrangements that today push costs rapidly upward every year.

Now, top officials in the Obama administration are pushing back hard with their own “narrative” on the cost-containment potential of the health care bills in Congress. Specifically, White House Budget Director Peter Orszag and Director of the Office for Health Reform Nancy-Ann DeParle contend in a series of recent interviews that the health care plan introduced by Senate Majority Leader Harry Reid is more than sufficient to meet the “bend the curve” test. Their views have been echoed by MIT Economist Jonathan Gruber, who has been arguing that the Reid bill contains every conceivable idea to slow the pace of rising costs. And Ronald Brownstein of The Atlantic has hailed Senator Reid’s legislation as a “milestone” in the health reform journey because of its superior cost-control provisions.

To get a sense of who’s right here, some perspective is necessary. Both the House-passed bill and Senator Reid’s proposal would put in place the most costly entitlement expansion in more than four decades. They would add millions of households to the Medicaid program and promise all Americans between about 100 and 400 percent of the federal poverty line — some 127 million people under the age of 65 in 2008 — that their health insurance premiums will not exceed a certain percentage of their incomes. They would also extend subsidies to small businesses offering insurance coverage. The Congressional Budget Office expects the combined federal cost of these new commitments to reach about $200 billion by 2019 and to increase eight percent annually every year thereafter.

You can read the whole thing here.

posted by James C. Capretta | 12:07 pm
Tags: Jeffrey Flier, Robert Samuelson, David Leonardt, David Broder, Peter Orszag, Nancy-Ann DeParle, Harry Reid, Nancy Pelosi, Ronald Brownstein
File As: Health Care

Not Even Health-Care Trumps Pro-Abortion Radicalism of Obama Democrats

The stated number-one priority for Democrats is passage of a government takeover of American health-care. President Obama and his allies in Congress have essentially bet the future of their party on securing something radical and sweeping. Congressional leaders have set aside everything else until they can pass some version of Obamacare, and they have pledged to do whatever is necessary — taxpayers beware — to reach their goal.

But there’s apparently one thing most Democrats aren’t willing to do, even if it jeopardizes their health-care ambitions. And that’s back down on their unwavering commitment to abortion radicalism.

For months, pro-life Democratic Congressman Bart Stupak has warned Democratic leaders that he and a sizeable bloc of like-minded colleagues would vote against the Democratic health-care bill in the House if it didn’t clearly and unambiguously preclude taxpayer funding of elective abortions in a reformed system of subsidized health insurance.

This should be a no-brainer for House Democratic leaders. Giving Rep. Stupak what he wants — which is a clean vote on a no-funding-for-abortion amendment — would remove one more roadblock on their way to the nirvana of government-run health insurance.

But Speaker Pelosi apparently sees a big problem with that approach, which is that Rep. Stupak would very likely win, perhaps cementing for good in permanent law a strong prohibition against taxpayer funding of abortions in a national health-care plan. To abortion radicals, that’s simply too much to stomach.

So instead of giving in to Stupak, House Democratic leaders are apparently working overtime on another course of action, which is to try to divide the Stupak bloc and pick off enough of his fellow Democrats with minor tweaks to the existing bill to allow passage.

Squishy pro-life Democrats shouldn’t be fooled. If they enable passage with their votes of a health-care bill that facilitates public funding of health insurance covering elective abortions, they will be held accountable by pro-life voters. It won’t matter if every pro-abortion politician in the country, from President Obama on down, asserts that the plan doesn’t pay for abortions. Pro-life voters won’t listen to them. They will listen to more trusted voices, and if they say that the health-care plan expands the abortion license, that’s all that will matter.

President Obama came in to office proclaiming a new openness to the pro-life position. But that was just a lot of talk to divide the conservative coalition. Actions speak louder than words. And his administration and its allies in Congress are using every tool at their disposal to make elective abortions a part of mainstream insurance coverage. Any Democrat who helps them to do so is no pro-lifer.

posted by James C. Capretta | 10:18 am
Tags: Bart Stupak, Nancy Pelosi, federal funding of abortion, pro-life Democrats
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

The Death of the House Bill

In July, the president and the Democratic leaders in the House of Representatives argued that the time for analysis and debate was over and that the House should pass its version of health-care reform before the August recess.

Now, just three months later, House Democrats are saying that the bill they were in such a hurry to pass during the summer is old news and irrelevant. What matters now, they assert, is their “new and improved” version of reform, which they promise will be much better and easier to pass. Of course, they aren’t sufficiently confident in its virtues to open it up to public scrutiny just yet. No, they assert the bill will be different even though the legislative plan is clearly going to be just as it was in July. House Democrats are hoping to unveil their updated version of Obamacare as close as possible to a vote, probably in November, so that there is no time for public opposition to stop it.

It might work. But then again, that’s what they tried to do with version 1.0. The original bill was made available on July 14 with the intention of having a vote in the full House on July 31. That strategy failed miserably because it took just a few days for the public to figure out that what House Democrats were pushing represented far more governmental control of health care than the public was comfortable with. Momentum toward passage dwindled.

Now even the original sponsors of the House bill are walking away from it. On Wednesday, Representative Pete Stark (D.-California), the chairman of the Ways and Means Health Subcommittee, responded to a new and devastating analysis of the original House bill (as passed by the Ways and Means Committee on July 17) by saying that it is beside the point. House leaders are constructing a new version, so the new analysis is “out-of-date relative to what will ultimately be voted on in the House,” Representative Stark said.

The analysis in question was conducted by the Chief Actuary at the Centers for Medicare and Medicaid Services (CMS). Given what it says, it’s understandable that Representative Stark would now disown the bill he helped write. Here are some of the findings:

  • Total national health spending would increase by $750 billion over the next decade. (So much for “bending the cost curve.”)
     
  • The overall cost of the House bill will be $1.2 trillion over the period between 2010 and 2019. By 2019, the annual cost of the entitlement expansions would be $236 billion, rising at a rate of 9 percent annually. After all this spending, there would still be 23 million uninsured residents in 2019.
     
  • The president’s signature initiatives to slow the pace of rising costs — comparative effectiveness research, prevention and wellness efforts, and payment changes in Medicare — won’t work as advertised. The savings are almost non-existent.
     
  • The cuts in Medicare Advantage plans would result in “less generous benefit packages” for millions of seniors. The actuaries estimate the House’s Medicare Advantage cuts, which are unlikely to change in any new version of the bill, would force about 8.5 million seniors out of the coverage they would prefer and back into the traditional program. (So much for “keeping the coverage you have today.”)
     
  • Democratic proposals to impose arbitrary, across-the-board payment rate cuts for hospitals, nursing homes, and home health agencies based on presumed “productivity gains” are unlikely to work as planned. The actuaries suggest that some institutions won’t be able to hit the targets because health care is more labor intensive than other sectors of the economy. Consequently, the cuts could force some organizations to leave the Medicare program, thus “possibly jeopardizing access to care for beneficiaries.”

In recent days, House Speaker Nancy Pelosi and her “leadership aides” have let it be known to reporters that they have gotten more favorable reviews of their updated bill from the Congressional Budget Office (CBO). According to press accounts, the new bill, which is not available to the public, comes in under $900 billion and will cut the federal budget deficit for two decades.

From a process standpoint, CBO should never allow members of Congress to characterize the findings of confidential cost estimates without consequences. Undoubtedly, CBO staff is told not to share its analysis with anyone until the bill is unveiled. But if House leaders decide to go public with CBO’s apparent bottom line, CBO really should be obligated to go public with the entire analysis to ensure no misunderstanding. Otherwise CBO’s findings can be distorted. House Democrats are trying to build momentum again toward passage by creating the impression they have found a painless way to turn their budget-busting bill from July into one that actually cuts the deficit. It’s CBO’s job to make sure no one gets away with this kind of phony free-lunch argument. If in fact a new version of the House bill reduces the federal budget deficit over two decades, someone is paying. Who? Here’s betting that’s it’s the American middle class. And as soon as that becomes known, the new updated House bill is likely to become just as unpopular as the now dead and buried old one.

posted by James C. Capretta | 10:37 pm
Tags: CBO, CMS, House, Ways and Means, Pete Stark, Medicare Advantage, Nancy Pelosi
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