Health Care


The Trouble with the Super Committee

September 2, 2011

I have a new column up at e21 on the ups and downs of the upcoming budgetary “super committee”:

As Congress gets set to reconvene after Labor Day, all eyes have turned toward the so-called “super committee” — the special budgetary panel created by the debt limit deal. That’s understandable because the super committee has the potential to be a very, very powerful force in Washington. As constituted, if seven of the twelve members of the committee agree to a proposed deficit reduction plan, it will be brought up for an up or down vote in the House and Senate — without the possibility of amendment from non-super committee members. Further, and even more importantly, the super committee’s legislative proposal can’t be filibustered in the Senate. That effectively lowers the bar of support needed to get a super committee-endorsed plan through the upper chamber by nine votes — from a super majority of 60 to a simple majority of 51.

The committee’s legislative mandate is also sweeping. It is charged with finding a minimum of $1.2 trillion in deficit reduction over the coming decade to avoid the same amount getting cut automatically and indiscriminately from a wide array of spending programs, including Medicare and the defense budget. To meet its deficit cutting objective, the super committee has the authority to tackle tax and entitlement reform, health care, the budget and appropriations process, even government reorganization. All it takes to get something big and serious moving through Congress is for seven of the super committee members to support it....

You can read the whole column here.

posted by James C. Capretta | 2:40 pm
Tags: super committee, budget
File As: Health Care

How Should Washington Control Medicare Spending?

September 1, 2011

On May 19, I participated in a public forum in Washington, D.C., sponsored by the Heritage Foundation, called “How Should Washington Control Medicare Spending?” My remarks focused on why a market-based reform of Medicare would be far superior to government-imposed cost controls. A transcript of the event is now available here, and the video is here. My slides are also available here.

posted by James C. Capretta | 1:13 pm
Tags: Medicare
File As: Health Care

Freeze, investigate, then replace Obamacare

August 29, 2011

I have a new Op-Ed with James Wootton of Partnership for America in the Washington Examiner:

President Obama says he wants a grand bargain on the budget with no ideological "lines in the sand."

Yet he insists that the costliest and most controversial program in decades — the Patient Protection and Affordable Care Act (Obamacare) — be taken off the table. That won't fly. Congress should unwind the health law in three quick steps: freeze, investigate and replace....

Read the whole piece here.

posted by James C. Capretta | 1:27 pm
Tags: repeal
File As: Health Care

Yes, It Is Obama’s Fault

The downgrade, though questionable, is a richly deserved rebuke for the president.
August 9, 2011

Let’s start by partially agreeing with Paul Krugman’s weekend column in the New York Times, in which he correctly calls out Standard and Poor’s for displaying an unusual degree of chutzpah in downgrading the creditworthiness of the United States government. After all, this is the same firm that was — at best — asleep at its lookout post during the worst wealth-destroying financial calamity in 75 years. Now, just days after Congress and the president agreed on a ten-year $2.1-trillion spending reduction plan, we are supposed to listen to S&P’s political prognostications ... because why?

Still, it’s hard to escape the conclusion that there is an element of justice in what has transpired because the S&P downgrade is such a clear and richly deserved public rebuke to President Obama. He and his allies have filled the airwaves since last Friday’s decision with their blame-game spin, trying to pin the downgrade on anybody but themselves. It won’t work. This happened on the president’s watch and was entirely preventable. But it happened because, at every crucial juncture over the past two and a half years, the president has cynically put his own political fortunes above what would be best for the country.

Recall that in February 2009, the White House convened a “Fiscal Responsibility Summit” at which the president pledged a new era of discipline and promised to tackle the problem of rising entitlement costs. He could have done so in 2009 or 2010 without the need for any Republican cooperation, given the huge Democratic majorities in both the House and the Senate. But, instead of making fiscal consolidation a priority, the president chose instead to use his once-in-a-generation Democratic majorities to secure an activist agenda that liberals had been dreaming of for years. First, there was an $800 billion “stimulus” bill that was loaded with inefficient public spending projects. Then came the $1 trillion health care plan that included the largest expansion in entitlement spending since the 1960s. These efforts, both highly controversial, exhausted all of the energy in the Congress. Deficit reduction never happened, and never really came up.

Meanwhile, to fend off questions about how exactly he planned to head off the fiscal crisis that most experts could see was rapidly approaching, the president appointed a debt commission, led by Erskine Bowles and former Senator Alan Simpson. Conveniently, the commission was given a reporting deadline after the November 2010 election, allowing the president and Democratic candidates to deflect questions about the deteriorating budget outlook during the election season until after the commission issued its report. In the end, this ploy did them no good, as Democrats were routed in an election dominated by mounting fiscal concerns around the country. The landslide put Republicans back in control of the House of Representatives.

In response to the election, the White House had a rare opportunity to create a political environment conducive to bipartisan compromise, especially on entitlements. But again the president chose otherwise. He completely ignored the Bowles-Simpson recommendations in his 2012 budget submission to Congress, and indeed avoided proposing anything controversial at all in what he submitted. The result was a budget request that called for an astonishing $11 trillion in deficit spending over the period 2011 to 2021, with federal debt rising to nearly 90 percent of GDP — well past the danger zone.

At the time, some speculated that the president submitted such an irresponsible plan because he wanted to preserve his ability to attack the inevitable Republican counter and thus boost his re-election prospects. Others said No, that couldn’t possibly be. Obama isn’t that cynical. Oh yes he is!

Led by Budget Committee Chairman Paul Ryan, the House passed a budget plan that cut spending by $6 trillion over a decade, stabilized federal deficits and debt on a permanent basis, and kept federal taxation at its historic average. If this plan had been adopted, there would have been no downgrade by S&P or anyone else. It was a serious plan, with fundamental and structural changes in the health entitlement programs — Medicare and Medicaid — to move away from the failed command-and-control model toward one in which the programs’ participants would call the shots.

Once again, the president could have used passage of the Republican budget in the House to move toward bipartisan compromise. But again he chose otherwise. In a stunningly partisan speech, the president launched a barrage of demagogic attacks on the Ryan budget. He essentially called it un-American and unworthy of any consideration whatsoever. And he pledged to fight to maintain the entitlement status quo, no matter the consequences.

It was plain from the president’s words that April day that he had no intention of ever working with Republicans on serious entitlement reform. What he planned to do was to relentlessly attack their plan — the one and only plan on the table that would actually fix the problem and reduce the risks of a debt-induced calamity — in the hope that such attacks would boost his chances of re-election. If his partisan political maneuvering meant that it would be near impossible to work with Republicans on the budget, and thus more likely that he was putting the nation at greater economic risk, so be it.

Democratic political operatives everywhere were ecstatic with the president’s choice. They sensed they were on their way to 2012 success.

But a funny thing happened on the way to a second term. It turns out that the presidency can’t always be just about cynical political games. At some point, the leader of the country must actually lead and solve problems, even if that means cooperating with his political opponents.

Since taking office, President Obama had had multiple opportunities to steer the country away from the fiscal abyss. But at every point, he has had other priorities — passing a massive health care entitlement, satisfying his liberal base, and most especially protecting his chances for re-election. In normal times, he might have gotten away with such self-centered governance. But these aren’t normal times. In 2012, the president could very well find that what seemed like clever maneuvering on the budget has hurt his re-election effort as much as it has hurt the country.

[Cross-posted to The Corner.]

posted by James C. Capretta | 5:31 pm
Tags: credit downgrade, President Obama
File As: Health Care

Why the Still-Looming Debt Crisis is a Health Care Crisis

August 4, 2011

Yuval Levin and I have a new article up at The Weekly Standard on why the debate over spending cuts versus tax increases doesn¸’t get to the root cause of the still-looming debt crisis — namely, spiraling health-care costs:

Simply put, our coming debt crisis is a health care cost crisis. In 1971, the government spent 1 percent of GDP on Medicare and Medicaid. Four decades later, spending on these two programs has more than quintupled to 5.6 percent of GDP last year. In its latest long-term outlook document, published in June, the Congressional Budget Office projected that spending on these programs, and on the new entitlements created by Obama-care, will reach 10.4 percent of GDP by 2035 and 13 percent by 2050. In the meantime, all other government spending combined (including Social Security, defense, domestic discretionary spending, and everything other than interest on the debt) will actually decline, from 17 percent of GDP today to 14.6 percent in 2035 and 14 percent in 2050....

[President Obama’s proposed cuts to Medicare] might produce marginal savings for a time, but they would not come close to addressing the heart of the problem. They would lock in place the immensely inefficient open-ended payment structure of Medicare (which is the chief driver of health care cost inflation) and the new health care law’s architecture, with the federal government calling the shots in the health sector. Under such circumstances, cost cutting can only be achieved at the expense of quality care​ — ​and even so it rarely happens. Worse yet, such trivial steps would make real reforms less likely, by letting our leaders persuade themselves they have dealt with entitlements when in fact they would have only bought a little time.

To fix health care and the federal budget, reformers must set their sights on a much more fundamental shift, away from central planning and toward a genuine marketplace in health care ​—​ with cost-conscious consumers subjecting insurers and providers to competitive pressures.

Read the whole article here.

posted by James C. Capretta | 1:15 pm
Tags: debt, Medicare
File As: Health Care

The Debt Deal: A Temporary Truce

August 2, 2011

I have a new post up on The Corner detailing why the debt deal is only a patch, and the real fights are still to come:

Fittingly, the “deal” that has emerged from the protracted, months-long stand-off on the debt limit isn’t so much a deal as it is a (very) temporary truce between the parties. Because, while its passage will result in some real and desirable spending reductions in exchange for a bump up in allowable federal borrowing, it also purposely sets the stage for new confrontations in the months ahead — confrontations that will bring to the surface all of the reasons this battle has been so heated, and which weren’t resolved at all by [the deal]....

For starters, it’s clear that both sides will find it exceedingly hard to live with the automatic cuts that will go into place if no plan comes out of the joint committee, or if the plan that does come out is defeated in the House or Senate. Keith Hennessey estimates that the automatic 2013 cut in defense could reach 10 percent. That’s not responsible, and most Republicans would find it extremely difficult to swallow.

Indeed, the Democrats are hoping that enough Republicans will balk at this prospect that the joint committee will be able to recommend a “balanced package” – meaning something with tax hikes. But as Hennessey notes, the automatic cuts in domestic spending would be nearly as deep as they would be for defense — perhaps 8 percent in 2013. And so it’s not clear who would feel the most pressure. Are rank-and-file Democrats really ready to go along with automatic, across-the-board cuts in education, labor, and health programs? Moreover, the president is the commander-in-chief. No one will get more blame than he will get if the military is hamstrung, and the country more vulnerable, from the cuts that would be imposed by political gamesmanship.

Read the whole post here.

posted by James C. Capretta | 1:15 pm
Tags: debt limit, debt deal, debt
File As: Health Care

Getting to “Yes”

July 25, 2011

With the collapse of the Boehner-Obama talks, it looks as if something closer to “regular order” in the legislative branch will probably be needed to produce the final deal to raise the debt limit. The House is moving toward taking up a plan drafted by the speaker and his lieutenants, and Senate Majority Leader Harry Reid is drafting a competing version for his chamber.

This is a good development. Because it’s been clear for some time now that President Obama has been the real roadblock.

The president and his advisors wanted to take what looked on its surface as a potential problem for them—the need to raise the debt limit—and turn it into an opportunity. They have had three primary objectives in this fight. First, the president has wanted to force congressional Republicans to agree to a large tax hike. Such a hike would partially mask the government’s spending problem for a time (though not permanently), and thus ease the pressure for spending cuts. It would also badly divide the conservative coalition going into an election year. In other words, it would be a real “twofer” for the president and his party and would certainly be trumpeted as such by the mainstream press.

Second, the president has wanted to further advance the Obamacare vision for health care. That has meant no meaningful move toward repeal and replace, and in fact further changes in Medicare and Medicaid that are in the spirit of Obamacare’s central-planning philosophy.

The president’s third objective was to reposition himself politically. His first two years in office were dominated by the so-called “stimulus” proposal and Obamacare — efforts that cemented the electorate’s perception of him as a big spending, big government liberal. Heading into 2012, the president and his advisors desperately want to change his image, especially among independent voters, and they were hoping that a “$4 trillion” deficit-cutting plan would do the trick.

Unfortunately for the president, as the details of his talks with Speaker Boehner have spilled out into the press, it hasn’t helped him shed his well-earned reputation as a big spender. The dominant story line that has emerged is that the president has insisted on a $1.2 trillion tax hike to get a deal, and Republicans have said “no,” especially given the president’s insistence that a serious re-write of the health care entitlements, including Obamacare, is “off the table.” By holding firm, Republicans have — so far — denied the president the ability to shift political blame onto them for the tax hikes he wants to impose on working Americans. Consequently, as matters stand today, the debt-limit talks have only further exposed the president as a big government liberal.

So Republicans have acquitted themselves remarkably well to date. The question is, what should they do now?

First, House Republicans must realize that, at this stage, they have to pass a credible plan through their chamber. Having rejected the Obama “grand bargain,” they need to show the country they are willing to pass a debt-limit increase on reasonable terms to avoid the real, if sometimes exaggerated, risks associated with a debt-limit crisis. The two-step process that Speaker Boehner outlined to his colleagues today looks like it should do the trick in that regard. It would impose discretionary spending caps for a decade, thus producing real restraint on domestic appropriations. The savings — about $1.2 trillion over ten years — would be accompanied by a substantial and immediate increase in the debt limit.

In addition, the Boehner plan would empower a special bipartisan joint committee of House and Senate members to draft further budget-cutting reforms, including entitlement changes. The target would be an additional $1.8 trillion in deficit reduction over ten years. The recommendations of this committee would go to an up or down vote in both the House and the Senate, probably sometime in early 2012.

Senator Reid and his Democratic colleagues are objecting to the Boehner plan on the grounds that it would force another debt-limit showdown in 2012, almost certainly with the same disputes about taxes and entitlements. Fair enough. House and Senate Republicans should be open to a reasonable counter-offer from Senator Reid, especially if it is an offer that could actually pass in the Senate.

The details of course matter immensely here. The legislation to raise the debt limit needs to include real spending restraint, not gimmicks or smoke and mirrors. But if the cuts in a Reid counter-offer are real, and if they are of a size to comfortably allow an even larger bump up in the debt limit, Republicans should be open to moving in that direction if doing so would produce a final deal with Senate Democrats.

Because, from a strategic point of view, even a resolution of the kind Reid is pursuing — one giving the president a debt-limit hike into 2013 — would give Republicans all they need from this fight, if the spending cuts are indeed real and not focused on defense. There would be no “grand bargain” for the president, and no “Gang of Six” plan. There would be sizeable, even historic, spending cuts, with no accompanying tax increase. There would be no tacit approval of Obamacare. And there would be no political fallout from the unpredictable economic turmoil that could accompany a hiatus in federal borrowing.

It’s true that such a deal would also mean giving up on entitlement reform before 2013. But, given what’s happened over the past two months, it’s obvious that genuine entitlement reform isn’t going to happen with this president in the Oval Office.

Republicans have successfully dodged several bullets to this point. It’s now time for them to see that they are in a good position to close a deal on their terms — and then move on.

[Cross-posted to the Corner.]

posted by James C. Capretta | 5:48 pm
Tags: John Boehner, Harry Reid, Barack Obama, debt limit
File As: Health Care

The Gang of Six Disaster: The Worst Plan So Far

July 20, 2011

Confusion among congressional Republicans about their objectives in the debt-limit endgame has increased the possibility that they will stumble into a policy and political disaster over the next two weeks.

Only ten days ago, Republicans appeared to regain their footing when House Speaker John Boehner torpedoed the disastrous “grand bargain” that President Obama was offering. That deal would have forced Republicans to accept a massive $1 trillion tax hike and left Obamacare in place. In return, the president offered more centrally planned cuts in Medicare and Medicaid and other minor entitlement adjustments. Some deal.

But now, along comes the Gang of Six plan, and some Republicans are apparently intrigued by it. They shouldn’t be. It’s a terrible, terrible plan. It will hand the president a huge strategic victory and deliver nothing that the GOP should be seeking in this fight. It’s far, far worse than anything we have seen thus far, and certainly much worse than the McConnell plan.

In a nutshell, the Gang of Six plan would have three parts. Let’s look at each part in turn.

First, there’s a relatively small bill to supposedly save $500 billion immediately with a combination of discretionary spending caps through 2015, a move toward the chained CPI for indexing Social Security and the tax brackets, repeal of the CLASS Act, and other unspecified process provisions. Although unstated, presumably it is this bill that would carry a temporary debt-limit increase to get past August 2, and probably provide about six months of room before another debt-limit increase became necessary.

Republicans must understand that even in this small, initial part of the package, the Democrats are insisting on a tax hike. The chained-CPI proposal will increase taxes along with slowing inflation increases in Social Security.

The second part of the Gang of Six package is far worse. It’s essentially a call for a budget “reconciliation” bill, with no specifics yet available. Senate committees with jurisdiction over taxes and entitlements would be tasked with achieving targeted amounts of savings or tax increases. For instance, the Finance Committee would be charged with reporting out a tax-reform plan that increases taxes by about $2.3 trillion over a decade. That committee would also be charged with finding savings in Medicare and Medicaid, but there’s absolutely no indication of how the savings will be achieved.

Republicans would be foolish to think this process will produce anything worthwhile. The Democrats control the Senate, and all of the committees. They will write the tax and entitlement changes, and look for Republican votes. It’s a recipe for another round of useless mishmash posing as “entitlement reform.” Remember, Finance Committee chairman Max Baucus is an architect of Obamacare. If his committee were to produce any real health-care savings at all, it would be with the same kind of price-setting and central planning that was written into Obamacare. There’s zero chance this process will lead to any meaningful movement away from the Obamacare model.

If this “reconciliation”-style package of tax and entitlement changes gets supermajority support in the Senate, then the Senate would move on to the third part of the Gang of Six proposal: a Social Security reform package that closes the long-term financing gap. Again, with Democrats in control of the Senate and the writing of legislation, this almost certainly would mean another large tax increase. The Social Security plan would then be attached to the legislation containing the other tax and entitlement changes, and sent to the House (probably on a take-it-or-leave-it basis).

In short, the Gang of Six has essentially offered a plan in which Republicans would hand over control of the budget process to Democratic senators and hope for the best. Enough said.

Republicans need to quickly get their bearings and figure out how they want to play the endgame. At this stage, any version of a “grand bargain” will play completely into the president’s hands. It will lead to a massive tax increase, with nothing meaningful on entitlement reform to show for it. The president would get a strategic victory, having forced Republicans to vote for a tax increase without giving up anything real on the spending side. And the conservative coalition would be at war with itself. So drop the idea of a grand bargain.

Next, Republicans must realize that being tactically nimble in this fight will be the difference between success and failure. The conservatives in the House who say they will never, ever vote to increase the debt limit need to realize they are handing all of the leverage to President Obama. To begin with, the budget they support — the Ryan budget that the House Republicans voted for nearly unanimously in April —requires a large debt-limit increase. Indeed, there’s no conceivable budget plan out there that doesn’t require one. Moreover, there is a strong chance that going past August 2 without an increase could completely backfire on the GOP. It’s hard to predict what will happen, but it could be quite chaotic and cause real damage to real investors and businesses. It will almost certainly trigger a very negative public reaction, which will then force Congress to raise the debt limit quickly, one way or another. It’s hard to see how such a confrontation will help Republicans get a better deal.

What conservatives should be doing is seizing the initiative in the House. They should move immediately to pass a small debt-limit increase, on the order of $500 billion, coupled with a reasonable set of spending cuts, including caps on discretionary spending. They should then send that to the Senate as the starting point for discussions. Doing this now would increase Speaker Boehner’s leverage immensely, as he would become the only person in the room who had shown by his actions that he doesn’t want a default. Moreover, at this late stage, there’s a very real chance it would become the vehicle for getting past August 2.

If Republicans can’t find their way to make such a move (for whatever reason), then they have little choice but to work with Senator McConnell on his version of Plan B. But they should make it absolutely clear that no version of the Gang of Six plan will be acceptable.

[Cross-posted at the Corner]

posted by James C. Capretta | 4:09 pm
Tags: Gang of Six, budget
File As: Health Care

A Hearing on the “Medicare Trigger”

July 15, 2011

On Tuesday, July 12, a Subcommittee of the House Oversight and Government Reform Committee convened a hearing on the so-called “Medicare Trigger.” I was asked to testify on a panel that included Chuck Blahous, Public Trustee for Social Security and Medicare, Joe Antos of the American Enterprise Institute, and Paul Van de Water of the Center on Budget and Policy Priorities. We followed Jonathan Blum of the Centers for Medicare and Medicaid Services, who testified on behalf of the administration.

The Medicare trigger was enacted in 2003 as part of the Medicare prescription drug legislation. It requires the Medicare trustees to monitor the financing of the program and issue warnings whenever dedicated revenue sources for the program (mainly payroll taxes and premiums) fall below 55 percent of total Medicare spending — or, to put it another way, whenever non-dedicated revenue sources cover more than 45 percent of the program’s total annual costs. This trigger was intended to help Congress keep track of the burden that Medicare spending is placing on general taxpayer funds. If the trustees issue a warning two years in a row, then the president is supposed to submit legislation to correct the breach. In 2011, the trustees issued a warning but no legislation was submitted by the president, which is the main reason the hearing was held.

My testimony is available here, and all of the written testimony, along with video of the hearing, are available here.

posted by James C. Capretta | 3:59 pm
Tags: Medicare Trigger, House testimony
File As: Health Care

Budget Danger Ahead

July 7, 2011

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

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