About the Author

James C. Capretta

James C. Capretta

New Atlantis Contributing Editor James C. Capretta is an expert on health care and entitlement policy, with years of experience in both the executive and legislative branches of government. E-mail: jcapretta@aei.org.


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James C. Capretta’s Latest New Atlantis Articles

 Health Care with a Conscience” (Fall 2008) 

 Health Care 2008: A Political Primer” (Spring 2008) 

 The Clipboard of the Future” (Winter 2008)

 

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Friday, February 12, 2010

Obama’s Very Weak Hand 

When all else fails, try bipartisanship

Over on National Review Online, I have a new piece about the president’s agenda, the national debt, and the political moment. An excerpt:

After Scott Brown’s stunning victory in the Massachusetts special election last month, it is now clear that the coalition President Obama was counting on to pass his health-care bill and follow-on legislation is in absolute tatters. The strain of the effort to ram health care through despite intense public opposition has taken a very heavy toll. Independent voters remain outraged at the arrogance of it all, and have swung decisively toward GOP candidates in recent contests. Congressional Democrats now know they are in peril, and are behaving accordingly. They are in no mood to take any more tough votes on behalf of a president’s agenda that their constituents have plainly rejected. Indeed, in the current environment, it’s hard to see how the House could pass the same health-care bill that it passed just last November.

This puts the president in a terrible bind, especially given the difficult budgetary choices now confronting him. His 2011 budget submission to Congress shows deficits rising to $1 trillion by the end of the decade and continuing thereafter. From 1789 through 2008, the U.S. government borrowed $5.8 trillion. If the Obama budget were adopted in full, government borrowing would exceed $18 trillion by the end of the decade. Debt accumulation at such a pace would almost certainly precipitate an economic crisis.

In their heart of hearts, most Democrats think the solution to the nation’s budget problem is a massive tax increase; if they had succeeded on health care, some might have been willing to use that momentum to propose one. But in the current environment, with so much distaste for out-of-control government, the White House and congressional Democrats know full well that it would be complete political suicide for them to push a tax increase at this stage.

Which brings us back to the president’s renewed interest in having Republicans share in, as he put it, “the burdens of governing.”

Unfortunately for him, he is now holding a very weak hand as he heads into discussions with his adversaries. His health-care program is so unpopular that Democrats themselves are walking away from it. He promised voters he wouldn’t raise taxes on the middle class, and his Democratic allies want to expand government, not contain or shrink it. So, unless he changes course, he is stuck with presiding over an unprecedented borrowing binge that threatens to cripple his administration.

The whole article can be found here.

posted by James C. Capretta | 2:46 pm
Tags: budget, deficit, bipartisanship, President Obama
File As: Health Care

Wednesday, February 10, 2010

Facing in Opposite Directions 

My EPPC colleague Yuval Levin has written a post that nicely sums up why a bipartisan health-care solution will not be easy to come by. It's not that conservatives and liberals don't both see the shortcomings of today's arrangements. They do. It's that they simply have very different conceptions of what must be done to fix the problems. Liberals believe that more empowered and enlightened government management of the health sector can deliver better results. Conservatives quite rightly are highly suspicious of this contention. The government has been running Medicare and Medicaid for more than four decades, and the result has been bureaucratic regulation and price controls that make the entire health sector less efficient and productive. The conservative solution is to empower cost-conscious consumers in a reformed marketplace that rewards efficiency and value. Given the intensity of the debate over the last year, the odds are long indeed that the two sides will suddenly find an acceptable compromise anytime soon.

posted by James C. Capretta | 5:01 pm
Tags: Yuval Levin, conservatives, liberals
File As: Health Care

Friday, February 5, 2010

The President’s Budget and Health Care Reform 

I have a new column up at Kaiser Health News this week. An excerpt:

It is now readily apparent that piling up debt at the rates implied by the president’s budget would all but invite an economic crisis. At some point, the flood of Treasury debt instruments worldwide would lead lenders to demand higher rates of return for their loans, or perhaps to runaway inflation — or more probably both. The result could be quite devastating to private-sector business investment, productivity and job growth, making it all the more difficult to get out from under the debt spiral that would ensue....

It’s not that the president and his advisors don’t recognize the problem. They speak frequently about the dangers of business as usual. The problem is that the president’s stated solution will never work.

What the administration would like to do is to have Congress pass the health care bill and then follow it up with a bipartisan deficit-cutting plan, put together by a special commission assigned with assembling a medium and long-term solution to the nation’s budgetary woes.

The first problem with this sequencing is its unrealistic political calculus.... The other problem is the planned timing of the debt commission’s recommendations and congressional action. The president would like the commission to issue its plan after the November congressional elections, and have a lame-duck Congress vote on it between early November and the start of new Congress next January. So the most far-reaching tax hikes and spending cuts in a generation would be recommended by an unelected commission and passed by an exiting Congress, all in a matter of days and weeks, even as newly elected members are set to take their seats. To say the odds are long is quite an understatement.

The whole thing is available here.

posted by James C. Capretta | 3:26 pm
Tags: budget, Obamacare, deficit commission, debt
File As: Health Care

Friday, January 29, 2010

‘Reconciliation’ Talk Reveals Democratic Desperation 

House Speaker Nancy Pelosi and many of her allies outside of Congress have spent the past week trying to convince rank and file Democrats and others that Obamacare need not be dead if only the party had the will to pursue what might be called the “reconciliation solution.” Indeed, the Center on Budget and Policy Priorities recently circulated a short white paper aimed at bucking up Democrats on the reconciliation option. The authors argue that using the budget reconciliation process — which effectively means legislation can pass in the Senate with a simple majority instead of sixty votes — to approve a massive health-care bill is entirely consistent with prior practice.

And, it is true that the budget reconciliation process has been used to pass significant pieces of budgetary legislation in prior years, including welfare reform, tax cuts, and scores of important changes in the Medicare and Medicaid programs.

But there’s a big difference between what’s been done in past and what Democrats are trying to convince themselves to do this time around. Those reconciliation bills made amendments to current law. What the Democrats are now contemplating is something entirely different and totally bizarre: they want to try to pass a reconciliation bill which amends another bill which has not yet been approved by Congress.

Here’s the scenario they have laid out: The Senate has passed a bill, which is now sitting on the House side awaiting action. As the Speaker has implicitly admitted, in the wake of Scott Brown’s election to the United States Senate, Democrats have run for the hills on health care. There aren’t nearly enough votes in her caucus today to pass the Senate bill as it stands, and there’s a real question about whether they could even pass the bill they already adopted last November.

But the Speaker says today’s impasse need not be the last word on Obamacare. According to this way of thinking, it might be possible to pass the Senate bill a little later this year if the Senate would just agree to first pass a bill providing a series of amendments to the previously-passed Senate health-care plan. Those amendments would be considered under the special rules governing budget reconciliation measures, which means no filibuster. There would be only twenty hours of debate, and then it would come to a vote on final passage. If Senate Democrats could hold just 50 of their 59 Senators (the vice president can break 50-50 ties), they could pass it, or so the theory goes. Once the Senate cleared such a measure, House Democrats would then supposedly feel comfortable going ahead and voting to approve the Senate-passed health-care bill because another bill would be following right behind it to make politically crucial amendments. The president and the Democrats would then get their “historic” signing ceremony after all, only there would be two bills to sign instead of one (more pens for everyone!).

That the White House and congressional Democrats are even thinking and talking this way is an indication of how far they have fallen. They are clearly desperate, so desperate in fact that they are willing to float any kind of half-baked and far-fetched scenario in the press if it has even a remote chance of breathing life into the rapidly expiring corpse of Obamacare.

But this reconciliation gambit is so full of holes and such a perversion of the process that it’s hard to imagine anyone taking it seriously. For starters, the baseline for assessing such a reconciliation bill would be current law, which would not include the Senate health-care plan still sitting in the House chamber. You can’t pretend something is already in law if it isn’t. And so, when the Congressional Budget Office assessed such a bill, they would have to assign costs based on what it would do relative to today’s tax and entitlement structure, not some fictitious baseline that assumes passage of the Senate bill.

Moreover, any provision in a reconciliation bill that does not change tax receipts or budgetary spending can be stricken from it with just 41 votes in the Senate under the so-called “Byrd Rule.” The rule was adopted by the Senate more than two decades ago to limit the kinds of provisions that could ride on a budget reconciliation measure to those that actually make non-trivial changes to the federal budget. But if a reconciliation bill includes numerous amendments to another bill which is not even law yet, the whole bill or large portions of it could be irrelevant budgetarily, and therefore “Byrd”-able. For instance, the Senate-passed health-care bill includes the so-called “Cadillac insurance tax,” which raises about $150 billion in revenue over ten years. House Democrats want to exempt union-sponsored insurance plans from the tax through 2017. But if such an exemption were included in a Senate reconciliation bill, it would not change federal revenues because the underlying tax it is amending would not yet be in the law.

Clever lawyers and budget experts are almost certainly working overtime to see if they can find a way around what would seem to be fundamental obstacles to such a scenario. But even if they could, the idea that the Congress could employ such a distorted process to ram through a government takeover of American health care, in the wake of what happened in Massachusetts, is itself far-fetched. Rank-and-file Democrats have lost their stomach for this fight. They don’t want to push legislation they know their constituents have rejected, and implausible war-gaming by their leadership isn’t going to convince them to change their minds.

posted by James C. Capretta | 6:17 pm
Tags: reconciliation, Cadillac tax, Senate
File As: Health Care

Wednesday, January 27, 2010

Entitlements, the Budget, and the State of the Union 

In a new post over on NRO's Corner tonight, I comment on the health care and budgetary aspects of President Obama's State of the Union address:

On health care, he offered nothing new. He is sticking with the plan the public has quite plainly rejected. According to a recent CNN poll, a full 70 percent of Americans want Congress either to start over entirely or to drop the subject altogether. That’s because they recognize that the plan the president has been pushing so aggressively for the better part of a year would be a disaster, for the quality of American medicine and for the nation’s budget outlook. The president claims the bill would cut the deficit, but that’s based on completely implausible assumptions. The bill would stand up another runaway entitlement program, paid for with offsets that will never hold up over time and cost-control ideas that are weak and largely meaningless.

Yesterday, I had another post on the Corner, remarking on the administration's proposed budget "freeze." An excerpt:

In reality, the Obama freeze is a purposeful diversion and sideshow. The nation is rushing headlong toward a fiscal crisis because of runaway government spending, and the Obama administration has no serious plan to head it off. Between 1789 and 2008, the federal government ran up $5.8 trillion in debt. In just the first three years of the Obama administration, CBO expects the debt to increase by nearly another $4 trillion. In 2010, CBO projects total federal spending will exceed $3.5 trillion, more than $500 billion over what was spent in 2008. Further, in 2012 and beyond, with realistic assumptions regarding extension of the Bush tax cuts, relief from the Alternative Minimum Tax, funding for the wars in Iraq and Afghanistan, and restoration of planned cuts in Medicare physician fees, the government is headed toward $1 trillion budget deficits every year for as far as the eye can see. 

This massive run-up in debt is set to occur just as the baby boomers head into their retirement years, pushing up costs in Social Security, Medicare, and Medicaid. Between 2010 and 2030, the population that is age 65 and older will rise from about 41 million to 71 million. CBO expects spending on the big three entitlement programs to rise from 9.8 percent of GDP in 2010 to 14.4 percent in 2030 — an increase of about 4.6 percent of GDP in 20 years. That’s like adding another Social Security program to the federal budget with no plan to pay for it.

So far, the president’s primary response to this looming budget and entitlement crisis is to propose to pile another runaway health-care entitlement program on top of the unaffordable ones already on the books. According to CBO, the federal cost of the health-care commitments in both the House- and Senate-passed health-care bills would reach $200 billion in 2019 and would increase about 8 percent every year thereafter. Meanwhile, the offsets to pay for this new spending are completely unrealistic, and the so-called “bend the curve” provisions are far too weak to make a difference.

posted by James C. Capretta | 11:35 pm
Tags: budget, entitlements, President Obama
File As: Health Care

Sunday, January 24, 2010

After Obamacare 

With my colleague Yuval Levin, I have cowritten a piece in the latest Weekly Standard examining the political landscape for health care reform in the wake of the election of Scott Brown to the United States Senate. After discussing how the Democrats’ ambitious plans have screeched to a halt, we suggest some ideas for health reform that conservatives should take up:

First, they should seek to address the problem of insuring Americans with preexisting conditions through state-based high-risk pools, not cumbersome insurance regulations that try to outlaw basic economics. Risk pools, backed with federal money but nowhere near the scale of Obamacare’s costs, would give those with preexisting conditions more options in the individual market and make a significant dent in the number of uninsured, but without overturning our health care system.

Second, they should propose to help doctors and patients limit some of the burden of rising costs with medical malpractice reform. Sensible caps on punitive damages would not only save money but also help address shortages of medical providers in key specialties, and allow more Americans to afford and access care.

Third, they should argue that the states be given the lead role in developing more detailed reforms of how and where people get their insurance—to cover more people and slow the rise of costs. The overall goal should be to build well-functioning marketplaces in which insurers and providers compete to deliver the best value to cost-conscious consumers. The federal government should remove bureaucratic obstacles to state experimentation on this front, and offer support where possible, but not design one mammoth new program. The regulation of both the practice of medicine and of insurance is done in the states, and their improvement should be too....

Meanwhile, for the longer term, conservatives should make a case for changes in the tax law that level the playing field between employer-provided and individually purchased health insurance, with a gradual transformation of the tax exclusion for employer-based coverage into a credit available to all. A consumer-controlled tax credit would also enhance the benefits of risk-pools, tort reform, and state-based reform efforts.

And they should press the case for real Medicare reform, not to use the program as a pot of cash, as the Democrats tried to do over the past year, but to put it on a sound footing by empowering enrollees rather than bureaucrats to make decisions....

These ideas would not yield a sudden transformation of American health care, but a gradual improvement in the areas that matter most—cost-control, greater access for the uninsured, and greater fairness for those with preexisting conditions—while sustaining the quality and innovation that characterize American health care.

The piece is available in its entirety here.

posted by James C. Capretta | 9:28 pm
Tags: Obamacare, Yuval Levin, tort reform, risk pools, Medicare
File As: Health Care

Friday, January 22, 2010

Health Care and the Deficit 

The House Budget Committee held a hearing yesterday on "Perspectives on Long-Term Deficits." I was invited to testify. Here is how I concluded my written testimony:

The nation’s long-term budget outlook is bleak in large part because our healthcare entitlement commitments far exceed the revenues available to pay for them. By 2019, the House and Senate-passed health-care bills would add at least another $200 billion per year to those commitments, and unleash pressures for even more spending down the road. Meanwhile, the offsets used to pay this spending would be much less likely to occur, and the cost control provisions are not nearly robust enough to make a difference.

Congress would be well-advised to take a step back and rethink this entire approach. Instead of passing an expensive health-care bill that uses $1 trillion in offsets to pay for more spending, it would be better to craft a sensible, consensus long-term budget plan which has as one of its core elements an affordable, bipartisan health-care program, one that truly does the job on costs and expands coverage as well.

Here's a video of the hearing (my testimony begins at 33:22):

[Video permalink]

posted by James C. Capretta | 5:27 pm
Tags: deficit, debt, entitlements, Obamacare
File As: Health Care

Thursday, January 21, 2010

Is There a Republican Plan for Health Care? 

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

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

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

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

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

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

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

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

Wednesday, January 20, 2010

What the Health-Care Debate is Really All About 

I had a piece on health care over on the online magazine Public Discourse yesterday (ably edited by Ryan Anderson, a sometime New Atlantis contributor). An excerpt from what I wrote:

All of this political fighting can be disconcerting to average citizens. Why, on an issue that is plainly so important, can’t our nation’s elected leaders check their politics at the door and work out an agreement that elicits broad-based support instead of war-room like campaigns to prevail over their opponents?

The answer is that the disagreement over what must be done to improve American health-care is profound and largely irreconcilable. This isn’t your usual, run-of-the-mill political fight. The two sides hold diametrically opposed views that simply do not easily allow for compromise. Moreover, the outcome of the battle will be highly consequential, not just for our system of financing and delivering health-care, but also for our economy and democratic processes. In short, the stakes are very, very high, and both sides know it.

Many people suppose that the heart of the disagreement is over whether or not to expand coverage to more people. It is, of course, a primary objective of the Democratic sponsors of the current initiative to ensure that every American, or nearly so, is enrolled in some kind of health insurance plan on a continuous basis.

But Republicans are not opposed to expanding coverage to the uninsured. In 2008, presidential candidate John McCain proposed a plan which would have provided to every American household a tax credit which could only be used to purchase a health insurance policy. It was, in a very real sense, a “universal coverage” plan in that it sought to ensure that every American would have the financial wherewithal, provided by the federal government, to acquire some level of health insurance protection. The issue, then, is not over expanding coverage to all.

No, the real sticking point between the two sides is over how to allocate resources in the health-care sector. Both sides agree that the status quo is unsustainable, largely because costs are rising much more rapidly than wages or governmental revenues. The crucial question is what to do about the problem. Put differently, the question health-care reform advocates must answer is this: what process will be put in place to bring about continual improvement in the productivity and quality of patient care? That might strike some as more of a technical question than one of fundamental importance. But, in reality, it’s just another way of saying that resources are scarce and must be allocated in some fashion. The only way to slow rising costs without lowering the quality of care provided is to improve the efficiency of the interactions between doctors and hospitals and those they care for. The question before policymakers is what reforms are most likely to lead to better care at less cost.

The entire article can be found here.

posted by James C. Capretta | 5:07 pm
Tags: Public Discourse, Ryan T. Anderson, John McCain, left vs. right
File As: Health Care

Tuesday, January 19, 2010

What If . . . 

Speculation is rampant on what will happen if State Senator Scott Brown pulls off an improbable upset and wins the special election for the U.S. Senate seat today in Massachusetts.

Of course, that’s still a big if. Most votes have yet to be cast in this race, and low-turnout special elections are notoriously difficult to predict. 

What we do know for sure is that the more ballots that are cast for Brown, the less likely it is that any of the current versions of Obamacare will pass. So those who are in position to help Massachusetts fire another shot heard even in faraway places should take nothing for granted.

Still, it is interesting to see so many stories popping up, such as this one in yesterday’s New York Times, in which Democratic operatives are openly speculating on what they will do on health-care if Brown were to win. That’s probably an indication of where most Democratic insiders now think this race is headed.

And what exactly would be their Plan B? Apparently, some Democrats believe the best course to follow would be to take the Senate-passed bill and jam it through the House without amendment.

That would be some trick. House liberals have spent the last month trashing the Senate bill. They hate the so-called high-cost insurance tax, the mandate which gives Americans no choice but to send their premiums to profit-driven private insurance plans, and scores of other provisions as well. Moreover, their main patrons — labor unions — despise the Senate bill for the same reasons.

Those advocating this fall-back plan think it is possible that objections to the Senate bill could be overcome if House members were promised that a second health-care bill would be passed later in 2010 with corrections to the first. Presumably, the second bill would include the recently struck White House–union “deal” which would exempt union workers from the high-cost insurance tax through 2017, as well as other provisions now under negotiation in talks between House and Senate Democratic leaders. House Democrats would also be promised that this second bill would be passed using so-called budget reconciliation procedures, which means it would need only majority support in the Senate, not 60 votes.

House members who oppose the Senate bill but went along with this particular version of Plan B would have to be awfully gullible. There’s no guarantee at all that a budget-reconciliation bill devoted to health-care would sail through either chamber, especially given the public’s utter disdain for the process that produced the first one. Plus, any item that reduced tax revenue or increased spending would need an offset, which is sure to stir up opponents and controversy. In short, this second bill would almost certainly be as red-hot politically as the first, and as time-consuming as well. Do House Democrats really want their 2010 legislative agenda dominated again by health care? That’s almost certainly what would happen if they agreed to pass the Senate bill with these conditions attached.

More fundamentally, the whole idea of a quick pivot to a Plan B is absurd. If Brown were to win, it would send shock waves through Democratic ranks unlike anything we have seen in recent years. Democratic infighting would intensify. Many more closed-door meetings would be held as members vented and fought over what to do. It would takes weeks, not days, for this process to play out. There would be no health-care bill before the president is forced to deliver a state of the union address.

In the end, the White House and Senate Democrats might be able to convince enough House members to go along with some version of Plan B to get the bill passed and the debate behind them. But they would not get there easily or quickly.

Of course, if Brown were to win today, it need not be a permanent setback for the president or congressional Democrats. They could do the smart thing and take the voters’ message to heart. Start over, shelve the ideological ambition, and work with Republicans on a sensible and targeted plan. That would leave them with a fighting chance to get through November 2010 with heavy losses instead of total annihilation.

posted by James C. Capretta | 11:41 am
Tags: Massachusetts, Scott Brown, Obamacare
File As: Health Care

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