For those of us in the healthcare policy field in Washington it has become as ritualistic as the changing of the seasons, the anticipation of the Masters Tournament in April or opening day in Major League Baseball – it’s known as “The Doc Fix.” For over a decade now, Congress has gone through the process of staving off reductions in payments to physicians under the Medicare program. Unfortunately, each year it does so, it gets more expensive to fix it permanently. It’s officially known as the sustainable growth rate (SGR) and the only thing sustainable about the growth rate in this instance is the frustration level most Members of Congress feel about having to go through this rite of passage every year or two. So, it is with great expectation and hope among many in Washington that we find ourselves nearing an agreement on a permanent solution to the madness we put ourselves through with too much regularity. (continue reading…)
On Tuesday, the NAM and the Council for Affordable Health Coverage unveiled a letter being sent to the Hill on Medicare Part D, the popular and effective prescription drug program for Medicare beneficiaries. The letter was co-signed by over 400 other organizations and urges Congress to dismiss proposals such as applying rebates to the Part D program. The overall message to Congress is: the program is working more efficiently than anticipated, is under-budget, and highly popular – don’t “fix it.”
Proponents of the Part D rebate scheme tell us it is “unfair” because the financially-stressed Medicaid program has a rebate system for prescription drugs. So “in-fairness and consistency” we should apply it to Part D. The problem with this logic is, there is little logic to it. They are completely different programs and they are structured very differently. Medicaid is a classic command and control government program – services are needed and the government will tell you how much you get paid for that service. In contrast, Part D is the government setting the ground rules for a market to develop and allowing the private sector to compete to provide products and services. It is a model Congress should look to replicate, not undermine.
The shortcoming of previous “reforms” of Medicare in 1997, 2000, 2003 and 2005 is they largely focused on payments for the services as a way to meet a budget number and didn’t address the real problem in the way services are delivered. The dials and levers were adjusted, but we avoided looking at whether the machine itself was in proper working order – or even the right machine for the job anymore. Manufacturers constantly look for ways to make things operate more efficiently. Often that means retooling with modern equipment to deliver a higher quality product more efficiently.
I’ll close with a quote from a report issued by the NAM 15 years ago. “The program needs to be restructured, drawing on successful strategies used by the private sector….This includes giving beneficiaries a greater choice of health plans than now available…” The NAM has been urging lawmakers to address the real issues for decades – perhaps we should start looking at new equipment with modern features. Medicare Part D seems like a good place to start the search for a better way.
From the American Benefits Council, which represents large U.S. corporations, a news release, “Exorbitant accounting hit to businesses will continue unless health law’s retiree drug subsidy provision is reversed“:
“For months, the American Benefits Council, along with several employers and labor unions, warned that the retiree drug subsidy tax in the health care legislation would impose an enormous hit on company financial statements as soon as the bill was signed into law,” Council President James A. Klein said today. “The recent announcements by major U.S. companies have captured Wall Street’s attention, while the Obama Administration fails to acknowledge their significance. Since the president has made clear that job creation is his top priority, we urge the Administration and Congress to remove this obstacle to economic recovery.
“Over the next several days, many companies will be compelled to either take a hit on their earnings or decide to move retirees into the Medicare Part D program.” Klein said. “As our recent research report clearly shows, as more retirees are moved from employer plans to Medicare Part D, government outlays will increase, and the shift from employer retiree drug subsidy programs to Medicare Part D is likely to be significant. In the end, this so-called revenue raising provision may actually cost the government money.” A separate study, conducted by the Towers Watson consulting firm, reported that unless companies change their benefit plans, the aggregate accounting charge would be nearly $14 billion.
Safe prediction, Mr. Klein. Today’s news is: “Boeing Expects $150 Million Charge In 1Q For Health-Revamp Impact.” More …
- Wall Street Journal, “The ObamaCare Writedowns—II“
- John Fund, Wall Street Journal Political Diary, “Waxman Convenes the First Death Panel“
- Chicago Tribune, “Companies reveal big hits to earnings over health care“
- Newark Star Ledger, “Reform has firms rethinking benefits“
From Heritage Foundation’s The Foundry blog, “Congress vs. The American People“:
Even Higher Deficits: According to the Congressional Budget Office, new entitlement spending in the reconciliation bill would cost $216 billion in 2019 alone and will increase by 8% every year after that. Now, the Democrats will tell you that the CBO has also said their plan raises enough taxes and cuts enough Medicare to pay for this gigantic new entitlement. But the CBO is obligated by law to believe whatever Congress tells them. The American people are not. According to the latest NBC/WSJ poll, 76% of the American people do not trust Congress. That is why, according to the latest CNN poll, 70% of the American people believe Obamacare will cause the federal budget deficit to go up.
Even Higher Taxes on Business: As bad as the employer mandates in the Senate health bill were, the taxes on businesses in the reconciliation bill are even worse. Companies that hire certain low-income Americans will have to pay $3,000 per employee, per year, even if the company offers insurance. And companies that employ 50 or more workers will face higher tax penalties to the tune of $2,000 per full-time employee.
New Taxes on Investments: Investment is what creates job growth. One would think at a time of 9.7% unemployment, the government would not want to increase taxes on investment. Not this leftist government. The reconciliation bill slaps a 3.8% tax on investment income.
In introducing President Obama at the bill signing ceremony, Vice President Joe Biden just quoted Virgil and declared, “The greatest wealth is health….America is wealthier today.” OK. But maybe not as wealthy as tomorrow.
UPDATE (11:43 p.m.): The Greek poet Virgil, that is. He also said in the Aeneid, “Whatever it is, I fear Greeks even when they bring gifts.”
President Obama used his Saturday radio address to attack the insurance industry for opposing the White House’s demands for government-expanding reforms to the U.S. health care system. Included in his populist rhetoric was a denunciation not just of the conclusions of the America’s Health Insurance Plans’ (AHIP) study of the costs of health care proposals but also of the group’s motives.
- “We’ve seen industry insiders – and their apologists – citing these studies as proof of claims that just aren’t true.”
- “It’s smoke and mirrors. It’s bogus. And it’s all too familiar. Every time we get close to passing reform, the insurance companies produce these phony studies as a prescription and say, ‘Take one of these, and call us in a decade.'”
Today Karen Ignagni, president of AHIP, responds in a Washington Post op-ed, “About that health-reform cost study“:
The report’s central finding has long been noncontroversial in health policy and economic circles: namely, that implementing reforms of the insurance market without a strong requirement that everyone participate will cause adverse selection and significantly increase costs for individuals and small businesses. This finding echoes the message President Obama delivered in his address to Congress last month. “And unless everybody does their part, many of the insurance reforms we seek — especially requiring insurance companies to cover preexisting conditions — just can’t be achieved. And that’s why under my plan, individuals will be required to carry basic health insurance,” he said.
The report concluded that the proposed new taxes on health plans, pharmaceutical manufacturers and medical-device makers will increase the cost of coverage. These findings are entirely consistent with the judgment expressed by the director of the nonpartisan Congressional Budget Office, who recently told the Senate “that piece of the legislation would raise insurance premiums by roughly the amount of the revenue collected.”
When the NAM commissions studies, we do so in good faith, and we assume the insurance association behaves no differently. Mandates and taxes are going to raise costs to the consumer — obviously.
So the question is, which study is better? Should we believe AHIP, the CBO, President Obama or somebody else? Add up the estimates and average them out? Or would we be better off using the entrails of fowl to divine future costs?
The Wall Street Journal today concludes that believing the federal government’s cost estimates is historically a mistake. From “Health Costs and History“:
Washington has just run a $1.4 trillion budget deficit for fiscal 2009, even as we are told a new health-care entitlement will reduce red ink by $81 billion over 10 years. To believe that fantastic claim, you have to ignore everything we know about Washington and the history of government health-care programs. For the record, we decided to take a look at how previous federal forecasts matched what later happened. It isn’t pretty.
The Journal reports, among other historical facts:
- The Medicare program for renal disease was originally estimated in 1973 to cover 11,000 participants. Today it covers 395,000, at a cost of $22 billion.
- The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected.
Challenging some group’s motives often makes political sense, although it’s hard to see how targeting one in a national radio address elevates the debate. But in assessing the costs of the current health care proposals — the real issue here — we’ll let history be our guide.
The Senate Finance Committee’s approval of the framework of a structure of a plan for health care reform legislation Tuesday is just a step, one step:
From TPM Live Wire, “Schumer To Reid: The Fate Of The Public Option May Be In Your Hands,” a quote of Sen. Chuck Schumer (D-NY): “It’s very important to see if a public option is in the bill that Leader Reid puts together. He hasn’t yet made up his mind, but many of us who believe in the public option are urging him to do so, and so far we’re getting heard.”
From CBS News, “Snowe: Public Option the Breaking Point,” quoting Sen. Olympia Snowe’s interview on the CBS “Early Show” today: “Because I prefer in utilizing the private sector as we do in this legislation that doesn’t include a public option. I think the government would have a disproportionate advantage in the marketplace against private insurers…But at the same time, I want to make sure the insurance industry performs and that’s why we eliminate and prohibit many egregious practices.”
And, outside the Beltway, from The Grand Forks Herald, “N.D. health system CEOs: ‘Public plan’ with Medicare rates threatens hospitals“:
If uninsured and/or underinsured individuals in North Dakota were covered by a public plan at Medicare rates, this would add a total of $16 million to MeritCare, Altru, Medcenter and Trinity’s revenues.
But if 10 percent of individuals who have private coverage switched to a public plan, this would result in a loss of $34 million in revenues to the big four hospitals. If 30 percent switched, this would result in $101 million in decreased revenues to the hospitals.
This gap will continue to grow as Washington cuts in Medicare payments uniformly throughout the nation.
In North Dakota, a million dollars is still real money.
Seconds ago on Fox News, Sen. Chuck Grassley warned that the public option still has broad support from the Democrats — “that’s where they want to go.” He is especially worried about its effects on rural hospitals.