The Super Committee Failure—What’s Next?

The stock market today was shocked, simply shocked, that the Super Committee didn’t come up with a debt deal.

I don’t know why. Republicans can’t vote for more taxes unless they’re willing to get “primaried” from the right and risk losing their seat. Ditto for Democrats who would face the same punishment from their base if they voted to change the sacred defined benefit entitlements without at least getting tax concessions from the Republicans.

Obviously, neither side has a lot of statesmen in their ranks who would actually be willing to compromise.

In this hyper-partisan environment, where both parties are effectively in the control of their far left and far right bases, it is simply not possible for any meaningful bipartisan compromise.

Some time ago on this blog, I said that we wouldn’t get any meaningful effort to deal with the federal debt and entitlement challenge until there was a bond crisis—when investors would no longer be willing to lend to the U.S. government at reasonable rates without our first getting our unsustainable debt under control. Right now the U.S. government is borrowing about forty cents of every dollar it spends!

We are now watching just such a bond crisis force government into action. But it isn’t our government—it’s happening before our eyes in Europe.

Ironically, and it’s a huge irony, U.S. government bond prices continue to rise and interest rates continue to fall because as bad as our problems are, Europe looks worse. But with the latest American failure to govern, how long will that last? The flight to American “quality” that is propping up our deficit spending is as irrational and unsustainable as any of our other recent economic “bubbles.”

To fix the American debt crisis we will need to fix our entitlement problems. To do that, there will have to be major changes to the biggest entitlement driver—health care costs in Medicare, Medicaid, and even federal employee benefit costs.

As long as we have a divided government we are stalemated—not only over what to do with Medicare and Medicaid but over what we will eventually do about implementing the Affordable Care Act as well.

All of this will now effectively be on hold waiting for the results of the 2012 elections. If the outcome of those elections continues to be a divided government it is hard to see how we’ll have a solution even after 2012—short of an American bond crisis forcing things to change.

I can’t realistically see a Democratic sweep in the next election—that they recapture the House and hold the Senate and the White House.

But it is possible that Republicans will win all three. That would end the deadlock and likely mean the effective repeal of the Affordable Care Act (at least 51 votes in the Senate could gut it), as well as serious efforts toward the Republican “solution” to the entitlements and the under-age-65 health insurance market along the lines of the Ryan defined contribution proposals.

It is also possible that Obama could be reelected and have to face a Republican House and Senate—and even more political confrontation with a Republican Congress sending a Democratic President their health care and debt fixes. Maybe, after the election, both sides would be willing to deal. Maybe not, the current political environment that abhors compromise would have to change dramatically.

Layer on top of all of this the sharp cuts the defense and homeland security budget will now get because of the debt deal fallback provisions—defense will have to sustain $600 billion in cuts. I don’t consider myself a deficit hawk but it is hard to see how these defense cuts can be implemented. Combat forces are already at half of 1990 levels and the defense budget spending is already on its way to the lowest level as a percentage of GDP since 1940.

That the defense cuts are unsustainable likely means the Congress will find a way to reverse them and make the federal debt situation even worse than it is today.

This country is facing one of the greatest domestic political and economic challenges in its history—our debt level as a percentage of GDP is double what it was at the end of the Great Depression! The modern economic way of life we have become accustomed to is literally hanging in the balance. But our political institutions are now clearly unable to confront the problems. The 2012 elections could finally give one side or the other the ability to confront these issues in a way that is starkly different than the way the other guys would have. Or, the election could just give us another divided government still unable to deal with the growing crisis.

More stalemate would leave only one outcome I can foresee—a global U.S. bond crisis that would literally stop the federal government in its tracks and the entire American economy with it. Such a sobering crisis could well force political moderation and compromise—hopefully before it was too late.

The 2012 elections are a big deal. But it will likely take even more—lots of something we haven’t seen in a long while—statesmanship.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

16 replies »

  1. Hola, Jacob de UCT Sudáfrica, estoy haciendo una investigación sobre este campo para el proyecto de mi Maestro. Yo sería feliz si me lo permite citar este artículo en mi tesis.

  2. On March 23, 2010 The Affordable Healthcare Act became a law. President Barack Obama created a healthcare plan that would be offered to 95 percent of Americans at an affordable rate. A lot of Americans are disagreeing with this act. They believe it will hurt our economy causing the US to go bankrupt. Though it os controversial, The Affordable Healthcare Act is an excellent way to provide healthcare to most of the American people and not be costly. This plan will ensure low cost coverage to individuals and small businesses, allows you to keep previous insurance, provide insurance security, require coverage for preventative care at no extra cost, provide tax breaks, and limit out of pocket expenses, amongst a plethora of other benefits.
    In 2003, healthcare spending increased 7.7 percent in a single year. That is four times the inflation rate. Employers began dropping their employee health plans because premium costs were growing eleven percent yearly (Longley 2011). Longley also estimates that an employee with three dependents would cost an employer about $10, 000 per year. Premium costs for a single employee would cost an employer about $3, 695 per year (2011).
    There are millions of people living in the US who do not have health insurance. Many cannot afford the high cost they incur and co pays they have to pay up front at doctors’ offices and for hospital visits. Others are denied healthcare coverage because they have pre-existing health conditions and are disqualified from obtaining insurance. There are also numerous people who work hard daily and their job does not offer health insurance. I worked for a nursing home caring for the elderly. My job offered insurance for vision and dental, but did not offer health insurance. When asking my employer why they don’t offer it, their response was they did many years ago. The insurance companies dropped them because the company was not big enough to be a big business and not small enough to be considered a small business. Therefore, they fell between some loophole were the insurance companies didn’t have to offer them insurance. With the Affordable Healthcare law insurance companies can no longer drop companies or individuals when they feel like it. The Affordable Healthcare Act makes it illegal for employers or insurance companies drop coverage without just cause. They can no longer stop coverage when you get sick or deny coverage because of a pre-existing health condition. This heinous crime is being committed daily and nothing was being done about it until now. Many Americans will finally get the insurance coverage they need and deserve. This act will also cut premium cost for individuals and small businesses making insurance more affordable.
    Some people fear they will lose the health insurance they already have and be forced to get another kind because this plan. However, that is simply not true. This plan allows individuals and employers to keep the insurance they already have. It’s brilliant. President Obama states, “It provides the security of knowing that if you lose your job, change jobs, or start a new business, you’ll always be able to purchase quality affordable care” (Obama 2011).
    CNN seems to think that this plan “mandates expensive and high subsidized coverage. They believe Americans will lose the right to choose what in their plan, and loose the freedom to choose their doctors. They also believe that a minimum list of benefits will be enforced.
    Diseases such as breast, colon, and prostate cancer are deadly and prevalent in the United States. These numbers can be reduced by getting regularly scheduled mammograms, colonoscopies, and prostate exams to detect the disease in its early stages. With the Affordable Healthcare Act, it is a requirement that insurance companies provide these preventative care services to you at no extra cost, limiting out of pocket expenses. This means more Americans can be proactive about their health and can take the steps necessary to stay healthy without worrying about high exam costs.
    Therefore, there is nothing wrong with imposing a minimum list of benefits. This will ensure that certain exams and services are provided each year. This plan was created to be affordable, not be expensive as CNN says. This plan also allows you to choose your own doctor, which is great. Premium costs for this plan would be $70 for an individual, $140 a couple, $130 for a single parent family, and $200 for all other family types (Longley 2011). The healthcare act also offers additional assistance for those who still can’t afford it. The Federal government will offer state incentives to get those still uninsured coverage. This healthcare act expands coverage to thirty two more million people in the US.
    The affordable healthcare Act will also provide “the largest middle class tax break in US history” (whitehouse.gov). Employers will be expected to provide the same quality insurance as The Affordable Healthcare Act would. If not, they would have to pay a small payroll based tax to support the act (Longley 2011).
    The Affordable Healthcare Act is estimated to cost $940 billion over ten years. It wioll reduce the deficit by $00 billion over the same ten years. Its estimated to save $1 trillion over the next two decades. Therefore, contrary to what a lot of people think this act will not bankrupt our economy. It will stabilize the economy and the federal budgets.
    Tully says this plan has benefits that people will not ever pay for with their own money. He’s right, but what’s so wrong with that. Americans are paying taxes on everything so some relief is great. The Affordable Healthcare Act brings universal healthcare to America. Medical care will be paid for by the US Federal government. This will strengthen Medicare benefits, and lower prescription costs, which is very beneficial to the elderly. Many elderly face poly-pharmacy. This means they have to take numerous pills daily for various ailments. It often costs hundreds of dollars for a single prescription. Often times they can’t afford the medicine they really need and they go on without it. This healthcare act will lower their prescription costs and allow them to receive the medicine they truly need.
    The Affordable Healthcare plan creates a new competitive insurance market. It will allow regular citizens to get the same choice of healthcare coverage senators and people high up in government get. It also creates incentives for insurance companies to “bundle” their services instead of charging for services provided individually.
    The Affordable healthcare Act provides numerous benefits not currently available in the market we currently have. All families, individuals, and small businesses gain the upper hand for once. The elderly can now afford prescriptions and get the medicine they truly need. Unlike, what many think this healthcare plan will not bankrupt our economy and will bring us out of the deficit we now face. The Affordable Healthcare Act works and marks a change for our health and our economy.

    Longley, Robert. (2006, February 16). Should the Us adopt a Nationalized Health Care System. Usgovinfo.about.com. Retrieved from http://usgovinfo.about.com/od/medicarehealthinsurance/i/nathealthins.htm
    Tully, Shawn. (2009, July 24). 5 Freedoms you’d lose in healthcare reform. Money.cnn.com. Retrieved from http://money.cnn.com/2009/07/24/news/economy/health_care_reform_obama.fortune/
    Unknown, Author. (2011, November 16). The Obama Plan. Healthreform.gov. Retrieved from http://healthreform.gov/obamaplan.html
    Unknown, Author. (2008, October). Retrieved from http://www.heritage.org/research/reports/2008/10/executive-summary-the-obama-health-care-plan-more-power-to-washington
    Unknown, Author. (2010, March 22). Retrieved from http://m.guardian.10.uk/world/2010/mar/22/us-healthcare-bil-passes-congress?cat=world&type=article
    Unknown, Author. (2011) Retrieved from http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html
    Unknown, Author. (2010). Health Reform Puts American families and small business owners in control of their own healthcare. Whitehouse.gov. Retrieved from http://www.whitehouse.gov/health-care-meeting/proposal
    Unknown, Author. (2009, September 21). The Obama Plan in 4 minutes. Youtube.com. Retrieved from http://video.youtube.com

  3. Gary,

    If your way worked, we would not need to reform this or any other part of our way of life.

    It is exactly your way that has led us to insolvency.

    If your way works, then I am for it. B

    But it does not work.

  4. “Now we see MD as Hell and Determined MD siding with the plutocrats of Wall Street and their Washington enablers. Thanks for revealing where your heads are.”

    You start this sound off with that comment, when you obviously do not read what I have been preaching about here for the duration, that being I have no interest in a for profit agenda in health care, nor do I have an interest in medicine being run as a business model in the first place.

    Earlier you wrote “To pay for a stimulus to get people back to work, raise taxes on the super-rich and cut bloat where it really exists: military spending and corporate welfare. The banks got bailed out, the people got sold out. Your elitist colors are showing when you mention not once anything about jobs and point only to entitlements for cutting. How disgusting.” How flagrantly liberal/democrat partisan is this commentary, and then slam commenters who you label opposition to failed policies you preach above for us moderates and independents to be terminally burdened. Frankly, I find the extremist bs of both parties to be failures and we need to rid ourselves of the incompetent incumbents both sides of the aisles spew on the country.

    And if what I write is thuggish and bullying, then what do we label your commentary? Oh yeah, projection! And by the way, what is the color of your world where social security is sound for another 30 years or more?

    Hard to discern color in that darkness, eh? Good luck with that sales pitch of expecting us to listen to those lies further to pretend they are truths. At the end of the day, we are ruled by Republocrats. They are the 1%, and want us to continue the status woe.

  5. “Thuggish, bullying remarks”?

    Please. How precisely are you “bullied”? Not that I agree with much that he says, but, that’s pretty whiny.

  6. Thuggish, bullying remarks should not be tolerated on this blog.

    Let’s get it right about Social Security. It is a myth that it is a drain on the budget (the subject of Mr. Laszewski’s post). It currently holds $2.6 trillion in U.S. Treasury notes from money paid by a tax on workers. Social Security benefits are modest, yet vitally important. The myth about Social Security is perpetrated by those of the 1% who have for a long time wanted to eliminate it and keep the trillions for themselves, even if it would mean pauperizing the 99%. (See Media Matter articleWash. Post Article Repeatedly Misleads On Social Security.

  7. Yeah, where are our heads? Not up our rectal canals like those who spout repetitive platitudes of why allegedly medicare and social security are as sacred as the cows that walk the streets in India. You know who screams the loudest to not touch those programs? Those who benefit from them the most at others’ expense. Now you know why we have the crappy representation we witness day in and out of late from DC. That’s right, the population over 50 vote the most, because they in general don’t care about anyone else at the end of their lives, as George Carlin said in his rant about boomers, their motto is “gimme that, it’s mine!” Hey folks, look at who is loudest in these retorts to not touch entitlements. The entitled. And they just love those incumbents who think and act just like their special interest groups, eh, Mr O?

    Great legacy this generation has bestowed upon the country. And I am in this pathetic generation, but, they don’t speak for me. My head is on top of my shoulders watching all the garbage politicians and their ilk cronies trying to burden those of us who do care about the future of America. By the way, do not expect to see dollar one from Social Security when I turn 75, should I get there, as that will be the age of benefits by then. I paid for my mom and dad, and I can live with that. Hear most boomers talk that way!?

    And I guarantee at the end of my life, neither I nor my family will be in health care providers’ faces demanding full court presses for treatment interventions that will not continue quality of life or hopeful options. Just watch how many physicians will continue to participate in that insurance program that will further servitude and enslavement for petty reimbursement, as it stands now. But that last point is trivial to those who just want the status woe, er, quo.

    Thanks for revealing where your head is, Gary O !

  8. Even large majorities of Republicans and self-identified conservatives oppose cuts to Social Security and Medicare. In fact, almost no one other than the Wall Street gang, who were supported with trillions of public money, want cuts to these programs. Now we see MD as Hell and Determined MD siding with the plutocrats of Wall Street and their Washington enablers. Thanks for revealing where your heads are.

  9. How the hell do you deal with a deficit/debt that this country owns with the role that Medicare and social security plays and howl this outrage to even suggest cuts to the programs?

    Wow, it is nothing less than both incredible and disgusting how dependency and entitlement rule public choice these days. We are nothing more than a bunch of whining, arrogant, and weak people in this country. And as a whole can’t face death when it is the reality at hand.

    Face it people, you vote the same, lame incompetent incumbents to stay in office for DECADES and then bitch in these polls how over 85% of the general public disapproves of these people. Umm, do you understand the concept of hypocrisy? Per the election results for the past decade or so, NOT!

    You want change for the better? Start with your primaries and general election choices after voting for President, you idiots! Or better yet, happy turkey day, you turkeys!!! And before you retort with an equally indignant response, admit how you have been voting the past 10 years before you risk piling more hypocrisy in the thread!!!

    I have not been voting for anyone in office more than 10 years the past 3 elections, and will never do so hereon.

    Hope and change? How about hope for some change?

  10. Wrong.

    Leave taxes alone.
    Cut all the red tape.
    Eliminate the EPA.
    Build a refinery or two.
    Build a nuclear power plant
    Tax at current rates the increased flow of real economic production.
    Cut spending.
    Cut spending.
    Cut spending.

  11. Mr. Laszewski, stop this nonsense that the market has been reacting to “the Super Committee [not coming up] with a debt deal.” According to yesterday’s Bloomberg news article The market was not concerned with U.S. debt, it was concerned that “the U.S. government will be forced to submit to $1.2 trillion in automatic spending cuts,” thus eliminating any chance for further fiscal stimulus. Debt is not the immediate problem. There is no debt crisis, except in your head and those who want to

    “The supercommittee was expected to pave the way to extend the stimulus that is in the system,” Barry Knapp, the New York- based head of U.S. equity strategy at Barclays Plc, said in a telephone interview. If stimulus is not extended, “you get a big hit to the economy in the first quarter right at the point when the economic fallout from the European debt crisis is hitting,” he said.

    Yields on treasuries have been going up, the best proof that the market is not currently concerned with the U.S. debt. The market and the populace want job creation. To pay for a stimulus to get people back to work, raise taxes on the super-rich and cut bloat where it really exists: military spending and corporate welfare. The banks got bailed out, the people got sold out. Your elitist colors are showing when you mention not once anything about jobs and point only to entitlements for cutting. How disgusting.

  12. Surprise, surprise, to hear from me this following comment:

    watch another 30 or more % of physicians drop Medicare patients from their practices by early 2012 if this cut below I mentioned in separate comment comes to fruition.

    And, maybe this issue will finally bring to the forefront what the 800 pound gorilla has been wildly gesticulating with his 8 foot poster board comment of “can’t live forever folks, get a life while you have the time!”

    The separate post about Andy Rooney’s death really shows what the crowd who wants heads is about. 92 year old people having surgery, and then dying. How absurd to see that endpoint!

    Man, we need a sarcastic font!!!

    Happy freakin’ thanksgiving to all, and good night!

  13. How about reading this little gem from the AMA, why they sent it to me when I am not a member I have no clue, but, even random chance for 1 out of 20 has it’s positive moment:

    “Nov. 21, 2011

    Supercommittee failure leaves 27 percent Medicare payment cut in place
    With the Joint Select Committee on Deficit Reduction failing to reach agreement on a deficit-reduction proposal, physicians still face a 27 percent cut in Medicare physician payments scheduled to take effect Jan. 1. Congress has missed an opportunity to address the nation’s fiscal problems, stabilize the Medicare program and permanently repeal the sustainable growth rate (SGR) formula.

    “The deficit committee had a unique opportunity to stabilize the Medicare program for America’s seniors now and for generations to come,” AMA President Peter W. Carmel, MD, said in a statement. “Once again, Congress failed to stop the charade of scheduled annual physician payment cuts and short-term patches that spend more taxpayer money to perpetuate a policy all agree is fatally flawed. A decade of uncertainty and repeated threats of steep cuts threaten access to care for seniors and military families who rely on the Medicare and TRICARE programs.”
    Proposals to repeal the SGR fell victim to disagreement over fundamental principles for achieving deficit reduction. Sharp partisan division over the mix of entitlement cuts and tax hikes prevented the supercommittee from reaching any agreement on a deficit-reduction package.

    Sen. Max Baucus (D-Mont.), Sen. John Kyl (R-Ariz.) and Senate Majority Leader Harry Reid (D-Nev.) were among the leading advocates for SGR repeal in the supercommittee negotiations. Earlier this year, Sen. Pat Toomey (R-Pa.) had also offered a deficit-reduction package that included SGR repeal.

    Congressional action expected to avert 27 percent cut on Jan. 1
    Democratic and Republican leaders in Congress have publicly stated their commitment to take action this year to avert the 27 percent cut. Options for SGR relief outside of the supercommittee process have ranged from short-term patches of a year or two to longer-term relief that provides for transition to a new Medicare physician payment system.

    The scope of the next SGR intervention will not come into better focus until Congress returns from its Thanksgiving break. Congress has a number of items of unfinished business that require action before departing for the Christmas holidays. Stay tuned for future updates via the Physicians’ Grassroots Network and other AMA communications.

    Medicare carriers have distributed information to determine if physicians want to modify their status as participating or nonparticipating physicians. The AMA has developed the “Know your options: Medicare participation guide” to help physicians evaluate their options and choose the direction that is suitable for their practice.
    The kit contains a detailed explanation of physician options, a calculator and various sample materials for communicating with patients. Given the current level of uncertainty, physicians may want to defer making a decision on their participating/nonparticipating status for a few weeks. Physicians have until Dec. 31 to modify their status.
    What can you do at this juncture?
    Register your strong concerns with your members of Congress that yet another SGR deadline is approaching and Congress has yet to act. Call the AMA grassroots hotline at (800) 833-6354 and ask your representatives and senators what specific steps they will take to end the annual SGR fiasco.

    If they tell you that they are “with you,” remind them about the multiple missed deadlines in 2010. Physicians and their patients need action rather than vague expressions of support.
    Thanks for past grassroots efforts; frustration, fatigue understandable
    AMA elected leadership and management thank all of you who have responded to our calls to action. Your hard work has helped us generate a massive grassroots outcry from both physicians and patients on behalf of SGR repeal, with more than 250,000 email and phone call contacts to Congress on this issue in just a few months.

    Everyone in the medical community is tired and frustrated with the annual Medicare payment battle. Responsibility for the current situation rests squarely with one group: Congress. Medicine should not beg or plead for short-term relief that grows the problem. It is up to our elected leaders to carry out commitments made to physicians and patients.

    Sequestration cuts
    Current law stipulated that across-the-board cuts totaling $1.2 trillion will be imposed in 2013 if the supercommittee fails to achieve this targeted amount. This spending reduction is to be equally divided between defense and non-defense programs.

    Medicare cuts are limited to a 2 percent reduction in provider payments. This sequestration cut would be separate or on top of any potential SGR reduction. Given the severe cuts that sequestration would impose on defense and other programs, there has been extensive discussion by members of Congress regarding passage of new legislation to prevent sequestration from being implemented in 2013.

    If you have specific comments on this AMA Alert, simply reply to this message. Do you have general questions about the AMA? Call the AMA Unified Service Center at (800) 262-3211.
    Sent by: American Medical Association * Helping doctors help patients
    515 N. State Street
    Chicago, IL 60654

    Copyright 1995-2011 American Medical Association. All rights reserved.
    The AMA’s strength comes from its numbers. That strength grows when our membership increases. Please urge your fellow physicians and medical students to join our cause by calling (800) 262-3211 or visiting the AMA website.”

    sorry I could not link it to avoid taking up a lot of space on the thread.


  14. “shocked, simply shocked”

    Did you inadvertently omit the snark tag?

    Yeah I was SO shocked.

    Anyone who took the trouble to actually read the 11th hour “Budget Control Act” and followed the subsequent Junta — oh, uh, Deficit Committee — had to know that this was just a Kabuki Dance. As are the “looming catastrophic DoD cuts” (which, like domestic cuts, won’t ensue until 2013 — if EVER).

    This is all about trying to Necklace Obama in 2012.

  15. I would just like to point out that the several and official Democrat proposals to cut said entitlements were miles to the right of what most liberals consider acceptable, and light-years to the right of lefty-liberals aspirations.
    I have not seen any Republican proposal deviate an inch from the radical right.

    Compromise cannot be defined as having those who you don’t agree with lay on the ground face down.

  16. Sounds like Greek to me. Oh, it was not about Greece?

    Better buckle up. I doubt there is any real money left in the world to be borrowed. That will bring hyperinflation and depression.

    Bye-bye, MediCare. Bye-bye dialysis. Bye-bye lift chairs and scooters and feeding tubes and home health. Bye-bye government spending at all levels. Time to get out of the way.

    Compromise is not going to happen. Time to cut out 40% of the budget.

    God help us.