Tag: Congress

Can HR 3200 Be Fixed?

Health care reform looks like it’s stalled. And rightly so, based on the provisions of the House Democrats’ health care reform bill. The grossly misnamed America’s Affordable Health Choices Act (HR 3200) combines the worst of all possible worlds: high taxpayer costs, big increases in federal deficits, and disincentives for businesses to hire, while leaving up to twenty million individuals still uninsured and doing little or nothing to control runaway national health care expenditures.

Although the bill would make health care coverage available to many of the millions who currently cannot afford it, its provisions will potentially add some $200 billion a year to federal expenditures, make only miniscule reductions in Medicare cost trends, and impose play-or-pay provisions and a new surtax that could hurt smaller businesses just as they try to recover from the recession.

So, is there anything that can be done to fix HR 3200 so that it would provide affordable universal health care coverage without increasing federal deficits or halting the recovery from the recession?

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Rantology: Sympathy for the blue devils?

6a00d8341c909d53ef0105371fd47b970b-320wi I do have some vague sympathy for the Blue Dogs, the group of mostly red-state Democrats who have to pretend that they care about fiscal responsibility. They, like me, think that we shouldn’t be increasing taxes on the non-health sector to pay for universal coverage. Unlike me they think that we should be reducing any commitment to universal coverage by reducing the level at which subsidies for people mandated to buy health care coverage cut off—which will leave us in a situation with lots of people who forgo coverage because they can’t afford it. I of course think that we should be finding the money to cover the uninsured from within the 16% of GDP we already spend on health care and then ratchet that overall number down, but then again I don’t have to get elected to Congress.

But I do have one modest question. Where were the dogs/devils’ concerns about the deficit when George Bush was borrowing for the future to pay for income and dividend tax rebates for the very wealthy, by invading Iraq and hiding the accounting, and by creating the boondoggle that was the Medicare Modernization Act. Now it’s late at night and I’m not going to go chasing voting records from 2001–3. But I sure have my guess….

More on the politics of health care reform:

Op-Ed: Reform- Why have our objectives been abandoned?


In the campaign of 2008 and the first six months of 2009, the call for healthcare reform has been a refreshing and important theme.  It has been widely recognized that

1.    Healthcare costs are out of control.  You cannot have healthcare expenses inflating at 8% in an economy that is growing in the best of times at 4%.  (today, the current inflation rate is negative 1.3%)

2.    47 million Americans need coverage

3.    14,000 Americans lose their insurance everyday

4.    Medicare is in peril, and along with Medicaid, the combination of ever-increasing costs are the main drivers of this government’s budget deficits that threaten our economic future.Continue reading…

A Wild Pitch: HR3200 Brushes Back Health Reform

Barack_Obama_addresses_joint_session_of_Congress_2-24-09 On May 12, the flame throwing Chicago White Sox pitcher Bobby Jenks was fined for throwing behind an opposing player, Texas Rangers second baseman, Ian Kinsler. When Jenks, who can throw a 102 MPH fastball, was asked about the pitch, he said, “Yeah, I wanted to go in and send a message and I think the message was sent.”  When asked later if he would do it again, he said, “We’ll have to see.”

Rarely do you see that kind of candor in baseball, let alone politics for that matter.  When Speaker Pelosi and House Leadership released their version of a health reform bill, HR 3200, America’s Affordable Health Choices Act of 2009 (AAHCA), she pulled a Bobby Jenks.  Rather than put the ball over the plate, and help frame a broad consensus for health reform, Speaker Pelosi “sent a message” to the President, which was:  “We’re in charge and we will do exactly what we wish.”

HR3200 is an arrogant, tone deaf and yet oddly cowardly bill that creates, among other things, a Health Choices Commissioner to help us with our health choices.  Its message to the voters seems to be, as David Brooks put it, “98% of Americans can party on, with the latest and costliest health care imaginable, no matter how ineffectual, and the top 2% will pay for it all.”

Just as she did with her “stimulus” pork fest back in February, Pelosi has created a huge problem not only for Obama, but moderate Democrats in her own chamber. Not only does the bill, under the best of circumstances, still leave nearly 17 million people without coverage.  It will greatly handicap any chance for recovery in our country’s ailing economy.  HR3200 is a recipe for a one-term Obama Presidency, and presents a nearly insuperable barrier to moderate House or Senate members seeking to run for re-election in a scant fifteen months.

The House bill lays a huge burden for financing health reform on the nation’s businesses, through a thinly disguised payroll tax (oops, I meant “Shared Responsibility payment”) and employer mandate, as well as a surcharge on the top tax rate that will have the effect of hitting many small businesses twice (in the worst business climate in 28 years).   If the CBO honestly scored the employer mandate as a tax, the tax increase part of the House bill’s financing scheme would far exceed the seemingly modest $544 billion advertised.

For businesses with payrolls over $400 thousand who presently do not offer health coverage, AACHA would raise their payroll tax (including Social Security and Medicare) to 23% or require them to purchase insurance for their workers, at a price which will not be a dime lower than it is today because of this bill.  Only businesses with a payroll less than $250 thousand would be exempt, and only those with low wageworkers will be eligible for any meaningful subsidy to defray the cost of complying with the mandate.

The economic context is worth reviewing briefly for those who have been living in a cave or were otherwise off the grid.   The US has lost 2.1 million jobs since President Obama took office. Financial services, manufacturing, retailing, light industry, even pharmaceuticals and biotech firms, are all shedding jobs at a pace not seen since the end of World War II.  Though the pace of job loss has slackened somewhat in the past two months (losing “only” 492 thousand jobs in June, for example), there is little likelihood of actual employment growth this year.

If you want job growth to resume next year, the last thing you do is make it more expensive to hire back workers, which is, unfortunately, precisely what the House bill does.  If you want wages to grow, so people can resume buying things (70% of our GDP!), the last thing you do is divert employer money from wages into a federally defined and managed health benefit.

One way or another, it isn’t wealthy Americans, the intended target of the House bill, who will pay the price for the House bill.  Who will actually pay: those American workers presently unemployed, or working involuntarily part time, or struggling to dig themselves out from under a mountain of debt, whose wages will not grow enough to offset their increasing cost of living. And though the bill explicitly forbids employers from lowering wages to pay for the mandate, it does not constrain employers from simply ceasing to increase their workers’ wages, or declining to hire back all the people they’ve laid off in the past ugly twelve months of collapsing sales and declining cash flow.

In addition to the payroll tax increase, for sole proprietorships and Sub S corporations, who pay taxes on their profits as ordinary income, after the expiration of the Bush tax cuts, the House bill moves the top tax rate to 46%, a rate we haven’t seen in the US since Jimmy Carter’s time.  Tax avoidance will experience a sudden and unwelcome renaissance, particularly in places like New York and California that could REALLY use a recovery, where, when you add in state and local taxes, the marginal tax rate is suddenly a Sweden-like 57%.   Party on, California!

What do we get for this steep price?  Well, we get an insurance industry that is regulated within an inch of its life.  It will be told the benefit package, its underwriting policy, the permissible amount of cost sharing each insured can bear, the medical loss ratio they are permitted to run, the ratio of premiums between highest and lowest cost enrollees (a 2:1 ratio is actually written into the bill, dramatically increasing the cost for ten million young people who are uninsured), and a whole bunch of other things, all managed by the Health Choices Commissioner (actually, Commissar).

To call it “health insurance” anymore is technically inaccurate because there is no longer any risk to patients. This risk is completely, comprehensively shifted to employers. Private health benefits will be, under AAHCA, a politically managed entitlement. Cost sharing will be reduced from today’s levels, in some cases dramatically.  “Consumer responsibility” is not part of the program. There is nothing in this bill that will make the bill for employers a dime cheaper than it is today, and a potential for their cost being a lot higher.

While the initial benefit package is comparatively modest, there is no insulation between a thousand hungry provider and patient advocacy groups and the employer’s health insurance premium except a Health Benefits Advisory Committee and a single political appointee, the Secretary of Health and Human Services.  Tom Daschle’s wisdom about the potential rapid expansion of the benefit package given the political realities in Washington has been lost on his elders in the House.  Congressional health barons are obviously disinclined to surrender any of their present power.

The eight hundred pages of the bill not devoted to the new entitlement make remarkably few substantive changes in our inflationary Medicare and Medicaid programs.  Despite Atul Gawande’s repellent portrait of rampant greed and self-dealing in McAllen, the bill declines to tighten meaningfully our existing Medicare fraud and abuse laws.  It extends a prohibition on new physician owned specialty hospitals, but only after carefully grandfathering in the money machines already on the ground and billing.

This is particularly disappointing given that the godfather of fraud and abuse enforcement, Pete Stark, is a cosponsor of this bill. This is prime time, Pete, a once-in-a-generation chance to do the right thing. There is clear and compelling evidence of abuse in imaging, surgery, radiation therapy, etc., so ripe you can smell it. If you don’t have the guts to clean up the program you’ve helped run for over thirty years, it’s time to go home to Piedmont and clip coupons.

Primary care physicians get a Medicaid pay increase; the rates are brought up to the inadequate Medicare levels that are driving out a whole generation of family practitioners, and then, only over a period of years.  Though primary care residencies are expanded and a medical home demonstration program is authorized, there is nothing in this bill that will meaningfully alter the economic choices of young doctors presently choosing to become dermatologists or cardiologists.  Those are your waiting lists now, Speaker Pelosi.  Radiologists do get clipped twice, and the updated Part B fee caps (under so-called SGR) are going to be split, between evaluation and management services, which may be increased someday, and procedure payments, which may be cut someday.

Hospitals will see modest reductions in their subsidies for caring for the uninsured, some reductions for those with excessive readmissions, a small nip in their DRG updates, and that’s about it. That and a demonstration project on post acute bundling, and otherwise, there are no meaningful changes in hospitals risks or responsibilities under Medicare, at least in this go-round anyway.   At least in the House, anyway, a huge bullet has been dodged by the industry.  And the do more/make more incentives to hospitalize Medicare patients, and for doctors to treat the heck out of them, survives for another, probably, five years.

Serious money is flung at community health centers (guess where those undocumented people will queue up), and at a black box labeled “Prevention and Wellness”, details to follow.  But there is nothing in this bill to deliver on the President’s bold promise to lower everyone’s health costs by $2500 a year, or to make the future year liabilities for Medicare any more affordable.  If someone can assert with a straight face that this bill is going to save money anywhere in the health system, they deserve to have their mouths washed out with soap.  It certainly didn’t fool Douglas Elmendorf, the head of CBO, who inconveniently said as much in Congressional testimony on July 16. .

The health reform financing problem with which we began is, sadly, of the President’s making.  He promised during the campaign what is turning out to be a $1.6 trillion extension of health coverage that 97% of Americans would pay nothing for.  With the crystalline clarity of hindsight, this was a costly political mistake.  He also explicitly promised not to tax health benefits, even for the wealthy that disproportionately benefit from the current exemptions, because it was a centerpiece of John McCain’s inadequate health platform. (Campaign’s over, everyone)

And on returning from his triumphal European tour to an increasingly skeptical United States, the President crisply reaffirmed both campaign promises, as well as his support for the troubled “public option”.  In a sense, all the House bill did was put into legislative form what Obama incautiously promised during his campaign. In other words, Pelosi narrowed his political options and dragged the whole process about sixty feet to the left at the very time financing options needed to be broadened and centered.

Unfortunately, it did so in a markedly more adverse economic climate, and in a country with rapidly narrowing economic options and a markedly diminished fiscal capacity.

If I were Tom Daschle and Peter Orszag, I’d barge my way into those political meetings, and help their President salvage this thing.   Way more savings need to come from the health system itself (50% isn’t enough), particularly from the rich matrix of subsidies and inappropriate incentives which sustain the industry’s inflationary cost curve, and the tax burden needs to be spread across consumption, particularly unhealthy consumption, and removed from the wage base.  Health insurance also needs to be much more affordable for ten million uninsured young people, or they’ll simply blow off the individual mandate and remain uninsured.

Otherwise, we’ll hate ourselves in the morning. The House bill is a sad reminder of why Americans detest Washington politics as usual.  AAHCA is right! (Say it again).  This bill is a bone in the throat for the Obama administration, and will divert vital political energy needed to bring the health reform process to a responsible conclusion.

If there is no job growth next year, the Democratic ascendancy in Congress will be bitter and short lived, and Obama, for all his bright promise, will have a very steep hill to climb to remain in office in 2012. If this recession is not over in less than a year’s time, it will be the President’s and Speaker Pelosi’s recession, and Lord Help Them politically.  They won’t be able to blame the Republicans either.  The Democrats will have squandered a veto proof majority in the Senate, and a seventy-vote margin of safety in the House.  And for what?  Mostly for more of the same, more broadly shared, at a huge cost to American workers.   Shame on the House!

Jeff Goldsmith is president of Health Futures Inc. He is also the author of a book released this year titled “The Long Baby Boom: An Optimistic Vision for a Graying Generation.” Health Futures specializes in corporate strategic planning and forecasting future health care trends.

More by this author:

House Health Care Reform: Ignoring the Elephant?

Democrats-cap-and-trade-bill-house-renewable After some frantic last minute political
gyrations and a lot of pressure from the President, House Democrats
have announced details of their draft health care reform bill.

Much as expected, the 852-page bill
emerging from three House committees would impose a mandate on larger
employers to provide insurance, impose a second mandate on individuals
to obtain coverage, prohibit medical underwriting by insurers, establish
a government-administered public plan to compete with insurers’ offerings
through insurance exchanges, offer subsidies to lower-income individuals,
and expand Medicaid. The target ten-year trillion-dollar (or more) price
tag would be funded through a combination of taxes on high income individuals
and reductions in some Medicare and Medicaid payments.

So, is this the answer to the nation’s
health care crisis of sky-rocketing costs and growing millions of uninsured?

Probably not.

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The Tri-Committee Health Reform Bill: Implications for Children

A little more than two weeks ago the three major committees in the
House with jurisdiction over health reform put out a draft legislative
proposal, known as "The Tri-Committee bill."  We've now read the 852-page document
a few times, and think it would make giant strides in providing access
to coverage to millions more people and transforming the country's
health care delivery system.  Of particular note for kids, it includes:

  • Major expansions in access to affordable coverage for their parents and other adults.  (Click here for just a few of the articles showing a clear link between how children fare and the health and stability of their parents.);
  • Continued coverage of children through Medicaid with its strong, child-specific benefit package;
  • Increases in Medicaid reimbursement rates; and
  • A
    guarantee that no child born in a U.S. hospital leaves without
    insurance.  (For more details on these and other provisions, see our Fact Sheet on the Tri-Committee bill.)

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In a comment on my previous post on
the Senate Health, Education, Labor, and Pensions reform bill, tcoyote
explained some of the political thinking behind what seem like totally
spurious cost projections. While I can readily accept tcoyote’s explanation
of the pols’ efforts to ignore reality, I’m still politically innocent
enough to want to know what the HELP bill might really cost. So I spent
some time looking at the Congressional Budget Office report on the bill. 

Here are a few things I noticed: 

  1. The “ten-year projection”
    starts in 2010, although the bill does not require insurance exchanges
    to be implemented until 2014. The result is that the projection includes
    only six years of reform (plus a lengthy transition period), NOT ten
  1.  The CBO projections
    include a $58 billion “credit” for the impact of the HELP bill’s
    proposed new long-term care program (the so-called CLASS Act). However,
    the “credit” accounts for the difference between premiums and benefits
    over the 2010-2019 period on a cash basis only. If conventional accrual
    accounting were used, CLASS would show a net cost for the period.

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Broad Agreement that Worker’s Comp Program for War Zone Workers Needs Fixing


Congressional hearings generally follow a script. Lawmakers publicly
vent their outrage, administration officials offer plausible defenses,
and the outcome is inconclusive. But this month's airing of complaints
about the government's system for taking care of civilian workers
injured or killed while on the job in Iraq and Afghanistan was notable
for its unanimity.

Republicans and Democrats, Obama administration officials, private
insurance companies and injured contractors all agreed that there are
serious flaws in the Defense Base Act, [1]
a 70-year-old law that requires federal contractors to purchase special
workers' compensation insurance for employees working in war zones.

The Labor Department, which oversees the system, acknowledged that
it had failed to consistently provide for the needs of the injured.
Insurance carriers complained that tight deadlines and paperwork
requirements were outmoded for the complexities of a war zone. Injured
civilians recounted long, painful battles to get prosthetic legs,
prescription eyeglasses and other basic medical needs.

Continue reading…

Careful What You Wish For

On the left are those who would like health reform to include a strong public plan, one that could negotiate large provider discounts, driving down the cost of medical care. On the right are those who think health insurance should be provided only privately. I’m neither left nor right. I consider myself a realist and an empiricist.

A reasonable reading of the political tea leaves suggests that health insurance for the non-elderly will remain largely a private affair. (See the Debating the Public Option in The American Prospect by Paul Starr, Robert Reich, and Robert Kuttner.) Therefore, I’d like the private insurance market to work well. I’m also very familiar with the Medicare experience (and its problems) with both public and private provision of insurance.

So is Kerry Weems, the former acting administrator of the Centers for Medicare and Medicaid Services (CMS), the agency that oversees Medicare and Medicaid. Weems was interviewed recently by John Iglehart, the founding editor of Health Affairs, a respected journal of health policy (Doing More With Less: A Conversation With Kerry Weems, Health Affairs, 18 June 2009). Based on his experience managing Medicare and Medicaid, Weems had some interesting things to say, some of which I summarize below.

In general he paints an ugly picture of a public plan. If you’re hoping health reform includes a strong public plan you should be careful what you wish for, and you should read the interview to see what problems a public plan might have. This is not to say a public plan is better or worse than private plans. It is just to say that one should expect that a public plan will likely experience certain types of problems. Now on to the summary of the Weems-Iglehart interview.

On Congress. Congress has not treated CMS well because funding it is not as sexy as funding other agencies overseen by the same appropriation subcommittees: the National Institutes of Health and the Centers for Disease Control and Prevention. A consequence is that CMS has insufficient resources to fight waste, fraud, and abuse. For example, according to Weems,

“CMS’ annual expenditures [are]…more than the economies of all but twelve nations, and CMS carries out its responsibilities with a staff of 4,600 people. Social Security is of comparable budget size and handles its dollars with about 66,000 people…”

On Medicare Advantage. Weems feels that private plans under Medicare advantage can offer “better care at lower or the same costs” as traditional fee-for-service Medicare.

On Payment Errors. Medicaid has a payment error rate of 24 percent, meaning that the payments paid to providers are either incorrect or unverifiable 24 percent of the time.

On Waste, Fraud, and Abuse. Investigations of waste, fraud, and abuse under Medicare and Medicaid have yielded a return of $17 for every $1 spent. However, far too little is spent in the fight. Therefore, a considerable amount of waste, fraud, and abuse exist under Medicare and Medicaid. (See the recent stories on fraud in Miami, Detroit, and Denver.)

On a Public Plan under Health Reform. Weems thinks a public plan is “a bad idea because the government has a difficult time selecting only those providers who deliver high-quality care. There is a risk that a lot of resources will be wasted on poor care.

On Political Pressure. CMS administrators get a lot of pressure from Congress to treat certain providers more favorably than they might deserve. Such political meddling is a handicap in properly administering a public insurance plan.

On Physician Payments. The American Medical Association (AMA) has considerable influence on physician payments through its Resource Based Relative Value Scale (RBRVS) Update Committee (RUC). Weems thinks the resulting payments have “contributed to the poor state of primary care in the United States.” (Weems’ anti-RUC statements sparked a blogosphere debate (hat tip: Kate Steadman of Kaiser Health News). Rebecca Patchin, Chair of the Board of Trustees for the American Medical Association wrote on the Health Affairs blog that CMS is under no obligation to follow the RUC’s recommendations and she cites examples where it has not done so. On the Health Care Renewal blog, physician and Brown University professor Roy Poses asks “why does CMS rely exclusively on the RUC to update the RBRVS system, apparently making the RUC de facto a government agency, yet without any accountability to CMS, or the government at large?”)

On balance, it is clear that Weems is not impressed with the public provision of health insurance under Medicare and Medicaid. Some of the sources of problems could in principle be remedied. However, if Congress were to implement a public plan under health reform there is no assurance it would not suffer from at least some of the problems that plague traditional Medicare and Medicaid. I think the most challenging are political pressures, including rent seeking on the part of providers, and a potential inability for a public entity to selectively contract based on quality.

The Incidental Economist holds a joint appointment at a major research
university and a federal government agency.  In his current position,
he studies economic issues pertaining to U.S. health care policy with a
focus on Medicare. His writings can be found at

HELP! This is Unbelievable

Key members of the Senate Health, Education, Labor, and Pensions Committee announced on Thursday what they claimed were dramatically improved cost and coverage estimates for the latest version of their health care reform bill.

Headed by Democratic Senator Christopher Dodd, HELP members (in a Muzak-marred conference call with reporters) stated that the revised bill would cost only $611 billion over ten years, a figure apparently computed by the CBO, and that with a further expansion of Medicaid would provide coverage for 97 percent of Americans.

Key features of the bill provided during the conference call included a public plan option, subsidies for lower-income individuals buying insurance through an exchange mechanism, and a play-or-pay employer mandate.

Sounds good? We’ll have to wait for details, but two big problems are already apparent.

The first BIG problem is that the ten-year cost estimate of $611 billion excludes the cost of Medicaid expansion. With Senator Dodd’s admission that the HELP Committee expects this to provide coverage for 7 percent of Americans (the difference between the 97 percent coverage with Medicaid expansion and 90 percent without it), the total cost balloons to far more than a trillion dollars. A rough calculation of Medicaid costs for 20 million Americans at present funding levels gives a total of $80 billion a year – or $800 billion just for Medicaid expansion, presumably to be shared with state governments already on the verge of bankruptcy.

Even assuming that Senator Dodd misspoke, and the at he intended his percentages to apply only to under-65 Americans, the ten-year estimate for Medicaid expansion is still over $700 billion—with no provision for medical inflation. And, given the financial condition of most states, most of this cost would have to be borne by the federal government.

The second BIG problem is the absurdly modest levy—$750 for businesses with more than 25 workers and $375 for businesses with fewer than 25—to be imposed on employers not providing employee coverage. It’s hard to believe, in the middle of a deepening recession, that many employers will not choose to pay the $375 or $750 levy rather than buy insurance at $3,000 or more (just for the employee, with no family coverage), with additional government subsidies needed to bridge the funding gap.

The CBO has apparently assumed in its estimates that there will not be a big change in the extent of employer-sponsored coverage over the ten-year period, but this seems unrealistic. While we have not seen a “rush to the exits” in Massachusetts so far, the longer-term experience of Hawaii may be more meaningful. Immediately after Hawaii passed its mandated coverage law, the uninsured rate was below 5 percent, but as a series of recessions hit Hawaii’s economy, the rate increased to 8 percent in 1998, and close to 10 percent today. Only the truly naïve can believe that numerous US employers won’t either choose the far cheaper levy option or—as in Hawaii—find other ways of ducking the employer mandate.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.  He is editor of Health Care REFORM UPDATE [].