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Healthcare Reform Update - October 22-28, 2009


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Compiled by Brian Betner*

October 28, 2009

Reid: Public Option With 'Opt-Out' Provision Is The 'Best Way To Move Forward'
October 26, 2009

Senate Majority Leader Harry Reid said this afternoon that he supports a public plan with a provision that would allow states to "opt-out." Reid's announcement represents a major reversal from his previous hesitation about this mechanism and ensures that some form of a public option will be included in health-care legislation headed to the Senate floor. Recent debate has focused on the best way to devise the approach and which lawmakers might support it.

The Washington Post reports: "'The best way to move forward is a public option with an opt-out provision,' Reid told reporters, adding that he 'fully' believes that such a bill would have 'the support of my caucus.' Under pressure from liberals in his caucus, Reid has carefully canvassed Senate Democrats in search of 60 votes needed to bring health-care reform to the floor with a public-option provision included. So far, he has not locked down commitments from every Democrat, Senate sources said" (Murray, 10/27).

The Wall Street Journal reports: "Mr. Reid noted that polls show widespread public support for giving the government a role in the overhauled health-care system envisioned by President Barack Obama and his allies in Congress. Top Senate Democrats are finalizing their health bill and could unveil a measure as soon as early this week that would include stiffer penalties on employers who fail to provide health coverage. Senate leaders plan to submit the bill to the Congressional Budget Office for a cost estimate as soon as Monday and make the legislation public as soon as Tuesday, according to a person familiar with the negotiations" (Adamy and Hitt, 10/26).

Fox News reports: "The compromise measure was one of a host of different so-called public options being considered in the Senate. Though the public option seemed off the table in the chamber just one month ago, it gained traction in recent weeks as Democratic leaders floated measures meant to be more appealing to party moderates. The 'opt out' proposal would set up a national insurance plan with government seed money and be run by a private, not-for-profit board. Under the proposal, states would have to prove they can provide comparable coverage in order to exit out of the federal plan. The plan would also negotiate rates with providers just like private insurance companies do, presumably keeping premiums on a level playing field with the private industry. House Speaker Nancy Pelosi is pushing a more robust version of the public plan, which would be based on Medicare rates and in turn provide for cheaper premiums. Pelosi reportedly does not yet have the votes in her caucus to pass that version" (10/26).

NPR reports that Reid said: "'I believe that a public option can achieve the goal of bringing meaningful reform to our broken system. It will protect consumers, keep insurers honest and ensure competition. And that's why we intend to include it in the bill . . . that will be submitted to the Senate'" (James, 10/26).

CNN reports that Reid said that the public plan was "not a silver bullet but will ensure healthy competition and a more level playing field for consumers." The version of health overhaul legislation Reid has been working on "will be given a cost assessment by the nonpartisan Congressional Budget Office, also includes a provision from the Finance Committee bill allowing for the creation of nonprofit health care cooperatives that would negotiate collective insurance coverage for members." He hopes this compromise "will appeal both to liberal senators insisting on a public option and to conservatives wary of a government-run plan . . . ." Sources also told CNN that the Majority Leader does not yet have firm commitments in support of the compromise from 60 senators, the requisite number needed to break a Republican-led filibuster (10/26).

Politics Aside, Annual Medicare Fix Is Same Old Story
October 26, 2009

This story comes from our partner NPR.

Congress is at an impasse over how to fix a perennial problem in Medicare.

Just about every year a formula glitch threatens to cut payments to doctors who treat seniors and the disabled. And just about every year Congress cancels the cut. This year lawmakers are complaining about the bill because it's not paid for. But, despite what both Republicans and Democrats are claiming, that's nothing new.

Permanent Fix Falls Short

Rather than do another one or two year patch for the Medicare doctor pay cut problem, Senate Democrats had wanted to fix the problem permanently. But their bill couldn't even make it to the Senate floor--it fell short on its first procedural test last Wednesday by 13 votes. The reason cited by virtually every opponent was that the bill's $250 billion, ten-year cost wasn't paid for with other spending cuts or increased taxes.

New Hampshire Republican Senator Judd Gregg is among the opponents of the bill. "We've only done yearly fixes in this area, the doctor fix, because it's a pretty difficult number to always pay for, but we have always paid for it," he said on CNN last Sunday.

Except that Congress hasn't always paid for it. In fact, when Republicans were in charge, they did cancel the Medicare cuts to doctors, but rarely paid for them. Just before turning control of Congress back to the Democrats at the end of 2006, Republicans actually tucked legislation to cancel the next year's doctor pay cut into a catch-all tax bill that wasn't paid for either. And then-Senate Budget Committee Chairman Judd Gregg was one of the people who complained the loudest.

"You just have to ask yourself how we, as a party, got to this point, where we have a leadership which is going to ram down the throats of our party the biggest budget buster in the history of the Congress under Republican leadership," said Gregg back in 2006.

Bipartisan Memory Loss

But Republicans don't have a lock on short-term memory problems. Here's how White House Press Secretary Robert Gibbs responded when he was asked about the issue last Thursday: "The cut in payments to doctors is something that is to be implemented every year; and gets fixed every year for the past six years. The president included in his budget fixing for and paying for that fix," said Gibbs.

Except Gibbs was only half-right. President Obama's budget does propose to fix the payment problem in that it would cancel next year's Medicare cut for doctors and cuts into the future. But it doesn't propose to pay for the added costs.

In fact, back in March, White House Budget Director Peter Orszag testified before a House Committee that the proposed fix could cause the federal deficit to be as much as $400 billion higher over the next decade.

Democrats Push To End Insurers' Antitrust Exemption
October 23, 2009

This story comes from our partner NPR.

In the ongoing health care overhaul drama, the Obama administration and the health insurance industry have gone from uneasy allies to bitter adversaries.

One result is that health insurers stand to lose a privilege their industry has enjoyed for the past 64 years: They, like Major League Baseball, have been exempt from federal antitrust laws. Congressional Democrats are now pushing to strip the health insurance industry of that exemption.

Things turned ugly earlier this month after the health insurance industry rejected the health care makeover it once supported. President Obama dedicated his most recent weekly address almost entirely to blasting those insurers; he accused them of skimming big profits off ever-escalating premiums.

"They're earning these profits and bonuses while enjoying a privileged exception from our antitrust laws, a matter that Congress is rightfully reviewing," the president said.

It was Congress, after all, that in 1945 overrode a Supreme Court ruling that the insurance industry was indeed part of interstate commerce and thus subject to federal antitrust laws. Lawmakers that year passed the McCarran-Ferguson Act; the law has ever since shielded insurance firms from federal prosecution for price fixing, bid rigging and carving out protected markets.

This week, Senate Judiciary Committee Chairman Patrick Leahy declared the time had come to do away with that protection.

"The antitrust laws exist to protect consumers, but also to promote competition," he said. "You remove the antitrust laws, you don't protect consumers, and you don't promote competition."

'Allow competition to have a greater role'

Leahy held a hearing last week on ending the antitrust exemption for health and medical malpractice insurers. Christine Varney, who heads the Justice Department's antitrust division, testified for the Obama administration.

"Repealing the McCarran-Ferguson Act would allow competition to have a greater role in reforming health and medical malpractice insurance markets than would otherwise be the case," she said.

Varney's assertion was roundly rejected by University of Arkansas business professor Lawrence Powell, who testified on behalf of the medical malpractice insurance industry.

"The best possible outcome from repealing McCarran is continuation of the status quo," he said. "However, it is also likely that repealing McCarran would have negative consequences for consumers, by decreasing competition and accuracy in insurance pricing."

Rhode Island Democrat Sheldon Whitehouse pointed out that the professor was relying on outdated information.

"You cite for the proposition that insurance markets are highly competitive an article by Paul Joskow. Do I have the date of that article correct, it's 1973?" he asked Powell. "I believe so," came the answer.

Whitehouse noted that in 39 states, two health insurers control at least half the market, while in nine states, one insurer controls at least three-quarters of the market.

Possible backfire?

Still, some health economists question whether breaking up big insurance companies with federal antitrust laws will help consumers.

"What you may find is that it's the opposite--that you break them up and they can't bargain down prices and, therefore, while they're competing at the margin, they're all competing at a higher level of premium than you had before," says Austin Frakt of Boston University's School of Public Health. "That's certainly possible."

It's the states that regulate the insurance industry. Still, almost all the nation's state attorneys general want to repeal the federal antitrust exemption.

"This gives us another tool in our arsenal to combat higher rates--proposed and accepted by companies that have a stranglehold in the market--in states like Maine, where basically one company controls the market," says Maine Attorney General Janet Mills.

The push to repeal the antitrust exemption has gained momentum. This week, three Republicans joined Democrats to vote such a bill out of the House Judiciary Committee. A similar measure is planned as an amendment to the Senate's health care overhaul.

Lawmakers, White House Consider Bipartisan Route To Bend Health 'Cost Curve'
October 27, 2009

Amid growing signs that health care overhaul legislation will do little to "bend the cost curve" in the coming decade, lawmakers and administration officials are considering tougher steps to rein in costly entitlement programs and address mounting concerns about soaring deficits.

One approach attracting widespread attention calls for the creation of a bipartisan commission to draft proposals to control the long-term costs of Medicare, Medicaid and Social Security. Together, the three programs account for 40 percent of all federal spending, other than interest on the debt.

The recommendations of the proposed commission would command a swift up or down vote by Congress. Senate Budget Committee Chairman Kent Conrad, D-N.D., and Republican Sen. Judd Gregg of New Hampshire, the chief authors of the proposal, say they may attempt to attach it to must-pass legislation raising the government's debt ceiling in the coming weeks.

"My concern is the trajectory of our deficits and debt are completely unsustainable and that [while] health care reform helps, it is not sufficient" to control runaway entitlement spending, Conrad said in an interview. "We've got to do much more, and I don't believe it will happen in the regular order. I think it requires a special process."

The Obama administration signaled earlier this month that the fiscal 2011 budget now being drafted would include program cuts that would help to control the deficit and "put our country back on firm fiscal footing."

Monday, Christina D. Romer, chair of the president's Council of Economic Advisers, said the White House was interested in the Conrad-Gregg proposal and other ideas floated by Sen. Evan Bayh, D-Ind., to create an entitlement commission next year, despite some past disappointments in such panels. But for now, she said, the administration's primary focus is on passing a health care overhaul bill to extend coverage to millions of uninsured Americans--a plan that is estimated to cost about $900 billion over 10 years--and to begin imposing discipline on health care costs and expenditures.

"That's the most constructive thing we can do to deal with the long-run budget deficit," Romer told reporters after a speech before the Center for American Progress. "What we're going to need besides that going forward, there certainly is the Conrad-Gregg Commission idea. We saw Senator Bayh mention something along the same lines, which is [that] Congress could at some point get its act together and work with the president and come up with a proposal."

Record deficit, and growing

The government ended the 2009 fiscal year Sept. 30 with a record
$1.4 trillion budget deficit, according to the Treasury and the Office of Management and Budget, and is on track to accumulate deficits totaling $9 trillion by 2019. While administration spending in response to the recession and financial meltdown helped drive up the fiscal 2009 deficit, most of the future problems will be due to rapid rises in entitlement spending on Medicare and Social Security for seniors and Medicaid for the poor and disabled.

"Some of this is just the result of the aging of the population, but the far greater source is the fact that health care costs, both public and private, are rising much faster than" the gross domestic product (GDP), Romer said in her speech. "It is simply not a problem that can be kicked down the road indefinitely."

U.S. public and private health expenditures are expected to reach
$2.5 trillion this year and account for 17.6 percent of the GDP, according to an analysis by the National Coalition on Health Care, a nonpartisan group. By 2018, national health care expenditures are projected to soar to $4.4 trillion.

Equally alarming, national health care spending will increase faster than the growth in the nation's economy. Between now and 2018, the average increase in national health expenditures is projected at 6.2 percent a year, compared to a 4.1 percent annual rise in GDP, according to the health care coalition study.

The idea of creating a bipartisan entitlement commission has been discussed, off and on, for two years. But it began to attract the interest of the White House, some Democratic leaders and Senate Minority Leader Mitch McConnell, R-Ky., after angry comments at a series of town meetings in August and subsequent polling signaled growing public alarm over the Democrats' efforts to pass costly health care legislation in the face of a budget deficit level not seen since World War II.

Obama administration officials have vigorously defended the massive government spending over the past year to bail out Wall Street and stimulate the economy as a necessary response to the worst recession since the Great Depression. And they have argued that the health care legislation would not add to the deficit but would take the first essential steps toward slowing the rate of growth of health care spending, or "bending the cost curve."

A booming elderly population

The Senate Finance Committee, for example, identified $404 billion worth of savings in Medicare and Medicaid over the coming decade; provided funding for comparative effectiveness research, electronic medical record keeping, and preventative medicine practices to help slow the growth of health care spending. And it proposed the creation of an independent Medicare advisory committee to recommend avings measures to Congress.

But Congressional Budget Office analysts and many health care experts have discounted the efficacy of those approaches in slowing the rate of spending. They warn that, with a fast growing population of elderly citizens making more demands on federal health care programs, spending on Medicare and Medicaid will exceed the entire Defense budget by 2019, regardless of what Congress does this year with health care reform.

"I don't think there's anything in the Finance Committee bill that really makes systemic reforms," said Michael D. Tanner, a senior fellow and health care policy expert with the libertarian Cato Institute.

"Even if all that stuff is included, it's a first step," acknowledges James R. Horney, director of federal fiscal policy at the left-leaning Center on Budget and Policy Priorities, a strong advocate of expanded health insurance coverage. "None of these are silver bullets, but over time those are the kinds of steps we will need to take."

Sen. Gregg, the ranking Republican on the Budget Committee, said the Democrats' health care reform proposals, designed to extend coverage to millions of uninsured Americans, "creates a brand new entitlement without at the same time controlling the cost and expenditures of existing entitlements," such as Medicare, Medicaid and CHIP, the Children's Health Insurance Program. He and Conrad contend that Congress must take a much more aggressive approach to containing health care costs.

'Jump off the political cliff together'

The proposed Bipartisan Task Force for Responsible Fiscal Action would operate in a manner similar to the successful Defense Base Closure and Realignment Commission (BRAC) since their recommendations would not be subject to congressional amendments, Gregg said. And because a three-fifths supermajority would be required in both chambers to adopt the recommendations, the two political parties would have to work in harmony to address the politically charged subject of entitlement reform.

"That's why we structured it this way," Gregg said. "The simple fact is that these are the types of issues which require people to join hands and jump off the political cliff together, or else it doesn't get done."

Bayh, a centrist, was one of nine Democrats who wrote to Senate Majority Leader Harry Reid, D-Nev., last week calling on Congress to approve a "special process" to control the deficit. Bayh said he would not support an increase in the debt ceiling "unless there's some mechanism to start getting the deficit under control."

The national debt--the accumulation of all the past budget deficits--is fast approaching $12 trillion, and the Democratic controlled Congress is contemplating setting the maximum level for government borrowing on the debt at nearly $13 trillion, an all time record.

Entitlement reform commissions have a mixed track record. A bipartisan commission appointed by President Ronald Reagan and House Speaker Thomas P. (Tip) O'Neill Jr. of Massachusetts in 1983 succeeded in extending the Social Security trust fund's solvency for several generations by raising the retirement age from 65 to 67, imposing a six-month delay in a cost of living adjustment and requiring government employees to pay into Social Security for the first time.

There was a bipartisan political consensus at the time that something had to be done to save Social Security, which was on the brink of insolvency. By contrast, there was no consensus about what to do to address the long term budgetary challenges of providing health care and retirement benefits to the baby-boom generation when former senators Bob Kerrey, D-Neb., and John C. Danforth, R-Mo., headed up the Commission on Entitlement and Tax Reform in 1994, during the Clinton administration.

Kerrey and Danforth floated a plan including cuts in Social Security checks for future retirees, an increase in the retirement age to 70, a cap on tax breaks for employer-paid health insurance and means-testing for veterans benefits. Kerrey and Danforth could never muster the 60 percent majority they needed from commission members to send their recommendations on to Congress, and their final report was shelved.

Whether the Conrad-Gregg commission approach would fare any better is open to speculation, but experts and lawmakers readily agree that real long-term health care and Social Security cost savings would necessitate highly unpopular measures, such as reducing health care benefits and cost-of-living adjustments, boosting taxes and fees, or, in the case of Social Security, raising the eligibility age even higher or increasing payroll taxes.

"Everybody knows what the options are, that's not the problem," said William A. Galston, a senior fellow in governance studies at the Brookings Institution. "People have known for ten years what the options are. The question is a political question, not an analytical question."

How Health Reform Bills Would--And Wouldn't--Affect Illegal Immigrants
October 23, 2009

As lawmakers continue to shape a health care overhaul bill to increase the number of Americans with insurance while driving down costs, one group is being deliberately barred from receiving any government benefits associated with the effort: undocumented immigrants. This brief explainer looks at some of the questions surrounding immigrants and health care in the United States.

How many are there and what is the law now?

There are nearly 12 million illegal immigrants in the U.S. In 2007, almost 60 percent of the adults had no health insurance, more than double the proportion of uninsured adults among legal immigrants and four times the share among U.S.-born adults, according to the Pew Hispanic Center.

Undocumented immigrants are barred from Medicaid and the Children's Health Insurance Program (CHIP)--the federal/state government programs for the poor. However, everyone--including illegal immigrants--have access to emergency room care through the 1986 Emergency Medical Treatment and Labor Act, which ensures public access to emergency health services regardless of an individual's ability to pay.

How do undocumented immigrants get medical care now?

Low-income immigrants--both legal and undocumented--are less likely than citizens to receive primary or preventive care, and they have lower rates of emergency room use than those of citizens, according to a 2007 policy brief by the Kaiser Family Foundation. (KHN is a program of the foundation.) But low-income non-citizens turn to health centers and clinics at a significantly higher rate than insured low-income citizens, with six in 10 relying on clinics and health centers as the place to go when they need medical help.

Who pays for their care?

Undocumented immigrants who seek care at health centers and clinics are typically billed on a sliding scale based on their ability to pay.

If illegal immigrants cannot pay their bills, hospitals and other providers first look to the federal government and charities for help in covering their uncompensated costs. The federal government, through the Disproportional Share Hospital program, allotted about $20 billion in 2009 to help hospitals and providers cover the costs they incurred treating uninsured patients, including citizens, legal immigrants and the undocumented.

But those government funds are generally not enough to cover the costs, and hospitals raise their fees for other patients to help provide the revenues needed to treat the uninsured.

Researchers estimate the cost of all uncompensated care was roughly $56 billion in 2008, according to a recent study published in the journal Health Affairs. However, because hospitals cannot inquire whether a patient is in the country illegally, it is difficult to tease out the cost of uncompensated care attributed to illegal immigrants.

How will reform proposals affect illegal immigrants?

All of the bills specifically exclude undocumented immigrants from qualifying for Medicaid or CHIP.

Neither the House bill nor Senate Health, Education, Labor and Pensions (HELP) Committee bill restricts illegal immigrants from being eligible to purchase coverage through a health insurance "exchange" or gateway set up in the legislation. However, the House bill explicitly states that undocumented immigrants would not be eligible to receive government subsidies to buy insurance, regardless of income. The Senate Committee Bill is much tougher and bars illegal immigrants from purchasing health insurance through the exchange.

Baucus' proposal also includes verification requirements to ensure that illegal immigrants are blocked from receiving federal subsidies or entering the exchange--an effort to quell Republican concerns that loopholes would allow illegal immigrants to benefit from receiving health insurance at a reduced rate.

The Senate and House proposals also call for reducing the federal DSH payments to hospitals for uncompensated care on the assumption that health care reform would provide insurance to more people.

None of the bills would change the requirement that hospitals offer emergency services to all patients, including illegal immigrants.

This information was reprinted from with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.

*We would like to thank Brian C. Betner, Esquire (Hall Render Killian Heath & Lyman, Indianapolis, IN), for selecting the articles for this week's update.

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