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Deficit Data Refocus Attention on Costs of Health Care, Reform

On Aug. 25, the White House Office of Management and Budget released its Mid-Session Review, projecting that the federal budget deficit would hit $9.05 trillion over the next 10 years. 

In a posting on his blog, OMB Director Peter Orszag attributed the $2 trillion jump in the projected deficit to the recession being deeper than initially thought.  Explaining that the deficit will amount to about 4% of gross domestic product in coming years, Orszag said the data underscore the need to address rising health care costs.

“The federal government simply cannot be put on a fiscally sustainable path without slowing the rate of health care cost growth in the long run,” Orszag wrote, adding that the administration remains committed to passing a deficit-neutral health care reform package that includes changes aimed at restraining the pace of health care cost increases.  

The question is, “How?”

Earlier this summer, the administration floated a proposal to create an independent advisory council to set Medicare payment rates.  The Congressional Budget Office estimated that the plan would save $2 billion through 2019.

If lawmakers want to generate savings amounting to a larger percentage of total Medicare spending, CBO Director Douglas Elmendorf wrote that the panel would need “broad authority,” “ambitious but feasible savings targets” and a clear mechanism to enact “across-the-board reductions in net Medicare outlays.”

It remains unclear whether Congress has the stomach to pass legislation like that.  And even if it did, the proposal would comprise only one element of a much larger funding mechanism.

The budget deficit will be front and center at a conference Sen. Orrin Hatch (R-Utah) — a member of both the Senate Finance and Health, Education, Labor and Pensions committees — is convening on Aug. 28.  “The Fiscal Future of America” forum is expected to address topics including, “Why America Must Reform Health Care” and “Are Entitlement Programs a Cancer on Our Future?”

Steve Forbes — editor-in-chief of Forbes and a presidential candidate in 1996 and 2000 — and Douglas Holtz-Eakin — a former CBO director and former chief economist for the President’s Council of Economic Advisers — will join Hatch at the forum.

California Healthline is taking a break next week, but “Road to Reform” will return on Sept. 9 with an update on Hatch’s economic forum and other issues influencing the health care reform debate.


  • Senate Democrats are considering their options for passing health care reform legislation, including using the budget reconciliation process to pass a public health insurance plan option, the New York Times reports. Using the process would require a simple majority of votes rather than the typical 60 votes needed to override a filibuster (Pear, New York Times, 8/24). Staffers in Senate Majority Leader Harry Reid‘s (D-Nev.) office have been preparing a number of legislative options for passing health reform legislation in the event that the Senate Finance Committee does not produce a bipartisan agreement by Sept. 15. According to a Senate aide, people in Reid’s office are examining what can and cannot be included in a bill passed under reconciliation and whether it is possible to craft a public plan that could pass the Senate (Pierce, Roll Call, 8/21).

Senate Finance Committee

  • Senate Finance Committee members are discussing legislation that would include an individual health insurance mandate and create a bare-bones health insurance plan that would be easier for people to afford without government assistance. The group also is talking about reducing the number of people eligible for government subsidies, according to a source familiar with the talks, the Washington Post reports (Montgomery/Bacon, Washington Post, 8/22). Sen. Olympia Snowe (R-Maine), a member of the Finance Committee’s bipartisan “group of six” negotiating reform legislation, said that contact with constituents over the August recess has “sharpened our focus on issues such as affordability and cost” (Werner, AP/Boston Globe, 8/22). Sen. Kent Conrad (D-N.D.) said that in order for it to pass, legislation must cost “significantly less than what we’ve heard talked about” (O’Brien, The Hill, 8/23).
  • On Aug. 20, Senate Finance Committee members met via teleconference and agreed to continue efforts to craft a bipartisan health reform bill, with an emphasis on affordability and reducing costs, Roll Call reports. The committee’s so-called “gang of six” includes Chair Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa), as well as Sens. Jeff Bingaman (D-N.M.), Conrad, Mike Enzi (R-Wyo.) and Snowe (Drucker, Roll Call, 8/21). The senators agreed to ignore increasingly contentious rhetoric from Democratic and Republican leaders and work toward legislation that could earn broad support from both parties, according to sources familiar with the meeting (Montgomery/Kornblut, Washington Post, 8/21).

How To Pay for Reform

  • Suggestions that congressional Democrats might attempt to pass health reform legislation on their own could raise the likelihood that one or both of the new tax proposals to generate revenue for the bill could be approved, the Wall Street Journal‘s “Washington Wire” reports. Several congressional aides said the House proposal for a surtax on high-earning residents is possible. However, that idea faces strong opposition in the Senate, where leading Democrats have expressed acceptance for a premium tax on high-priced insurance plans (McKinnon, “Washington Wire,” Wall Street Journal, 8/20).
  • Although many public health experts and the public are calling for additional taxes on high-calorie, low-nutrition drinks and foods as a way of combating obesity or funding health reform legislation, there are questions regarding whether such a tax would be effective, the Los Angeles Times reports. A Kaiser Family Foundation survey from July found that 55% of respondents favored a tax on unhealthful snack foods, up from 52% in April, and 53% favored a tax on soda, up from 46% in April. However, research has found that such taxes must be “steep and widespread” to have an effect on obesity rates (Kaplan, Los Angeles Times, 8/23).

What’s in the Bill

  • Policy experts say that nothing in health reform proposals being considered by Congress suggests that the U.S. health care system will devolve into a system of medical rationing, making widespread fears that an overhaul would lead to the government limiting medical care unfounded, the New York Times reports.  Concerns about rationing appear to stem from discussions about a government-run public plan option and proposals for government-sponsored research to determine which medical treatments are most effective. However, health policy experts do not find a high likelihood of lawmakers adopting a system where bureaucrats decide how to allocate care (Abelson, New York Times, 8/25).
  • Legislation being debated in Congress intentionally does not address out-of-network fee issues because the goal of the bills is to encourage people to stay in-network, according to former CMS Administrator Mark McClellan, who now works for the Brookings Institution, the New York Times reports. Linda Douglass, communications director for the White House Office of Health Reform, said, “Under health insurance reform, insurance plans will be required to give consumers much more information about what is covered and what is not. They will be expected to warn consumers that if they go out of network, they can be hit with some very high costs.” Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, said that it makes sense to encourage people to stay in-network, but first networks need to be improved (Kolata, New York Times, 8/19).
  • A provision of the House health reform bill (HR 3200) that would require greater transparency of pharmacy benefit manager pricing information has set off a “lobbying battle” about how much information the companies should disclose, the Wall Street Journal reports. Mark Merritt, president of the Pharmaceutical Care Management Association, said that PBMs are able to “play drug companies off one another and get big discounts on drugs,” adding, “The thing that drives prices down is competition, not this kind of transparency, which tends to help suppliers keep prices higher.” Congressional Budget Office analyses of draft legislation found that the provision could result in smaller discounts to PBMs, which could lead to higher drug prices for insurers and consumers. Meanwhile, the National Community Pharmacists Association has increased its lobbying against PBMs and is pushing for the provision to be included in final health reform legislation (Zhang, Wall Street Journal, 8/19).

Lingering Concerns

  • Many elderly U.S. residents and insurance counselors say they have justifiable reasons to believe health care reform legislation could lead to a “rationing” of care, the New York Times reports. The Obama administration and congressional Democrats have said that current reform proposals will attempt to generate savings by improving the efficiency of Medicare but not by denying or limiting care. However, advocates for the elderly point to proposals on comparative effectiveness research and end-of-life counseling as examples of how cost-cutting measures could lead to medical care rationing. Such advocates say they are skeptical that the government will generate Medicare savings exclusively by reducing waste and inefficiency in the system (Pear, New York Times, 8/21).
  • Having addressed the controversy surrounding the “death panels,” White House officials are now attempting to address an issue pertaining to an obscure section of the House reform bill (HR 3200) on the standardizing of electronic administrative transactions, the Journal‘s “Washington Wire” reports. The bill’s language would require private insurers to include information about each customer’s health policies on personal insurance cards. The cards, which currently only display group identification and an account number, would provide caregivers with additional data to reduce their administrative tasks, the provision’s authors wrote. However, one viral e-mail states, “If my card reads that I have a certain condition and the machine has no ‘code’ for that condition, the machine will refer me a ‘consultant,'” adding, “This person will be compassionate and caring but cannot make the machine accept my card so she tells me all about planned deaths, assisted suicides, etc. and that they certainly will not let me suffer” (Weisman, “Washington Wire,” Wall Street Journal, 8/20).
  • At a forum sponsored by Health Affairs on Aug. 20, medical experts on end-of-life care said claims that health care reform would bring the government into decisions on whether to prolong life were “lies,” CQ HealthBeat reports. The experts at the forum said that efforts to overhaul the health system should not be hindered because of controversial language in the bill, and that much needs to be done to fix the system for elderly and terminally ill patients (Norman, CQ HealthBeat, 8/20).

Republican Opposition

  • Last week, Sen. Jon Kyl (R-Ariz.) said that the creation of health insurance cooperatives as an alternative to a public health plan option likely will not gain any more Republican support, the Journal reports (Boles, Wall Street Journal, 8/18). However, some moderate Democrats and Republicans in the Senate already support the idea (Kranish, Boston Globe, 8/19).
  • Last week, House Minority Leader John Boehner (R-Ohio) criticized the Pharmaceutical Research and Manufacturers of America for its “appeasement” strategy in negotiating with the Obama administration over health reform legislation, CQ Today reports. In a letter sent to PhRMA President and CEO and former Rep. Billy Tauzin (R-La.), Boehner said the drug industry was “cutting a deal with the bully” when PhRMA agreed in June to offer $80 billion in prescription drug discounts over the next 10 years in exchange for the White House not pursuing dramatic reductions in Medicare drug prices (Armstrong, CQ Today, 8/18). Boehner also criticized Tauzin for making a deal that helps the government “steal others’ money as the price of protecting” drug industry profits (Crabtree, The Hill, 8/18). In response to the letter, PhRMA spokesperson Ken Johnson said, “Emotions are running high on both sides and we are not going to fan the flames,” adding, “We believe we’re doing what’s best for patients and America” (House, CongressDaily, 8/18).

Shaping the Debate

  • Despite withdrawing his nomination as HHS secretary six months ago, former Senate Majority Leader Tom Daschle (D-S.D.) continues to council lawmakers on reform efforts, the New York Times reports. He met with President Obama on Friday and talks frequently with top White House advisers, while simultaneously working as a policy adviser to hospital, pharmaceutical and other health care industry clients of Alston & Bird, a law and lobbying firm (Kirkpatrick, New York Times, 8/23). Recently, Daschle advised White House senior aide Pete Rouse and White House Office of Health Reform Director Nancy-Ann DeParle (Rucker/Kornblut, Washington Post, 8/22). According to White House officials, Daschle and the president at the meeting on Friday “agreed that substantive reform that lowers costs, reforms the insurance industry and expands coverage is too important to wait another year or another administration” (Nicholas, Chicago Tribune, 8/23).  Daschle said he gives lawmakers and clients the same messages on reform. He said, “I do not tailor my views to any specific group or client.” One of his main stances is that the Senate likely will not include a public plan in its legislation, so an alternative must be promoted. As a result, he has endorsed not-for-profit health insurance cooperatives as a politically feasible alternative.  White House officials have said they appreciate Daschle’s counsel (New York Times, 8/23).
  • Thousands of health insurance employees are being sent to town-hall meetings and other forums during the summer recess to try to counter criticism directed at the insurance industry, the Journal reports. The employees have been given talking points about the need for legislation that is bipartisan, and about the unintended consequences of a government-run public plan that would compete with private insurance companies. America’s Health Insurance Plans President and CEO Karen Ignagni said that the meetings provide insurers with an opportunity “to strongly push back against charges that we have very high profits” (Fuhrmans/Johnson, Wall Street Journal, 8/24).
  • AHIP spokesperson Robert Zirkelbach said House Democrats‘ request for insurers’ financial information is an attempt to “silence the health industry and distract attention away from the fact that the American people are rejecting” a public health insurance plan, the AP/Chicago Tribune reports. On Aug. 17, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) and Rep. Bart Stupak (D-Mich.) sent letters to 52 health plans, requesting information on executive compensation, conferences and events, and other financial data (Espo, AP/Chicago Tribune, 8/19). A statement from Stupak says the lawmakers “want to know if the rise in premiums corresponds to an increase in care or if it has simply padded these companies’ bottom lines while many families struggle to obtain the health care they need” (Reichard, CQ Politics, 8/19). 
  • On Aug. 26, supporters of Democratic reform efforts are launching a national grassroots campaign that aims to tell lawmakers that the majority of U.S. residents support overhauling the U.S. health care system.  The effort is being organized by the Democratic National Committee, Organizing for America and Health Care for America Now.  It will include more than 500 events before congressional lawmakers return on Sept. 8 (Frates, Politico, 8/24).
  • The group Let Freedom Ring has spent the last two months asking all 535 members of Congress to sign a pledge not to vote for a health care bill that they have not read in its entirety and that is not made available to the public at least three days before a vote, The Hill reports. So far, 114 Republican senators and House members have signed the pledge, and the group said that it plans to focus efforts on members of the Blue Dog Coalition (Crabtree, The Hill, 8/23).
  • Despite the Obama administration courting support for health reform legislation from small businesses, the National Federation of Independent Business has publicly stated its opposition to some reform plans’ major components, the Washington Times reports. NFIB has said that small-business owners should be concerned with a provision in current proposals that would require employers to provide health coverage and with a provision that would create a surtax on high-income U.S. residents to fund a reform plan (Haberkorn, Washington Times, 8/24).
  • When Congress reconvenes on Sept. 8, Rep. Chaka Fattah (D-Pa.) plans to introduce a concurrent resolution that would open the grounds of the Capitol in Washington, D.C., for a citizen march in support of a public plan in health reform legislation, CQ Today reports. The proposal for the march, which would be held on Sept. 13 to coincide with National Grandparents Day, was first offered by Robert Reich, Labor secretary under President Clinton (Teitelbaum, CQ Today, 8/20).
  • Town-hall meetings across the country are prompting conservatives opposed to current health reform proposals to become grassroots organizers in an attempt to reshape the debate, USA Today reports. Such groups are using many of the same techniques that Democrats used in 2008 to build support for Obama and are providing networking opportunities for conservatives who feel passionately about health reform (Kiely/Fritze, USA Today, 8/20).
  • Former Democratic National Committee Chair and Vermont Gov. Howard Dean has begun regularly challenging Obama and Congress as he travels across the country advocating for universal health care, the Post reports. In mid-August, he warned that if Democratic leaders drop the public plan, they have given up their principles in favor of politics. He said that without a public plan the U.S. would “put 60 billion new dollars a year into the health insurance industry that is busy taking away your health insurance when you need it most, stopping you from getting health insurance, taking it away if you lose a job and not giving it back to you if you get it back” (Rucker, Washington Post, 8/20).
  • In mid-August, blogs touted the efforts of ActBlue — an online fundraising group for Democratic donors — to raise more than $160,000 over a 24-hour period in support of the more than 60 House Democrats who pledged not to vote for health reform legislation that does not include a public plan, Roll Call reports (Roll Call, 8/19). According to CQ Politics, ActBlue — which raised more than $52 million for Democrats in the 2008 election — allows contributors to select the House members whom they would like to receive the money (Knott, CQ Politics, 8/19).


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