State Budget Challenges Loom Over Proposals To Expand CHIP, Medicaid

Yesterday, Gov. Arnold Schwarzenegger (R) signed a budget package that cut state funding for Medi-Cal by more than $1.3 billion and Healthy Families by more than $170 million.  The move comes just months after Schwarzenegger approved a spending plan that cut health and human services funding by $1.6 billion and eliminated Medi-Cal coverage for a number of services, making it easier to understand why governors are worried about their funding obligations for proposed federal expansions of Medicaid and the Children’s Health Insurance Program.

A new research brief published in the journal Health Affairs on Friday highlights the arguments for and against the proposed expansions.  The House bill would have the federal government pick up the tab for expanding Medicaid, but the Senate Finance Committee — which has jurisdiction over the program, as well as CHIP — has not completed its proposal, adding to governors’ uncertainty about the budgetary implications for states in Congress’ health care reform proposals. 

While California’s budget crisis provides a useful lens to consider Medicaid and CHIP funding, the state’s actions on health insurance policy rescissions also came into play in health care reform talks this week.

On Monday, the House Energy and Commerce Subcommittee on Oversight and Investigations convened a hearing in New Albany, Ind., to focus on the issue.

In written testimony, Brian Sassi — president and CEO of WellPoint, the parent company of Anthem Blue Cross of California — argued that insurers should be permitted to rescind coverage in some cases, asserting that rescissions are needed to curb health care fraud and help control premium increases for individual policyholders.

Sassi traced public concern about rescissions to California media reports in 2006 and restated WellPoint’s belief that the individual insurance market “cannot be sustained” if insurers are not permitted to rescind policies in cases where they can demonstrate fraud.  He went on to outline a proposal for new regulations governing rescissions.

Discussions over health care reform have grown more contentious, but health care opinion leaders still are voicing substantial support for an overhaul of the U.S. health care system.  A Commonwealth Fund survey found strong support for a national health insurance exchange and the inclusion of a government-run insurance plan in reform legislation.  A bare majority — 51% — said they supported basing a public plan’s reimbursement rates for health care providers either at Medicare levels or somewhere between the rates paid by Medicare and private health plans.

That’s the sentiment among health care opinion leaders, but legislators and interest groups on all sides of the issue will be going directly to the public in the coming weeks.  To help inform those arguments, the House Energy and Commerce Committee released an analysis of House Democrats’ proposal for each congressional district, including California’s 53 districts.

While you’re preparing for the onslaught of arguments, here’s a rundown of other efforts to shape the debate from the Obama administration and health care stakeholders, as well as an update on proposals on the table.

Administration Message

  • In his weekly radio and Internet address on Saturday, President Obama said Democratic reform plans would help small businesses that cannot shoulder the increasing costs of health care and are forced to offer workers less comprehensive health coverage, eliminate coverage altogether or close (Shear,Washington Post, 7/26). Citing a report released Saturday by the White House Council of Economic Advisers, Obama said, “Because they lack the bargaining power that large businesses have and face higher administrative costs per person, small businesses pay up to 18% more for the very same health insurance plans — costs that eat into their profits and get passed on to their employees” (Pear/Zeleny, New York Times, 7/26). Christina Romer, head of the Council of Economic Advisers, said that provisions such as a health insurance exchange and tax credits for purchasing coverage would help small businesses “compete fairly on a level playing field with big businesses to attract the best workers” (Raum, AP/Google, 7/26). Republicans “dismissed the new report as more political propaganda by the administration” as it seeks to address concerns about its health care goals, the AP/Google reports (AP/Google, 7/26).
  • President Obama intends to continue to push for health care reform throughout August, White House press secretary Robert Gibbs said Friday, the Wall Street Journal reports. Gibbs said, “Whether we get a vote in August or not, we’re still going to have to come back in September, reconcile legislation and in many ways go through the House-Senate process all over again” (Pulizzi, Wall Street Journal, 7/24).
  • In an attempt to highlight how health reform will benefit most U.S. residents — not just the uninsured — Obama has started to use the phrase “health insurance reform,” Politico reports. Health care insiders suggest that the phrase “insurance reform” likely polls better because it highlights something that U.S. residents know and generally dislike and sets up the health insurance industry as the target (Frates, Politico, 7/22).
  • On Thursday, Obama headed to the Cleveland Clinic, which he has praised as a good example of an effective and efficient health care system (AP/San Diego Union-Tribune, 7/23). However, Cleveland Clinic’s success in delivering high-quality and cost-effective health care could be difficult to replicate throughout the U.S., the Journal reports (Fuhrmans, Wall Street Journal, 7/23).
  • Members of the Obama administration began meeting with health care executives in February, shortly after President Obama took office, according to a White House visitors list released on July 22, the AP/Boston Globe reports (Theimer, AP/Boston Globe, 7/22).  The government watchdog group Citizens for Ethics and Responsibility in Washington filed a lawsuit on July 22 after the Secret Service rejected a request for the logs of visits by health care industry executives. The administration promptly released the information in a letter to CREW later that afternoon.  White House counsel Gregory Craig wrote that the letter includes information through June 30, 2009, on 18 individuals CREW had requested information on, adding that the White House is “continuing to review your specific [Freedom of Information Act] request, as well as the White House’s general policy governing the discretionary release of visitor records” (Gerstein, Politico, 7/22). 
  • In the midst of problems with progress on health reform legislation, White House Office of Management and Budget Director Peter Orszag has become involved in the “thick of the political haggling,” the Journal reports. One day after Congressional Budget Office Director Douglas Elmendorf said none of the congressional health reform proposals would reduce health spending growth, Orszag began pushing his plan to create a new agency to reduce spending and implement changes in Medicare. Orszag also met with Blue Dog Democrats to discuss the idea (Meckler, Wall Street Journal, 7/24).
  • After a meeting with Senate Democrats, HHS Secretary Kathleen Sebelius said that a new public health plan would increase competition in the health insurance market and meet Obama‘s goal of reducing costs and improving access to coverage, Roll Call reports. Sebelius was joined by Sens. Christopher Dodd (D-Conn.) and Tom Carper (D-Del.). Carper, a member of the Senate Finance Committee, has raised concerns about a public plan option and in the press conference with Sebelius questioned her assertion that the idea would meet Obama’s goals (Drucker, Roll Call, 7/23).
  • On July 22, Orszag stressed that reforming the U.S. health care system is crucial to restoring fiscal balance, the New York Times reports. Speaking at the Council on Foreign Relations, Orszag said, “If we fail to do more to move toward a high-value, low-cost health care system, we will be on an unsustainable fiscal path, no matter what else we do” (Shih, New York Times, 7/23).

Blue Dog Coalition

  • On Monday, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) made an offer to the Democratic Blue Dog Coalition that included each of their 10 requests for the chamber’s reform bill (HR 3200), Politico reports. Waxman and the Blue Dogs ended a meeting without reaching a deal, according to Politico. However, the Blue Dogs said they would consider the details but want the Congressional Budget Office to provide estimates on the items included in Waxman’s offer, according to Rep. Mike Ross (D-Ark.), chair of the Blue Dog Health Care Task Force. Waxman said it will be difficult for CBO to assign an estimate on any proposal that is not physically submitted to the office (O’Connor, Politico, 7/27).
  • Congressional Black Caucus leaders were critical of the Blue Dogs, sending a letter Thursday to House Speaker Nancy Pelosi (D-Calif.) and President Obama complaining that “some within the Democratic Caucus have raised spurious claims” about the cost of the House reform bill, Roll Call reports. The letter was drafted in response to a House Democratic Caucus meeting Thursday where seven Blue Dog members “derailed” a markup over concerns about cost, the impact on small businesses and the specifics of the proposed public plan, according to Roll Call (Newmyer, Roll Call, 7/23).
  • The Blue Dog Political Action Committee has received more money for the 2010 election cycle than any other leadership PAC in Congress, according to CQ Moneyline. The $1.1 million in total contributions includes about $300,000 from health care interests.  For the 2008 election cycle, the PAC collected about $875,000, including $218,000 from health care interests (Ota, CQ Moneyline, 7/23).


  • On Thursday, some Finance Committee Democrats criticized committee Chair Max Baucus (D-Mont.) for sharing limited information about bipartisan health reform negotiations, Roll Call reports. Finance Subcommittee on Health Chair Jay Rockefeller (D-W.Va.) also expressed frustration that he and other panel members have not been involved in the “real” discussions with the group (Pierce, Roll Call, 7/23).  Baucus said, “I made it clear to the group, too, that any proposal that the group of six comes up with will be just that: a proposal,” adding, “This is just part of the process. I can’t negotiate a proposal with all members of the Finance Committee in the same room. There’s just too many people” (Drucker [1], Roll Call, 7/23).
  • On July 22, Senate Finance Committee member Orrin Hatch (R-Utah) announced that he had left the panel’s bipartisan negotiating group on the reform bill, Roll Call reports. He said he was unhappy with the direction of discussions on several of the bill’s proposals (Drucker [2], Roll Call, 7/23). “It is going to be difficult for me to support what they’re talking about,” Hatch said, citing an employer mandate, an individual mandate, a Medicaid expansion and tax hikes (Budoff Brown, Politico, 7/22).

Seeking More From PhRMA

  • In a letter to the Senate Finance Committee last week, 23 Democratic senators urged the panel’s leadership to force pharmaceutical companies to pay the government rebates on drugs for certain Medicare beneficiaries, the Journal reports. The rebates, which are included in the House’s health reform bill, could be used to help finance a health system overhaul, the lawmakers said.  Under the senators’ proposal, drugmakers would return some of the cost difference between higher prices charged for drugs under Medicare and the lower prices charged for drugs under Medicaid (Mundy, Wall Street Journal, 7/24).
  • Although the pharmaceutical industry in June pledged $80 billion in cost-savings over the next 10 years, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) said that he would like the industry to contribute more to health care reform, the New York Times reports. On July 22, Waxman said he would like the pharmaceutical industry to contribute an additional $63 billion over the next 10 years. The money would come from reversing a 2006 policy change that eliminated Medicaid drug coverage for millions of low-income elderly beneficiaries and required them to pay higher costs for the same drugs under Medicare.  Billy Tauzin, head of the Pharmaceutical Research and Manufacturers of America, said drugmakers could not support Waxman’s plan (Wilson, New York Times, 7/23).
  • PhRMA could spend $100 million on an ad campaign to start in September, Bloomberg/Globe reports. No strategy has been decided yet, and the content of the ads will depend on the outcome of pending legislation in the House and Senate (Pettypiece/Burger, Bloomberg/Boston Globe, 7/28).

Republican Opposition

  • On Monday, House Minority Leader John Boehner (R-Ohio) said that Republicans will not release their proposal for health reform until markups of Democrats‘ proposals have been completed, Roll Call reports. Speaking to reporters on Capitol Hill, Boehner said, “We are continuing to work on our bill as the Democrats continue to work on theirs, and then as the week goes on we’ll have to see whether there is a Democrat bill,” adding, “There are a whole host of considerations about what our next move will be” (Kucinich [1], Roll Call, 7/27).
  • In related news, Minnesota Gov. Tim Pawlenty (R) joined Boehner on Monday for the release of a report that highlights problems they see in Democratic agendas on health reform, Roll Call reports. The report, titled “Capital Malpractice,” also highlights Republicans’ warnings about the House reform bill and other Democrat-proposed reform plans. It also includes news media clips, congressional correspondence, expert testimonies and cites a June study by the Lewin Group (Kucinich [2], Roll Call, 7/27).
  • Republicans are criticizing a provision in the House health reform bill that would establish Medicare coverage for an end-of-life care consultation once every five years, with the option to have more frequent consultations for those with life-threatening diseases, Politico reports. A statement from Boehner and Rep. Eric Cantor (R-Va.) says the provision “may start us down a treacherous path toward government-encouraged euthanasia” (Budoff Brown, Politico, 7/28).
  • On Thursday, Republican leaders met with business groups to discuss Democrats‘ health care proposals, Roll Call reports. Republicans said that the meeting was intended to serve as a forum for business leaders to discuss their concerns with the Democratic proposals, not as a strategy session to defeat reform bills, according to Roll Call (Kucinich, Roll Call, 7/23).
  • On July 22, Republicans suggested that President Obama is attempting to influence the Congressional Budget Office to secure a favorable cost projection for the health reform proposals endorsed by his administration and Democrats in Congress, The Hill reports. Officials in the Obama administration invited CBO Director Douglas Elmendorf to the White House last week to meet with the president and senior officials. White House spokesperson Reid Cherlin said that Obama had no improper motives, adding that the president wanted to discuss strategies for bringing down health care costs.  Elmendorf wrote in a CBO blog about the meeting, “I presented CBO’s assessment of the challenges of reducing federal health outlays and improving the long-term budget outlook while simultaneously expanding health insurance coverage.” He added that it was “exciting” to be in the Oval Office (Bolton, The Hill, 7/22).
  • Republicans are planning to use polling data and a series of events to attack Democrats‘ health reform proposals, Roll Call reports. The House Republican Conference has told members to use the August recess to schedule roundtables in their home districts with local doctors to discuss the legislation, and the National Republican Congressional Committee is preparing Republican candidates with health care talking points (Kucinich, Roll Call, 7/22).

What It’s Going To Cost

  • A proposal in the Senate Health, Education, Labor and Pensions Committee‘s health reform bill for a voluntary long-term care insurance program has funding and structural approaches that are “unsustainable within the near future” and would benefit a small number of patients, according to a recent analysis of the plan by the American Academy of Actuaries, CQ HealthBeat reports. According to the analysis, the fund used to cover beneficiaries’ claims under the bill’s Community Living Assistance and Support Services Act would be insolvent by 2021, or within 11 years, based on the minimum benefits it provides. The program would be funded through voluntary payroll deductions (Norman, CQ HealthBeat, 7/24).
  • House Democrats‘ health reform legislation would establish at least a dozen new boards, programs and task forces, creating a bureaucratic infrastructure that would add to the already high cost of the proposal, the Washington Times reports. Democrats say the infrastructure is necessary to administer the expansion of health benefits to uninsured U.S. residents and create more competition to reduce control costs (Haberkorn, Washington Times, 7/27).
  • Policymakers and consumer groups are concerned that under some congressional health reform plans, insurance could still be unattainable for many moderate-income families who receive small subsidies or none at all, the New York Times reports (Pear, New York Times, 7/27).

What’s in the Proposal

  • The tentative agreement reached between the Blue Dogs, House Energy and Commerce Committee Chair Henry Waxman (D-Calif.) and President Obama could jeopardize or weaken physician and hospital support for health reform, according to certain health and hospital organizations, including the American Medical Association. Despite AMA’s endorsement earlier this month of the House reform bill, the group now is expressing reluctance regarding the idea of giving authority to an independent panel for cutting costs under Medicare (Edney, CongressDaily, 7/23).
  • Abortion is not mentioned in the House reform legislation, but the issue continues to be brought up in talks over the chamber’s overhaul plan, the Washington Post reports. According to the Post, some opponents have said that the bill could make abortion procedures more widely available and more common by requiring insurance plans to pay for them and providing government funding to subsidize such plans (Eggen/Stein, Washington Post, 7/23).
  • Sen. Tom Harkin (D-Iowa) and other senators are pushing for health reform legislation to include a provision that would provide health insurance coverage for alternative medicine, the Globe reports. Harkin’s amendment — adopted by the Senate Health, Education, Labor and Pensions Committee — states that health plans would not be permitted to “discriminate” against any care provider who is licensed by the state (Kranish, Boston Globe, 7/24).

Shaping the Debate

  • A pair of letters from AARP and Health Care for America Now, along with several unions and other advocacy groups, expressed strong support for the House‘s proposal to subsidize health insurance premiums for lower- and middle-class U.S. residents, The Hill reports. The letter does not specifically mention Blue Dog Democrats, but criticizes the push to scale back the premiums, an idea Blue Dogs support. A second letter — signed only by HCAN — refers specifically to Blue Dogs and states that the fiscally conservative Democrats are “threatening affordable health care” by criticizing the premium subsidies plan and proposed surtax on the wealthiest U.S. residents that would generate about $544 billion (Young, The Hill, 7/23).
  • Large labor unions, including the Service Employees International Union and the AFL-CIO, are working to influence key players in the health care debate, the Journal reports (Trottman, Wall Street Journal, 7/27).
  • The American Federation of State, County and Municipal Employees is using a vehicle to tour the country and promote its health care views (Fram, AP/Minneapolis Star Tribune, 7/27).
  • Americans for Prosperity, which sees the Democratic reform plans as a “federal takeover of health care,” is sending two buses to 13 states to drum up opposition, the AP/Star Tribune reports (AP/Minneapolis Star Tribune, 7/27). The group also has aired a 60-second spot in which a Canadian woman says she would have died of a brain tumor if she had relied on Canada’s health care system (Wall Street Journal, 7/27).
  • America’s Health Insurance Plans spokesperson Robert Zirkelbach said AHIP seeks a bipartisan reform plan and is “working with people on both sides of the aisle in both the House and Senate.” He added, “We think we need to accomplish reform, but we have also expressed our strong opposition to a government-run plan and the impact it would have on the coverage people have and currently like” (Ackley, Roll Call, 7/27).
  • HCAN has spent about $2 million on ads in July and plans to spend the same amount on ads and send members to town-hall meetings held by lawmakers in August (AP/Minneapolis Star Tribune, 7/27).
  • National Retail Federation Vice President Neil Trautwein said the group shares House Republicans‘ concerns that deals cut by health care stakeholders with Congress are flawed. He also said that NRF believes the House bill and Senate Health, Education, Labor and Pensions Committee bill would hurt retailers (Roll Call, 7/27).
  • Several large religious coalitions are seeking to mobilize religious communities across the U.S. to support reform efforts. Hundreds of clergy members and lay leaders have visited lawmakers in recent weeks, asking that they pass health reform legislation this year. The groups also are using sermons, prayer and advertising on Christian radio stations to spread their message — that health coverage for everyone is a moral responsibility (Salmon, Washington Post, 7/25).
  • The U.S. Chamber of Commerce is launching a $2 million Internet and print ad campaign in five states to oppose a public plan option, The Hill reports. During the August recess, the chamber also will hold rallies in five states — Arkansas, Colorado, Louisiana, Maine and North Carolina (Bogardus, The Hill, 7/21). Bruce Josten, the chamber’s top lobbyist, said lawmakers representing those states have questioned the need for a public plan (Ackley, Roll Call, 7/22).
  • Former HHS Secretary Mike Leavitt, who served under the George W. Bush administration, said that offering a public plan option would result in “essentially a bankrupt system,” the Post reports. Leavitt also questioned the idea of building or modeling a public plan on Medicare, saying the program does not provide coordinated care and is structured so that “every incentive in the system is to provide more care, not better care” (Hilzenrath, Washington Post, 7/24).
  • Spending on television ads in support of Democratic health care proposals in 2009 has reached about $12 million, while $5.9 million has been spent on opposition ads, according to the Campaign Media Analysis Group. Ad spending has increased by 20%, or $8 million, in the past three weeks (Dann, CongressDaily, 7/23).
  • A coalition of antiabortion groups last week was slated to launch a campaign to assert that current health care reform proposals include provisions that would prohibit federal money to be spent on abortion and a requirement that health plans cover abortion services, Politico reports. While the reform debate thus far “has proceeded largely without reference to abortion,” the groups’ actions could “change that and provide a new obstacle to the reform legislation,” Politico reports (Smith, Politico, 7/22).
  • Executives from the Institute for Healthcare Improvement, Dartmouth Medical School, the Harvard School of Public Health and the Brookings Institution recently invited physicians and hospital officials from 10 communities nationwide where health spending is lower than average and health care outcomes are better than average to Washington, D.C., for a discussion on national health care reform, NPR’s “Morning Edition” reports (Rovner, “Morning Edition,” NPR, 7/22).  Representatives from Sacramento were among those invited to participate (Galewitz, Kaiser Health News, 7/22).


  • The latest New York Times/CBS News poll found that more than three in four U.S. residents are “very satisfied” or “somewhat satisfied” with their current health care, while a large majority also said that the health system requires fundamental change and that rising costs are a serious threat to the economy, the New York Times reports (Leonhardt, New York Times, 7/26).
  • Fifty-six percent of U.S. residents say now is the time for the country to overhaul the health system, down from 61% in June, according to a new Kaiser Family Foundation survey, Kaiser Health News reports. The survey of 1,205 adults also found that 21% of U.S. residents believe that they would be worse off if health reform passes, compared with 11% in February. The survey has a margin of error of three percentage points (Galewitz, Kaiser Health News, 7/23).


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