A Big Setback for Health Reform?
Read this quote, from Congressional Budget Office Director Douglas Elmendorf, testifying before the Senate Budget Committee. You are going to hear it repeated often by opponents of the health reform bills that have been unveiled thus far.:
“Dr. Elmendorf, I am going to really put you on the spot, because we are in the middle of this health care debate — but it's critically important we get this right,” Mr. Conrad said. “Everyone has said, virtually everyone, that bending the cost curve over time is critically important, and one of the key goals of this entire effort. From what you have seen, from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?”
Mr. Elmendorf was unequivocal. “No, Mr. Chairman,” he replied. “In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs.”
How damaging is this assessment? It could be devastating. We have talked before about how crucial it is to make the numbers work for health reform. (And Jon Cohn has a must-read piece here.) Under the budget rules, the legislation will be scored not on how it affects health care spending overall, but rather, how it affects the federal bottom line. Harry Reid's dismissive comment notwithstanding, CBO is the arbiter of this. And as the story notes, arguing with its estimates is about as useful as challenging the balls and strikes called by the umpire in a baseball game.
Which means there may yet be some life in another idea--one that Democrats have declared a loser for them politically:
In his testimony, Mr. Elmendorf said that one step that would contribute in a large way to offsetting costs would be to tax some employer-provided health benefits, which are currently excluded from taxable income.
Mr. Conrad and Senator Max Baucus, Democrat of Montana, the chairman of the Finance Committee, have advocated such a change. But the Finance Committee was forced to scrap its plan to tax some employer-provided benefits because of the objections of President Obama and other Democratic leaders in Congress.
Asked about Mr. Elmendorf's comments, Mr. Baucus said the White House had tied his hands on the issue.
“Basically, the president is not helping us,” Mr. Baucus said. “That's making it difficult.”
All of this happened after our deadline for dead-tree TIME this week. But it does speak to the basic premise of the piece I wrote, which is that if Obama wants bills to clear the House and Senate before the August recess, he may have to become more deeply involved in the process.
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1
Wait a second. Isn't this the same CBO that the Republicans criticize as being inaccurate whenever it suits them?
And also, didn't the AMA endorse the House health care bill today?
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1.1
Is the endorsement from the AMA a good thing or a bad thing? I don't know whether they're for _us_ or Big Health Co.
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2
I be no' s'rprised. Ri' disapointed, bu' no' a whit s'rprised.
yarr.
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3
Well, a simpler solution is to increase the surtaxes proposed.
I actually do not get why taxing benefits would help. From a purely public finance theory position, they should be taxed. For everybody. As with life insurance premiums and a myriad of other compensation that is untaxed.
But a tax on benefits would increase the incentive for an employer to ditch coverage and let workers fend for themselves with the public option or private care alternatives. This would increase the federal involvement in health care.
Also, the quote is weird. It says that federal health care expenditures would increase. This is true. But my understanding is that these expenditures would be funded by premiums, increased tax revenues. And more people would be under the fed umbrella, but while that increases fed expenditures, it does not necessarily (in fact almost certainly does not) increase health care expenditures.
But I do get that the strategy is to trumpet that any reform will be too costly to implement. And any strategy that actually reduces costs will be denounced as socialism.
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4
But, but, but after the CBO scored the HELP Committee bill as costing $600 Billion dollars, polite company decided they weren't going to talk about the CBO again because they hate America.
I am with Ezra Klein on his proposals:
Politicians who are going to use this CBO report against the existing health-care reform proposals must do some combination of the following:
a) Support, as the CBO says you should, the eradication of the tax exclusion that protects employer-based health-care insurance;
b) Support, as Lewin and Commonwealth say you should, a public insurance option that can bargain at Medicare's rates;
c) Support, as the Office of Management and Budget and every health-care wonk in town says you should, one of the various policies floating around to give MedPAC authority to continually reform and modernize Medicare;
d) Support some form of aggressive cost-sharing that would make people extremely angry because it will save money by reducing their access to health-care services;
e) Support comparative effectiveness review that can judge not only the effectiveness but also the cost-effectiveness of various treatments, and give the federal government authority to use that data when deciding reimbursement rates.
In short, anyone who is going to whine should have to give their recommendations.
I'll give you mine, focus on the House Bill and cut the ankle-biters and self-important tyrants in the Senate out of it.-
4.1
Point (a) was the one that Elmendorf made again today in his testimony.
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4.2
We have Conrad asking these questions. I may be wrong about this, but from what I have seen, the only "reform" I can figure Conrad definitely for supporting is to increase the prices Medicare pays in his state, which makes healthcare more expensive. Public option--No. Single payer ---No. Any and all taxes ---No. He (and his "No" buddies) needs to put some suggestions out there that really reform the system, or get his *ss on the record as not wanting to reform the system. If he doesn't like something, that shouldn't be good enough, he should have to offer alternatives.
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5
KT, thanks for this update.
Word on more Obama involvement, but where's Sebelius?(I'm trying to gain a bad snarky reputation here and help bring tears of laughter to your eyes / Jay's/ Michael's, etc. without trolling, but no, seriously, where IS Sebelius? Hopefully at least she's twisting arms behind the scenes - literally. Or at least wearing down blue dogs into compromise? thx)
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6
And update
http://blogs.abcnews.com/thenote/2009/07/cbo-sees-no-federal-cost-savings-in-dem-health-plans.html
Questions about this exchange have followed Elmendorf to the House Ways and Means Committee, where he clarified a bit, according to ABC's Lisa Chinn.
Elmendorf told members of the committee that his answer to Conrad shows only that the bill "adds to federal health spending, and that amount is difficult to offset."
In other words, it's not that the health reform bills do not lead to savings for the federal government -- just that those savings may not offset the added expense of subsidizing insurance for many more Americans.
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6.1
But the plan has to balance (within 10 years) to pass muster under the pay-go budget rules. So either you would have to cut back in the drive toward universal coverage, or find some way to raise more money.
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6.2
Re: Paygo, the Bush tax cuts had "sunset horizons" (that everyone basically figured would just get extended ad infinitum) and as I understand this was to get around really terrible CBO projections.
Paygo is such a joke that there is plenty of ways to get around. Heck, maybe they could invite Bush, Frist, and Delay back up to the Hill and they can show them how to fund it via an "off budget" appropriation.
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7
Oh and lets all say it together for Max Bauchus...
Then do what President Obama said and take away the frikkin charity contribution deductions for the wealthy you shmuck!!!
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8
KT
Then doesn't that simply mean that the Senate needs to come up with a way to generate revenue ie the surcharge on the rich the House is pushing or taking away the deductions for charity contributions for people making over 250k? What I am saying is isn't this more of a revenue problem than a savings problem at this point?
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8.1
Not entirely. One argument that economists make for taxing employer-provided benefits is that it would change the way that people purchase their health care. That's why Elmendorf talks about it bending the curve of health care costs (everyone's favorite cliche these days) in addition to raising revenue. Essentially, it would discourage people from getting really expensive plans. The surcharge -- because it is being raised outside the health care system -- doesn't address health care costs at all.
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8.2
OTOH: The idea is a HUGE loser politically, and potentially a real political trap. People like getting these benefits tax-free. And a lot of those who have fancy plans are people like teachers and cops, who have given up wage increases in collective bargaining so that they could have good health care.
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8.3
Thanks KT. Your reporting here is why I keep coming back.
This truly is a political mess. The explanation you've given ('...the legislation will be scored not on how it affects health care spending overall, but rather, how it affects the federal bottom line') will no doubt be left out of the arguments of those who would kill health care reform entirely. We will just hear that its a money loser.
I am very weary of any plan that would tax health care benefits. Not only is my family in the category of persons you describe who have accepted reduced pay for benefits (my wife is a nurse with the county), but I fear that taxing benefits is just intended to be a poison pill that will kill the entire effort..
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8.4
FWIW,
KT's description of people 'who have given up wage increases in collective bargaining so that they could have good health care' is very real. My wife is in this very situation.As a nurse at the local county hospital, she receives letters and phone calls from other hospitals, clinics, and head-hunters on an almost weekly basis. They all offer her a substantially larger salary that she is receiving now. However, they also all offer her substantially reduced benefits. That's why she continues to stay where she's at.
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9
AMA Endorses Health Reform Bill:
http://blog.healthcareforamericanow.org/2009/07/16/the-ama-just-endorsed-the-house-health-reform-bill/ -
10
“In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal [military] spending by a significant amount."
Why is not fixing our bloated, Cold-War-era-designed military spending and "how it affects the federal bottom line", a relative non-issue but fixing our bloated, Cold-War-era-designed health care system and "how it affects the federal bottom line" potentially "devastating" when we spend the ten year cost of the latter about every two years on the former?
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10.1
Maybe they should pass a bill that declares that every citizen is a "veteran" and then we could simply expand the VA.
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10.2
Because our journalistic establishment refuses to challenge the premises of the debate (government war machine good, government services to citizens evil) and instead allow the lobbyists to determine the parameters of the discussion.
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11
deconstructiva - Sibelius was busy prepping for her appearance on The Daily Show last night.
Greg Sargent shows one rep who has figured out what to say --
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11.1
I don't suppose he's one of KT sources -- but I'm sure my sister up in New London must be proud.
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11.2
Thanks for the link! Nice. Great idea to drop names, either through ranting or risibility. A lot. If MSM would still ignore it some can try anyway (KT?)? Not media criticism but facts: these officials are hypocrites because...
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12
unsurprisingly, KT doesn't mention the $1 million plus that Conrad had gotten from the health care parasites this election cycle -- and doesn't mention that the reason the reform bill does not achieve significant savings is that its not a single payer bill. If Conrad wasn't in the pocket of the parasites, wouldn't he have asked the follow-up question about single payer? And wouldn't a good journalist have pointed out that the most crucial question went unasked?
We pay TWICE for health care what the rest of the industrialized world does per capita, and the big difference is that our system is run by private insurance firms and profit oriented health care providers. The only way to achieve real savings is by getting the parasites out of the system, and changing the philosophy. Stop treating health care as a product to be marketed for profits, and start treating it as a basic service.
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12.1
“Stop treating health care as a product to be marketed for profits, and start treating it as a basic service.”
…maybe such as viewing HC as public safety like police and fire protection? Instead of a disposable thing to buy, like a prom dress...or an insurance policy?
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12.2
Maybe we should make health care a division of the Defense Department. The Defense Department would then be responsible for the defense of citizens as well as property. This would also have the added benefit of making any cost overruns and deficits politically incorrect to mention (as defense budgets are now).
Ok, just kidding. But I think you've got a very valid point.
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13
So....no comment, then? On the AMA, which only a few months ago was digging in its heels about a public plan, endorsing this new legislation?
Did I miss the memo notifying us that the AMA was no longer a big deal?
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13.1
I'll take a crack at it: it's just that the power, greed and obstructionism of the insurance giants is a much, much bigger deal.
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13.2
I'll go along with that, but I just want to note that there were posts on this very blog several months ago about how the AMA's resistance was a death knell to the public option, about how they put their thumbs down on every attempt to reform health care over the past century.
And now, as if by magic, the AMA is no longer worthy of comment.
It seems like all these supposed death knells we keep hearing about keep failing to materialize.
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13.3
This is similar to the situation with the CBO I noted above. When they are saying what Republicans want them to say, they are the most important acronym on the planet and their proclamations must be shouted from every rooftop and Hardball segment. However if they don't say what republicans want them to, then are to be ignored at all costs because they are not patriotic.
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13.4
I'll swing at the pinata too. If insurance cos. have money and power to decide treatments / not, then they're making medical decisions, yes? Are they then practicing medicine without a license? Or if they have docs. / nurses in house, are those fools taking on all of the medical liability? State boards do yank licenses and go after unlicensed folks (not just medicine, they do in engineering, architecture, etc.). How then can insurance cos. practice medicine?
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13.5
I'm not sure what you're getting at, deconstructiva.
Essentially I'm asking why this statement from the CBO shouldn't be disregarded, considering the pattern so far.
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13.6
The political value of the AMA's endorsement is important and welcome.
But the AMA still sucks.
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13.7
bobcn1, you are correct. They still suck...eggs...real hard. We wouldn't be having this discussion right now if it wasn't for their historical legacy of suck.
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13.8
How much does the AMA really care about health care?
This is the organization that OPPOSED free polio vaccinations for children in the '50s. Why? Because they wanted to charge for the vaccinations.
The AMA sucks. But I'll accept their endorsement of the House's health care bill.
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13.9
I be bettin' th' public option be significant watered down an' restricted in order t' obtain tha' endorsement fr'm th' AMA.
It be lookin' li' only individuals be able t' participate, not businesses. Only individuals tha' be no' able t' find other cov'rage, no' any individual who'd be likin' th' choice. If I be wantin' t' switch fr'm me employer's plan t' th' public option, th' answer be NO. If I be a business lookin' fer a better deal fer me an' me employees, th' answer be NO.
Tha' be th' cost o' th' AMA endorsement - a gutless, restricted public option available t' hardly anyone.
It be set up t' fail.
No thanks, me hearties - tha' be no' worth it, an' be no' good enough!
YARR!
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14
KT -- You do get that the reason Democrats find taxing benefits so popular is because Republicans like it and they think that means the GOP won't hit them over the head with this kind of tax increase. Well first of all trusting the GOP is absurd, anyone watching the confirmation hearings understands that they would and have hit themselves over the head to gain ideology points. Plus, the GOP only likes this tax because its one way to stick it to the unions they hate more than life itself. However, if the Democrats would just provide the health reform they wouldn't have anything to worry about because people will love it as much as Medicare and Social Security and it would become the next 3rd rail of American politics. Yeah that's the other reason why the GOP wants to kill health care because they've been unable to mess with Medicare or Social Security without pulling back a nub.
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PS -- The GOP keeps predicting that the public option will kill employer provided health coverage. The truth is what's going to kill it is taxing benefits. The only reason employers provided it in the first place is because they don't pay payroll taxes on it -- tax the benefits and what's the upside for them? What will be the point of doing it? -
15
Transcript of a theoretical interview that will never happen.
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Senator Clownbags: Government-run healthcare stinks because the Post Office stinks. Did you know they keep trying to deliver catalogs to some guy named "Current Resident", and he doesn't even live with me?
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Reporter: But Senator Clownbags, the VA system is government-run healthcare, where is your bill to get rid eradicate the VA?
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Senator Clownbags:Snort, chortle, socialized health care is going to kill us all. Private market, co-op. Did you know that some people buy vegetables at a co-op? Just think if you could buy some new corneas at one!
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Reporter: But if government-run health care is really so bad, aren't you really "hurtin' the troops" if you make them suffer under government-run healthcare? Is hating the troops an American value?
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Senator Clownbags: Uhh...bias...fairness doctrine...Reagan...Mommie! -
16
I am with Cliff, I think the big news is the AMA endorsing the house plan.
Wonder if Conrad had help in the wording of his question to the CBO. The last time I saw him on a talk show he did not look happy. Must be hard to do what big donors want and know that the voters in your state want something else.
Democrats found out that taxing benefits were not going to work on the last break.
Dee is right the Republicans were big on this as they knew it would be something they could use against the Democrats. The Republicans are doing everything they can do to slow down the process to get a health bill passed.
The AMA endorsement is huge, I am not worried about the Finance committee any more.
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16.1
To third you and Cliff there is one other thing that makes the AMA endorsement even bigger. And that is that the House bill was the one that the Villagers and the pundit class (see Joe Klein just yesterday) had labeled as the bill that was unrealistic and that would be negotiated away. Of course it was also seen as "too liberal". And yet the AMA saw fit to endorse it without any caveats. Now the question will be if we will hear any Villagers even mention it in their reporting on health care reform. I can promise you this, had the AMA trashed the House bill we for damn sure would have heard THAT over and over again.
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16.2
I wonder how much arm twisting is going on behind the scenes here.
And I think there must be arm-twisting, otherwise how did the AMA go from "No way Jose" to "Bring on the public plan" so quickly?
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17
People like getting these benefits tax-free.
As goes California, so goes the nation.
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18
"OTOH: The idea is a HUGE loser politically, and potentially a real political trap."
I don't care. People need health care. Those employer plans everyone wants to protect are going to go away just like pensions, because the costs keep going up and our companies are not making the profits any more.
State plans out the door. States can't afford to do this by themselves. They are losing tax bases and can't even afford their share of medicaid payments in a lot cases.
"But the plan has to balance (within 10 years) to pass muster under the pay-go budget rules."
Really? We had rules against torture and illegal wiretaps. Found away around them though didn't we? And no one will want to investigate anyway. Might make the country angry remember? Lets just look forward.
I'm done protecting pols. Done protecting insurance company profits while my neighbors go bankrupt and with them goes the nation paying twice the rate for less health care. Done with saving this industry or that one because they are too big to fail. We can pay for that without a CBO report. Done with people telling me that this can't be done because of this rule or that rule when they are more than willing to ignore other rules when it protects their agendas.
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18.1
Well said, gunny. I wonder if our corporate masters (or their servants in Congress and in the media) have any idea how close we are to pitchforks and torches or that they'll be coming from wide swaths of both ends of the political spectrum.
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19
don't care. People need health care. Those employer plans everyone wants to protect are going to go away just like pensions, because the costs keep going up and our companies are not making the profits any more
Gysgt213 This is the reason we have not seen opposition from employers. They are hoping for a plan that they will eventually be able to drop covering employees. They know that with the economy they cannot do it right now.
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19.1
Aaaghhhh!!!
So be givin' us th' single-payer system an' let 'em be droppin' it!!!
I'll give 'em me premiums an' out o' pocket expenses in additional taxes!
Let businesses pay a little extra tax, too!
Just DO IT, fer cryin' out loud!!!
YARR!
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20
Cliff, sorry about that, I forgot to add shepherdwong's name, was agreeing with shep's answer about insurance big deal using this example.
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20.1
I get it now.
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21
Yet the AMA signed on to the president's plan. Isn't that a big deal?
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22
How much would the government save if they cut SS benefits to the wealthiest americans?
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22.1
How much would they make if they legalized marijuana? I see CA calculated $1.5 billion - ?
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23
If the key issue is now not healthcare per se, but how do we fund it, then life is actually rather better for the Democrats, because getting real healthcare reform through would be a vote winner. There are ways of raising revenue to do this, and the question would be which path produces the most gain for the least pain. That's something which we can figure out with time.
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On the other hand, if healthcare reform is too limited or too compromised to really benefit anyone, then the discussion of revenue and budgets really won't matter, because it will be a huge loss for Obama and the Democrats. If Obama has any sense, he will see that this is the time to be tough, fight tooth and nail for real healthcare reform, and sell it to the nation with every ounce of rhetoric that he has. Fortune favors the brave - and in this case bravery and good sense coincide. -
24
Elmendorf: Bending the cost curve is difficult. As we said in our letter to you, there is a widespread consensus, and you quoted some of this, that a significant share of health spending is not contributing to health. But rooting out that spending without taking away spending that is beneficial to health is not straightforward.
Shame that isn't the take away point, rather than the fact that it's going to cost us money in the near term to insure the 40-50 million who are currently left out of the system. That's what this is supposed to be about, even as it attempts to bring down cost through better competition (and you can't count what you can't yet see).
“Bending the cost curve” will (or won't) happen mostly through other means revolving around promoting lifestyle changes (which will require Obama to take on the agro and commercial food giants next) that will be partly supported by more primary and wellness care and an emphasis on preventing obesity, diabetes and co-morbid disease. That will be made easier with the institution of a strong public plan but the benefits of those next steps can't be calculated or taken into account anytime soon because they haven't even been proposed. By looking strictly at predicted net cost, we're using the wrong yardstick to measure this plan.
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25
[...] you like this post, please subscribe to read more content on this topic.Time's Karen Tumulty predicts that we'll be hearing a lot more about the cost of health care reform from insurance industry lackeys, using statements from CBO Director Douglas [...]
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