Yesterday marks our crossing the [starting] line of potential health reform. It marked the first time a complete health reform bill was released by Congress this session - not a summary, talking points, or pseudo-bills with large holes – a complete bill. Up until this time, everything has been “talking head soup.”
[FYI, the image at right is a crossing the line certificate typically given to sailors when they cross the equator.]
First, I must admit a bit of surprise. Many of us expected the Senate Finance Committee to lead health reform as they invested a significant amount of time and effort over the last year with listening sessions, roundtables, and the like. The House was almost an afterthought – except for the fact that revenue bills have to originate in the House. The basic thinking was that the House would just put forth a bill, any bill, and that the Senate bill would dominate the conference where the Houses meld the two bills, and voila, we have health care reform. Regardless of where one stands in the political spectrum, the House deserves some credit - their three committees worked together in a short amount of time to put forth a strong bill. On the other hand, reading the policy options from the SFC was depressing…a lot of expansion and tweaking with little focus on fundamental change that brings costs to a manageable level. In defense of the Senate, they tend to be more compromising since they have the filibuster but with knowledgeable persons like Senators Baucus (D-MT) and Grassley (R-IA) at the helm, many of us expected better.
The House bill’s impact on Medicaid (see House Medicaid summary) is substantial and may mark a shift toward increased Federalization of Medicaid (another post on this is forthcoming). Basically, the bill has the Federal government foot the entire bill for expanding all Medicaid state programs to cover individuals with family incomes at or below 133% of poverty ($14,400 for an individual in 2009). It would also allow individuals with incomes at or below 133% of poverty who lose health insurance coverage, the choice of enrolling in Medicaid or enrolling in a Health Insurance Exchange product with premiums-assistance. Finally, it has the Federal government foot the entire bill for increasing Medicaid rates for primary care physicians and practitioners for primary care services from 80% of Medicare rates in 2010, to 90% in 2011, and 100% in 2012 and thereafter. Thus, in many ways, this bill removes much of Medicaid’s stigma and moves it toward being more of a vital safety-net. But, to my disappointment, it does not addres many of Medicaid's many weaknesses and like one observer said, "it merely splashes another coat of paint on top of a rusted shell."
The bill includes other numerous measures that will affect the uninsured and underinsured. For example, it increases funding for Community Health Centers and the National Health Service Corps above and beyond the additional $2.8B included in the Recovery Act (ARRA 2009). It also includes a health insurance exchange with a public plan option, consumer protections, and insurance market reforms. And finally, it institutes price controls on drugs purchased by low-income seniors and incorporates the drug industry’s $30 billion deal with the White House and the SFC to plug the infamous “doughnut hole” in Medicare Part D.
Also yesterday, the Congressional Budget Office released an estimate on the bill’s impact. They CBO stated in its preliminary estimate:
…enacting legislation that embodied those specifications would result in a net increase in federal budget deficits of $1,042 billion over the 2010–2019 period. By 2019, CBO and the JCT staff estimate, the number of nonelderly people without health insurance would be reduced by about 37 million, leaving about 17 million nonelderly residents uninsured (nearly half of whom would be unauthorized immigrants). It is important to note, however, that those estimates are based on specifications provided by the tri-committee group rather than an analysis of the language released today. For that reason and others outlined below, those figures do not represent a formal or complete cost estimate for the coverage provisions of the draft legislation.
The House bill is primarily financed with Medicare cuts and new taxes on the wealthy. For example, a married couple making more than $350,000 and less than $500,000 would be hit with a 1 percent tax, those making between $500,000 and $1 million would be assessed a 1.5 percent tax and those making more than $1 million would see a 5.4 percent surtax added to their tax bill. This funding mechanism of significant new taxes would be my only qualm with the bill.
In “budget world” (kind of like Disney World), the decisions of budgeteers (kind of like mouseketeers) rule because everything needs to be measured and scored. That is not to denigrate the CBO - they have some of the toughest jobs around. Trying to take squishy policy in a complex system and make predictions is no easy task. But we need to remember that there are different types of savings:
- Possible savings (not scoreable because of lack of evidence but believed to lead to savings – e.g. EHRs and medical homes),
- Probable (i.e. scoreable) savings (which tend to be those things that are more easily measured like cuts and taxes),
- Behavioral offset (this is the real tricky one and is kind of like culture change), and finally
- Real savings (this is the REAL outcome, in terms of lives, quality of life, and our country’s financial health).
For a good read on the current evaluation of these various options, CBO’s boringly titled Budget Options: Volume I is a thorough reference.
There are two important things to note. First, just because it is scoreable, does not mean it is meaningful. This is kind of like Einstein’s famous quote:
Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.
For example, the Sustainable Growth Rate used to determine physician payments looks good on paper and is scoreable but is not meaningful policy because it is not practical (or even followed). The other important thing to note is the counter-intuitive nature of health care costing…i.e. the cheapest beneficiary is the one who dies.
Thus, a good bill is a balance between the art and science of policy that leads to fundamental change (and thus, behavioral change). That is pretty much what the House tries to do in this bill and where the SFC misses the mark. The delicate part is the balance. For example, if one focuses too much on the savings that are easy (e.g. taxes or cuts), we will neglect the hard work necessary to truly transform the health care system for the better.
This leads to my to my qualm with the House bill. The Democrat in me believes that time is ripe for top earners (who have fared very well over the past 10 years, either fairly or unfairly) to sacrifice more for the greater good but the economist in me has a natural aversion to significant new taxes, especially when they fall on those who did not cause the problem in the first place. In this way, I fall in the Bob Laszewski camp (kudos Bob for your recent NBC news appearance, which is available at this link). Bob basically points out that using the tax system to drive people to more efficient health plans could be good policy but that:
It appears we are on our way to a $600 billion to $800 billion tax increase for a health care bill because we can’t find that amount of money in a system that will waste $10 trillion over the same period. I don’t think these guys could find a John Deere in a hay stack.
Thus, it appears that the first bill out of the gate is a good start in that it moves Medicaid closer to being more of a true safety net (i.e. insurer of last resort) and it tries to address access by paying primary care providers more but it still has a ways to go to address many of Medicaid's structural deficiencies.
Let's hope that as this bill moves down the production line, it addresses more of Medicaid's weaknesses and draws more financing from those who benefited from this mess in the first place. Also, let’s keep our focus on transforming health care delivery so that any “crutches” needed for scoring (i.e. taxes) are only temporary. ~BAA
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