Monday, April 20, 2009

Weekly Newsletter: April 20, 2009

Administration Reiterates Support for Government Rationing to Reduce Health Costs

Yesterday, National Economic Council Director Larry Summers appeared on Meet the Press, where he offered his comments on the Administration’s health reform proposals.  Asked how the Administration intended to pay for the $1.5 trillion cost of its proposed new government-run health plan, Summers responded that “cost-effectiveness research [and] doing a better job on reimbursements” would achieve savings—“we could take as much as $700 billion a year out of our health care system.”

Some Members may be concerned that these comments, coupled with President Obama’s stated desire to create a government-run health plan that would cause as many as 120 million Americans to lose their current health coverage, would result in explicit rationing of care by government bureaucrats in order to pay for the costs of the Administration’s universal coverage scheme.  Some Members may also question how many jobs will be lost as a result of this arbitrary reduction of up to $700 billion in health care expenditures.

A previously prepared Policy Brief on the potential for health care rationing as a result of proposals in the Obama budget can be found here.

If It Walks Like a Duck…

During Congress’ two-week Easter recess, Administration officials and others have been talking about a government-run health plan, and how a so-called “public option” could be structured in such a manner as to address Member concerns on the issue.  On Wednesday, the head of the White House Office of Health Reform, Nancy-Ann DeParle, claimed that a government-run plan need not look like Medicare, and that, “when you start talking to [Members of Congress] about what [a government-run plan] might look like, you realize that you’re talking about two different things.”

However, many Members may remain concerned that the very nature of a government-run health plan means that it will end up eliminating private health coverage.  Congressional Budget Office Director Elmendorf recently testified that it would be “extremely difficult” to have a government-run plan compete “on a level playing field” with private coverage—and Democrats’ own actions prove that point.  For instance, some Members may note that the same Obama Administration that proposed a “level playing field” between a government-run health plan and private coverage want to eliminate the private market for student lending, forcing all students to use the government-run plan for college loans.  Some Members may therefore be concerned that Democrats would purposefully use a government-run health plan, no matter its structure, in order to eradicate private health coverage—just as they are currently attempting to do with the student loan marketplace.

A Policy Brief outlining potential concerns with a government-run health plan can be found here.

A Victory for Honest Budgeting

Just before the Easter recess, the Congressional Budget Office (CBO) released a letter with significant implications for the upcoming health reform debate.  In a letter to House Budget Committee Chairman Spratt, CBO defended its estimates for current law spending under Medicare—including the impact of a 21% cut in physician reimbursement levels scheduled to occur in January under the Sustainable Growth Rate (SGR) mechanism.  CBO Director Elmendorf noted it is unclear whether reductions in physician payment levels would, for instance, cause hospital spending to rise—a scenario which would likely reduce the estimated $285 billion cost of repealing the SGR.

Some Members may be heartened by this assessment, and what it portends for its analysis of health reform proposals.  Democrats have already admitted the implications of the CBO scoring model on the Congressional debate, with Senate Finance Committee Chairman Baucus going so far as to claim that the success or failure of health reform legislation hinges on the actions of CBO Director Elmendorf.  Yet despite Chairman Baucus’ public comments—and a letter from Chairman Spratt designed to create “phantom” budgetary savings unsupported by evidence—CBO has thus far indicated that it will not be moved by Democrat political pressure.  In a world of record budget deficits and seemingly unrestrained spending, some Members may find CBO’s impartial, evidence-based philosophy to budgetary score-keeping to date a refreshing approach.

Article of Note: A Democrat Leader Cautions His Party

Last Monday, a voice from the 1993-94 health reform debate re-surfaced to offer President Obama and Congressional Democrats advice on over-reaching in their efforts this time round.  Former House Majority Leader Dick Gephardt (D-MO), in an interview with the New York Times, warned his fellow Democrats to spend more time focusing on reducing health costs and less time on creating a government-run health insurance plan for all Americans.  Gephardt—who unsuccessfully attempted to cobble together a health reform bill that could pass the House in the summer of 1994—said that universal coverage “needs to be dealt with.  But the way to get to it is to show that we can deal with some of these problems [i.e. skyrocketing health costs] first.”

Some Members may agree with former Leader Gephardt’s assessment, and believe that slowing the growth of health costs while placing our existing entitlement programs on a stable long-term footing should take precedence over creating a new government-run health plan.  Medicare currently faces unfunded obligations of $36 trillion, and its Hospital Insurance Trust Fund is scheduled to be exhausted as soon as 2016.  However, Democrats have put forth no comprehensive plan to solve Medicare’s shortfalls, and President Obama proposed to use Medicare savings in order to create a “reserve fund” financing new entitlements—taking money from a program for seniors to expand health coverage for the young.  Some Members may believe that spending as much as $1.5 trillion on a new government-run health plan is precisely the wrong way to control costs, and that expanding competition—not government—represents a better approach to health reform.

Read the article here.