Monthly Archives: January 2010

More on Jonathan Gruber

As the Obama Administration admits that it needs to “open…things up more” with regard to transparency in the health care debate, Senators Grassley and Enzi sent a letter to Jonathan Gruber yesterday.  You may recall that earlier this month, various media outlets discovered that Dr. Gruber had previously failed to disclose the nearly $400,000 in contracts he had obtained from HHS.  Also of note, Dr. Gruber also currently serves on CBO’s Panel of Health Advisers, and was quoted in an October 19 Washington Post article as “praising the CBO…for making the best of ‘an unbelievably hard job’” in scoring health reform proposals.  The fact that a paid (but undisclosed) Administration consultant was publicly quoted supporting CBO’s scoring models at a time Congress was considering health care legislation raises further questions about non-transparency and conflicts-of-interest – which the letter goes into in further detail.

CBO and Democrats’ Fuzzy Health Care Math

As you may have seen, CBO released their updated January 2010 budgetary baseline, which can be found here.  Of particular note for health analysts is Appendix A, in which CBO revised its estimate for the total cost of the “stimulus” upward by $75 billion – from an estimated $787 billion (exclusive of interest costs) at the time of its February enactment to $862 billion today.  That’s a nearly 10% increase in estimated federal spending in just eleven short months, based on a few changes in economic assumptions.  The updates serve as a reminder that the long-term costs of the Democrats’ permanent new entitlements – currently estimated at a “mere” $2.5 trillion, based on the cost of the Senate health care bill when fully implemented – could be just as under-stated as Democrats’ claims of “deficit neutrality” are over-stated.

It’s also worth noting that Table D-1 (page 134) of the document confirms that for the first time last year, the Medicare Part A Trust Fund ran a $9 billion deficit, forcing the Treasury to begin the process of liquidating the bonds in the Trust Fund to meet Medicare’s funding obligations.  Both CBO and the Medicare actuaries have confirmed that the various Medicare savings proposals in the Democrat bills “cannot be simultaneously used to finance other federal outlays [i.e. new coverage expansions] and to extend the [Medicare] trust fund.”  Thus sustaining both Medicare and Democrats’ proposed new entitlements will involve massive new government borrowing – at a time when the CBO report confirms that China is about to become the largest holder of Treasury bonds, exceeding the government debt held by all American individuals combined.  Many may wonder: How is borrowing more money from China to finance new entitlements “reform?”

Obama vs. Obama on Transparency

In an interview with ABC’s Diane Sawyer yesterday, President Obama accepted some “responsibility” for the secretive process that led to back-room deals with labor unions, pharmaceutical companies, hospitals, and Sen. Ben Nelson (D-NE) in an attempt to buy support for Democrats’ government takeover of health care.  He noted that the “health care debate as it unfolded legitimately raised concerns…that we [i.e. the American people] just don’t know what’s going on.”  A full transcript can be found here.

But in response to the very next question, the President claimed that “I didn’t make a bunch of deals,” blaming the entire secretive process on Congress.  That statement might come as news to Billy Tauzin, CEO of the pharmaceutical industry’s trade organization, who told the New York Times back in August that “the Administration had approached him to negotiate…‘We were assured, “We need somebody to come in first.  If you come in first, you will have a rock-solid deal.”’”  How can the President square his belief that he “didn’t make a bunch of deals” with lobbyists who have been publicly bragging about their “rock-solid deals” with the Administration?

Even more to the point, the President has said “we have to move forward in a way that recaptures that sense of opening things up more.”  Given that statement, and the multiple news reports over the past several days indicating that Democrats are attempting to negotiate more “compromises” to jam their government takeover of health care back through the House, when can the public expect to see THOSE negotiations televised on C-SPAN?

The American People’s Message: Start Over on Health Care

In case you hadn’t seen, Gallup is out with a new survey today analyzing the health care debate in the wake of Sen.-elect Brown’s victory on Tuesday evening.  A clear majority (55%) believe Congress should “suspend work on the current health care bill” being worked on and consider more bipartisan solutions.  By contrast, only 39% want Congress to continue working to pass the existing legislation.  A definitive 56-37% majority of independents – a demographic group critical to the Brown victory – support starting over, as do more than one quarter (26%) of Democrats.

Likewise, only 32% believe passage of health care reform should be Congress’ “top priority;” a strong majority believe that Congress should address other problems first (46%) or do not view health care as a major legislative priority (16%).  With unemployment remaining at 10%, and more than 2.7 million jobs lost just since President Obama signed the $787 billion “stimulus” bill, many may view bringing jobs back into the economy as a larger priority than passing tax increases to fund massive entitlement expansions.

In Massachusetts and across the nation, the American people have spoken, calling on Democrats to abandon their government takeover of health care.  The question remains: Will Democrats heed the people’s call?

Doc Fix Update

As a follow up to the e-mail of last week regarding the status of the Medicare “doc fix,” you may have seen a letter the AMA and AARP sent to Leader Reid and Speaker Pelosi today calling for permanent repeal of the Sustainable Growth Rate (SGR) formula.  To that end, Sen. Reid has placed the House-passed SGR bill (H.R. 3961) on the Senate calendar.  These efforts come in advance of the expiration of the two-month SGR “patch” included in last year’s Defense appropriations bill (P.L. 111-118); the patch expires February 28, triggering cuts of over 21 percent in Medicare physician payment levels absent further action.

As background, the House-passed bill would eliminate any potential future “cuts” by permanently replacing the SGR formula with two separate formulae for physician spending – primary care and preventive services would grow at a rate totaling GDP growth plus 2 percent, and all other services would grow at a rate totaling GDP growth plus 1 percent. (By comparison, the Stabenow bill (S. 1776) the Senate considered in October would freeze the SGR for ten years, at which point the SGR’s payment cuts would return.)  This new spending would NOT be offset; CBO has estimated the cost of H.R. 3961 at nearly $210 billion, and further estimates the bill would raise seniors’ Medicare Part B premiums by nearly $50 billion over ten years.  H.R. 3961 also includes House-passed PAYGO language (H.R. 2920), that was added during the engrossment process on the House floor.

The Legislative Bulletin summarizing the legislation, and offering potential concerns with this new deficit spending, can be found here.  We will have more information as it becomes available.

Did Democrats’ Backroom Deals Cost Them a Senate Seat?

In the wake of Scott Brown’s historic election victory last night, even some Democrats are admitting as much.  Former special counsel to President Clinton Lanny Davis, writing in this morning’s Wall Street Journal, notes that “We Democrats had to explain to Massachusetts voters and other Americans why non-Nebraskans and nonunion members have to pay more taxes, while Nebraskans and union members get to pay less.  Those two deals seem to have alienated most people across the political spectrum.  That’s not easy.”

The voters of Massachusetts agreed.  Interviewed by the New York Times in North Andover, 73-year-old Marlene Connolly said she voted Republican for the first time in her life, because “’I’m just devastated by what Obama’s doing.  I don’t think he cares enough about anything other than his own personal agenda or this foolish health care bill.’”  The Times correspondent noted that “most upsetting to her was the proposed deal made for unions recently on the excise [aka “Cadillac”] tax.  ‘My daughter and her husband work for companies that are not unionized and they would get slammed’” so that union members could get special favors.

In a leaked memo yesterday, one of Martha Coakley’s advisors noted that her polling lead “dropped significantly after the Senate passed health care reform,” because “polling showed significant concerns with the actions of Senator [Ben] Nelson to hold out for a better deal.  Senator Nelson’s actions specifically hurt Coakley…”  And the polling surge that brought Scott Brown to the lead – and eventual victory – in the Senate race occurred over the weekend, just a few days after the backroom deal was announced with union bosses to modify the “Cadillac tax” solely for their members.

Massachusetts has the highest health insurance premiums in the country – just under $14,000 for a family, and nearly $1,500 more than the national average – meaning a disproportionate share of Massachusetts residents would likely be hit by the tax, except for the select few in a politically favored union constituency.  The evidence therefore suggests that Massachusetts voters thought this latest backroom deal with labor bosses was, like the rest of Democrats’ government takeover of health care, a raw deal for them.

Policy Brief: Democrats’ Latest Backroom Deal: Give Democrats Cash to Pass a Health Care Clunker

Press reports indicate that Democrats, once again acting behind closed doors, have struck their latest “sweetheart deal” needed to pass a government takeover of health care.  Among other proposed changes, Democrats would exempt union members from the new “Cadillac” tax on certain insurance policies under Senate Majority Leader Reid’s bill (H.R. 3590)—as a way to “blunt [unions’] protest against the health reform plan.”[i]  If enacted, the proposals being considered would impose substantial new taxes on Americans across the income spectrum—so a politically favored constituency can receive special benefits:

  • As Democrats themselves have admitted, this backroom deal would impose higher taxes on middle-class families who are non-union members—all so labor bosses would receive a temporary reprieve on new taxes for their members.  Many may oppose this strategy of giving special favors to politically powerful Democrat constituencies—an attempt to divide and conquer the American people in order to enact a government takeover of health care.[ii]
  • This latest union “deal” follows on the heels of other kickbacks included in the bills to protect unions—a retiree reinsurance trust fund, and a special provision modifying the Reid bill’s employer mandate to target the construction industry, inserted at the behest of union leaders.
  • Press reports indicate the approximately $60 billion in changes to the “Cadillac tax” will be paid for by a further unprecedented expansion of the Medicare payroll tax to include non-wage income like dividends and capital gains.
  • The higher taxes on capital formation needed to fund this sweetheart arrangement could force firms to lower wages, delay hiring, or even lay people off.[iii]  As a result, union members may keep their current plan for a while longer, but lose their job—all thanks to Democrats’ latest backroom deal.
  • Proponents of the tax increase on insurance companies have publicly admitted that the “Cadillac tax” would raise taxes on middle class families.  Thus the underlying “Cadillac tax” proposal would break two of then-Senator Obama’s central campaign promises: not to tax individuals’ health benefits, and not to raise taxes on individuals with incomes under $250,000[iv]—all of whom would be required to purchase health insurance under the Democrat plans.
  • The inflation measure for the “Cadillac tax” threshold would remain linked to the Consumer Price Index plus one percentage point, as in the underlying Reid bill, meaning that the tax would hit most Americans—including union members—over time.

Press reports also suggest that the “Cadillac tax” would be modified in several other ways:

  • Union members—as well as all state and local employees—would be exempt from the tax for its first five years, until 2018;
  • The threshold level for the tax would be raised from $8,500 for an individual policy and $23,000 for a family policy in 2013 to $8,900 and $24,000, respectively;
  • The cost of supplemental dental and vision coverage would be excluded from the tax threshold amounts beginning in 2015;
  • Thresholds may be increased further—by a formula that has not been publicly disclosed—to take into account age and gender, a provision that would benefit union plans with high percentages of older workers; and
  • The thresholds may also be increased further if health costs rise faster than expected—a provision which some may view as a tacit admission of the criticism of Tom Daschle and others that the bill’s cost containment provisions would be of “minimal value.”[v]

However, the gist of the latest kickback remains the same: Americans at large suffer so a politically connected constituency may benefit.  Thus many may oppose Democrats’ latest secret deal as indicative of the larger problems with their government takeover of health care—lack of transparency, backroom deals, higher taxes, and crushing new burdens on the middle class.



[i] Politico, “White House Scores Key Labor Deal,” January 15, 2010, http://dyn.politico.com/printstory.cfm?uuid=2F7D2C55-18FE-70B2-A8E1A3057E02406E.

[ii] CongressDaily AM, “Unions Tentatively See a Deal Regarding Excise Tax,” January 15, 2010, http://www.nationaljournal.com/congressdaily/hca_20100113_9874.php

[iii] See for example the Heritage Foundation, “Economic Effects of Increasing the Tax Rates on Capital Gains and Dividends,” April 2008, and the Treasury Department, “A Dynamic Analysis of Permanent Extension of the President’s Tax Relief,” July 2006.

[iv] Barack Obama, campaign speech, Dover, N.H., September 12, 2008, http://www.youtube.com/watch?v=Q8erePM8V5U

[v] “Daschle Handicaps the Final Health Bill,” New York Times, Prescriptions blog, January 13, 2010, http://prescriptions.blogs.nytimes.com/2010/01/13/daschle-handicaps-the-final-health-bill/?scp=2&sq=daschle&st=cse

The Latest Sweetheart Deal Helps Unions — And Hurts Union Workers

Various press outlets are reporting some type of “deal” has been reached between union representatives and Democrats regarding the “Cadillac tax.”  Multiple sources over the past several days – including the Roll Call story from this afternoon – have indicated that such an agreement would exempt union-negotiated plans from the “Cadillac tax,” at least temporarily.  This would represent the latest “sweetheart deal” favoring a politically popular constituency at the expense of all Americans – and far from the only giveaway to unions in the bills (the retiree reinsurance trust fund and the construction exemption to the Senate “fair share” mandate being two other obvious union “sweetheart deals.”)

While this provision may appear to benefit unions – or at the very least union leaders, who have campaigned hard against the tax – such an agreement may not benefit union workers, if (as it appears) the changes to the “Cadillac tax” will be paid for by a further unprecedented expansion of the Medicare payroll tax to include non-wage income like dividends and capital gains.  Those income sources are the very same ones which businesses, particularly small businesses, rely on to reinvest in their firms – and higher taxes could force those firms to lower wages, delay hiring, or even lay people off.  So the upside of this agreement could be that union members will keep their current plan (at least for a while longer), but lose their job – all thanks to Democrats’ latest backroom deal.

Tom Daschle Admits Health “Reform” Will Not Contain Costs

The New York Times reports on its Prescriptions blog that in a speech to a group of investors in San Francisco yesterday, former Senate Majority Leader Tom Daschle – the man whom President Obama wanted to be his HHS Secretary – admitted that the health “reform” bills being considered have cost containment provisions that “would be of ‘minimal value’ at the beginning.”  This analysis remains consistent with reports from the Obama Administration’s own actuaries, which found that the House and Senate bills would each raise overall national health expenditures, as well as an analysis from the Congressional Budget Office finding that the legislation would raise the federal budgetary commitment to health care by hundreds of billions of dollars in the first decade alone.

The Obama Administration allegedly wants to focus on controlling costs – not least to keep the President’s campaign promise to cut Americans’ health insurance premiums by $2,500 for a family.  Yet Daschle is just the latest former Congressional leader to warn about the problems of creating new – and unsustainable – entitlements without tackling cost growth.  As early as last April, former House Majority Leader Dick Gephardt told the New York Times that “the way to get to [universal coverage] is to show that we can deal with some of these [cost] problems first.”

Even as the Administration’s closest advisors admit their proposals will not contain health costs, Harry Reid and Nancy Pelosi continue to work on a government takeover of health care costing nearly $2.5 trillion.  When will Democrats scrap their risky experiment and work to build bipartisan support for solutions that can help all Americans struggling with rising health care expenses?

Democrats’ Alternative to Government-Run Insurance: More Government-Run Insurance

As Democrats continue their attempts to draft a health care bill behind closed doors, several press reports – including this article from this morning’s Wall Street Journal – have indicated the Administration’s preference for the national exchanges included in the Pelosi health care bill (H.R. 3962).  However, the provisions establishing a national Exchange in that bill include another noteworthy provision: The bill prohibits the purchase of private, individual health insurance.  Specifically, Section 202(c) of the bill (page 100 of the House-passed legislation) notes that beginning in 2013 (when the Exchange comes online in the House version) “individual health insurance…may only be offered” through the national, government-run Exchange.

Thus, if the press reports are accurate, Democrats could be about to “sacrifice” their government-run health plan by requiring individuals to purchase coverage through a government-run Exchange – and create a “Health Choices Commissioner” (aka the new federal insurance “czar”) whose job it will be to PROHIBIT people from choosing to buy health insurance outside the federal government’s purview.  Somewhere, George Orwell must be smiling.