Monthly Archives: June 2010

JCT: At Least $27 Billion in Improper Insurance Subsidy Payments

CongressDaily has an interesting article this morning on a significant source of over-spending in the health care law – excessive health insurance subsidies provided to individuals and families.  The issue arises from the fact that the new insurance subsidies are based on an individual’s (or family’s) most recent tax return – so that subsidy levels beginning in January 2014 will be based on reported income for 2012.  As might be expected, a family’s circumstances can change significantly during this time lag for a variety of reasons – a change in job, significant raise, divorce, birth, or death, to name just a few.

The health care law established a reconciliation process intended to recapture any subsidy over-payments – but the law capped the amount of such repayments at $250 for individuals and $400 for families.  As the article reports, raising these limits to $1,000 for an individual and $2,000 for a family would result in an additional $27 billion in repaid subsidies.  This $27 billion in subsidy overpayments represents a significant portion of the $464 billion total devoted to insurance subsidies in the new health law.  But the figure does NOT represent the full level of overpayments – it excludes the revenue repaid under the law’s existing provisions (capped at $250 per individual and $400 per family), and it does not include any additional revenue that might be repaid if the repayment cap were lifted entirely, rather than merely raised to $1,000 per individual and $2,000 per family.

It is however fair to say that at least $27 billion – and quite possibly a good bit more than $27 billion – will be paid in insurance subsidies to individuals who do not deserve them based upon their income levels at the time they actually receive the payment.  Some of these payments could be a result of innocent mistakes that a family might not have noticed.  But it’s also worth asking whether the law itself encourages individuals not to report changes that would reduce their subsidy eligibility: After all, would you be quick to disclose a change in income that will result in your insurance subsidy being cut, if you knew that the most you would have to pay back for receiving thousands of dollars in taxpayer-funded subsidies you didn’t deserve would be $400?

The Obama Administration recently announced its intention to cut Medicare fraud in half by 2012.  That’s an admirable goal, considering both the skyrocketing federal budget deficit and Medicare’s shaky long-term financing.  But it’s worth examining whether the overpayments associated with what an expert quoted in the article called “an entirely new welfare system” will erase any gains from anti-fraud efforts in Medicare – and whether, at a time of skyrocketing deficits and high unemployment, it is appropriate for the federal government to raise taxes by more than half a trillion dollars to create a system where individuals will receive more than $27 billion in insurance subsidies to which they are not entitled.

An Individual Mandate — To Eat Your Vegetables???

During their questioning of Elena Kagan yesterday afternoon, Sens. Cornyn and Coburn both touched on the Commerce Clause issues surrounding the individual health insurance mandate and the limits (or lack thereof) on federal power.  In response to Sen. Cornyn’s questioning about the scope of the Commerce Clause, Ms. Kagan said that “the current state of the law is to grant broad deference to Congress in this area, to assume that Congress knows what’s necessary in terms of the regulation of the country’s economy, but to have some limits.”  However, the limits she went on to describe were centered around “activity…not itself economic in nature.”  Left unstated in this exchange was whether NOT buying health insurance constitutes economic activity, as the health care law, and the Justice Department’s defense of it, assert.

Dr. Coburn followed up on this point, asking whether Congress could pass a law forcing individuals to eat three fruits and three vegetables every day.  Ms. Kagan replied that such a measure would be a “dumb law,” but did not answer as to whether or not the Constitution gives Congress power to create and enforce such a mandate.  In fact, she implied that Congress MAY have such a power, noting that “We can come up with, sort of, you know, just ridiculous sounding laws, and the – and the – and the principal protector against bad laws is the political branches themselves.”

Dr. Coburn went on, pointing out Ms. Kagan that a finding that “eating three fruits and three vegetables a day would cut health care costs 20 percent, now – now we’re into commerce.  And since the government pays 65 percent of all the health care costs, why – why isn’t that constitutional?”  Once again, Ms. Kagan declined to say a law would be unconstitutional, and instead asserted that “deference should be provided to Congress with respect to matters affecting interstate commerce.”

It’s worth asking: If Ms. Kagan is unwilling to admit that Congress cannot regulate the diet of all Americans, is there any area where she believes the federal government CANNOT invoke the Commerce Clause to intrude upon every facet of Americans’ daily lives?

Health “Reform”: High Premiums, Rising Costs

The Associated Press has a story this morning profiling the new federal high-risk pool program set to be introduced later this week (more than a week behind the schedule laid out in the health care law).  However, the article also notes that “premiums will be a stretch for many,” and notes that “cost issues dog” the new program.  It points out that “technical experts who advise Congress and the Administration have repeatedly warned that the White House underestimated the cost,” and observes that, if the program runs out of money (which CBO predicted last week it would), “that would be an embarrassment for Obama, since the program is a centerpiece of his plan for putting the nation on a path to coverage for all.”

Again, it’s worth pointing out that Democrats easily could have provided full funding for high-risk pools, had they chosen not to provide $15 billion in taxpayer funding for a “slush fund” for jungle gyms and other dubious spending projects, or billions more in backroom deals needed to obtain the votes necessary to pass the legislation.  Many may question how dedicating billions in taxpayer funds to new backroom deals and pork projects, rather than individuals with pre-existing conditions, constitutes true health care “reform.”

Did Obamacare Violate the Fifth Commandment?

No, I’m not referring to the dictum to “Honor your father and your mother” and its applicability to the Medicare portions of the law, which is an entirely different discussion.  I write instead about the “Ten Commandments for Fiscal Adjustment in Advanced Economies” that the International Monetary Fund released last week, ahead of the G-20 summit.  That document’s fifth point specifically called on developed countries to pass “early health and pension reforms, as current trends are unsustainable.”

How well did Democrats’ health “reform” law meet this standard, according to the non-partisan Congressional Budget Office?  CBO Director Elmendorf today gave a lukewarm assessment at best, noting that if the law is fully implemented, it will make “steps in the direction of a sustainable fiscal policy.  But they are small steps relative to the journey that will be needed for fiscally sustainability.”

Most critically, even this rather tepid analysis presumes that all the tax increases and savings measures in the health care law are fully implemented – an assumption about which CBO remains highly skeptical.  While today’s CBO report included one current-law baseline estimate that presumes the law is fully implemented, it also included an alternative baseline that presumes many of the largest and most controversial savings proposals will never be allowed to take effect by Congress.  The alternative fiscal scenario is not an unusual phenomenon – at the Fiscal Commission meeting this morning, Budget Committee Chairman Conrad called it a useful tool, and some experts view it as giving a more accurate and realistic picture of the country’s long-term fiscal picture.  What is striking though is the way in which CBO, in arriving at its alternative scenario, assumed that most of the law’s major savings provisions will never take full effect – this only three months after the law was first enacted.

So in sum: While the IMF called current trends on health spending “unsustainable,” the Congressional Budget Office released a report highlighting several “Questions About Sustainability” for a law enacted mere months ago, and recently asserted that even if the law is fully and successfully implemented, “putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including this year’s health legislation).”  Sounds like some Democratic fiscal hawks may need a trip to the IMF confessional.

One final word on health care and the budget: The Center for American Progress released a report today claiming that according to CBO, the health care law “is fully funded, strengthens the Medicare trust fund, and reduces the federal deficit.”  That claim is demonstrably false.  In January CBO stated that “the majority of the [Medicare] trust fund savings under [the health law] would be used to pay for other spending and therefore would not enhance the ability of the government to pay future benefits.”  CBO followed up with a March letter to Congressman Ryan, in which it tallied the budgetary effects of keeping the Medicare Hospital Insurance savings in the Medicare HI trust fund: “the legislation’s effects on the rest of the budget—other than the cash flows of the HI trust fund—would amount to a net increase in federal deficits of $260 billion over” 10 years.  In plain English, the same money can’t be used BOTH to “save” Medicare and to reduce the deficit – if the Medicare savings proposals were dedicated solely toward Medicare, the deficit would soar – so CAP’s claim is clearly false.  Moreover, with respect to the claim that the law is “fully funded,” CBO released a letter last week claiming the high-risk pool program is NOT fully funded, and that as many as 500,000 individuals with pre-existing conditions could lose out on coverage as a result – so that CAP claim needs fact-checking as well.

CBO Exposes Obamacare’s Budgetary Gimmicks

The Congressional Budget Office released its annual long-term budgetary outlook today, and it contains some striking new statements in regards to the health care law.  First, the report notes that in calculating its long-term health spending projections, CBO is “using the same growth rates that would have been applied in the absence of the legislation,” which the fact that CBO “does not have an analytic basis for projecting the effects of the recently enacted legislation on the growth rate of federal health care spending over the very long term.” (citation at page 26; longer discussion at page 36)

When analyzing the health care law, the report includes a section entitled “Questions About Sustainability” on page 35, which I’ve pasted below.  Many of the same quotes were included in CBO’s initial analyses of the health care and reconciliation laws.  CBO notes that “increases in payment rates for many providers will be held below the rate of increase in the average cost of providers’ inputs” and “it is unclear whether the [Medicare provisions] can be sustained, and, if so, whether it will be accomplished through greater efficiencies in the delivery of care or will instead reduce access to care or diminish the quality of care.”  CBO similarly calls provisions in the reconciliation law slowing the growth  of insurance subsidies after 2018 “difficult to sustain.”

For these reasons, CBO’s alternative fiscal scenario – which, for example, presumes that physicians will receive increases in Medicare reimbursements, rather than cuts under the sustainable growth rate (SGR) mechanism – similarly assumes that “the continuing reductions in updated for Medicare’s payment rates, the constraints on Medicare imposed by the IPAB, and the additional indexing provision that will slow the growth of exchange [insurance] subsidies…will not continue after 2020” (page 37).  In other words, Congress’ non-partisan budgetary scorekeeper believes that the major savings proposals in the health care law cannot—and will not—be sustained in the long-term.

In addition, CBO highlighted the scope of the “Cadillac tax” on high-cost health plans.  Page 57 of the report asserts that “a greater share of premiums will be subject to” the tax over time.  More importantly, the report notes that “in CBO’s estimation, whether policy-holders pay the excise tax through higher premiums or avoid it by switching to lower-cost plans, total taxes will ultimately rise” as a result of the provision.

Finally, I’ll reference a couple of other interesting tidbits.  First, Table 2-1 on page 31 confirms that from 1975-2008 and 1990-2008, excess cost growth in Medicare has exceeded that of Medicaid and all other health spending (including from private sources), which raises doubts about Medicare’s ability to function as a leader in controlling health care costs.  Second, a discussion on page 30 notes that “the substantial reduction in the percentage of health care costs that people pay out of pocket has also increased demand” – a trend that will likely only get worse as a result of the health care law.

But the major story here – as with CBO Director Elmendorf’s presentation from a month ago – is that Congress’ independent budget arbiter once again confirmed that Democrats’ new, $2.6 trillion health care law is ultimately unsustainable.

 

 

Questions About Sustainability

One challenge that arises in projecting federal outlays for health care over the long term is that the recent legislation either left in place or put into effect a number of procedures that may be difficult to sustain over a long period.  For example, the legislation did not alter the sustainable growth rate mechanism used for determining updates to Medicare’s payment rates for physicians; under that mechanism, those rates are scheduled to be reduced by about 21 percent in 2010 and then decline further in subsequent years. Since that mechanism was enacted in 1997, its provisions have usually been modified to avoid scheduled reductions in payment rates, and legislation was just enacted to delay cuts in those payment rates until December 2010 (a development that is not reflected in the projections). At the same time, the legislation includes provisions that will constrain payment rates for other providers of Medicare’s services. In particular, increases in payment rates for many providers will be held below the rate of increase in the average cost of providers’ inputs.

Taking all the provisions of the legislation together, CBO expects that, adjusted for inflation, Medicare spending per beneficiary will increase at an average annual rate of less than 2 percent during the next two decades—compared with a roughly 4 percent annual growth rate during the past two decades (a calculation that excludes the effect of establishing the Medicare prescription drug benefit). It is unclear whether that lower rate of growth can be sustained and, if so, whether it will be accomplished through greater efficiencies in the delivery of health care or will instead reduce access to care or diminish the quality of care (relative to the situation under prior law).

Another provision that may be difficult to sustain will slow the growth of federal subsidies for health insurance purchased through the insurance exchanges. For enrollees who receive subsidies, the amount they will have to pay depends primarily on a formula that determines what share of their income they have to contribute to enroll in a relatively low-cost plan (with the subsidy covering the difference between that contribution and the total premium for that plan). Initially, the percentages of income that enrollees must pay are indexed so that the subsidies will cover roughly the same share of the total premium over time. After 2018, however, an additional indexing factor will probably apply; if so, the shares of income that enrollees have to pay will increase more rapidly, and the shares of the premium that the subsidies cover will decline.

Elena Kagan and the Individual Mandate

As the questioning of Elena Kagan gets underway this morning in the Senate Judiciary Committee, many commentators have focused on the constitutionality of the individual mandate in the health care law – a critical policy issue in its own right, and also a window into Ms. Kagan’s views on the limits (or lack thereof) of federal power.  A Wall Street Journal editorial yesterday pointed out that if Ms. Kagan believes individuals can be forced to buy health insurance – and a specific type of “government-approved” health insurance at that – there is little the federal government cannot compel individuals to do.  George Will made a similar point in his Sunday column, when he raised some hypothetical questions for Ms. Kagan that could logically follow from an individual mandate to purchase health insurance:

– If Congress decides that interstate commerce is substantially affected by the costs of obesity, may Congress require obese people to purchase participation in programs such as Weight Watchers? If not, why not?

– The government having decided that Chrysler’s survival is an urgent national necessity, could it decide that “Cash for Clunkers” is too indirect a subsidy and instead mandate that people buy Chrysler products?

– If Congress concludes that ignorance has a substantial impact on interstate commerce, can it constitutionally require students to do three hours of homework nightly? If not, why not?

– Can you name a human endeavor that Congress cannot regulate on the pretense that the endeavor affects interstate commerce? If courts reflexively defer to that congressional pretense, in what sense do we have limited government?

Conversely, a Politico op-ed this morning claims that if the Court strikes down the individual mandate, future courts could use that decision to invalidate existing civil rights legislation or other acts of Congress.  However, this claim is simply not convincing.  The civil rights laws all involve entering into commerce –businesses that choose to enter into commerce must comply with the laws and may not discriminate by refusing to serve certain customers.  Conversely, the individual mandate claims the federal government’s authority to force individuals into commerce to begin with.   In short, the individual mandate is a claim for unprecedented federal power – which the non-partisan Congressional Research Service acknowledged by stating the individual mandate raises a “novel issue whether Congress may use the [commerce] clause to require an individual to purchase a good or service.”  Because the individual mandate presents a “novel” case, the Court could strike it down without disturbing any of the precedents on which the civil rights and other previous federal laws rest.

Policy Brief: How Obamacare Gives Insurance Companies More Control Over Small Businesses

President Obama and Democrats in Congress claim that their government takeover of health care will curb insurance company abuses.  But in reality a series of new rules will give small businesses struggling to afford coverage for their workers even less ability to control skyrocketing premiums.  Instead of being able to negotiate with insurance companies for more affordable coverage, small businesses face a “choice” of either accepting their current carrier’s premium increases or purchasing new, costlier coverage mandated by the health care law:

  • On June 14, 2010, the Administration issued rules affecting the ability of individuals and employees to maintain their current health coverage.[i]  Violating the rules would require employers and individuals to purchase new policies that meet all the additional mandates, requirements, and regulations imposed in the law.
  • The Administration estimates that 51 percent of all employees, including 66 percent of workers in small businesses, would find themselves in violation of the rules, and have to obtain new coverage, by 2013—less than three years from now.[ii]  Under the worst scenario, nearly seven in 10 workers, and four in five employees in small businesses, would lose their current coverage by 2013.[iii]
  • The rules have a particularly dire effect on small businesses, most of which purchase coverage from an insurer rather than assuming the financial risk themselves.  Small businesses will not be permitted to change insurance companies without violating the new rules, giving them a significant disadvantage in negotiating with their current carrier.[iv]
  • As a result, small business owners face a difficult choice: They can accept double-digit premium increases from their existing insurance companies, averaging 10 to18 percent nationwide,[v] or they can shop around for new coverage, in which case they will have to comply with 20 new mandates in the health care law, each of which could raise insurance premiums by one to three percent.[vi]
  • Within days of the rules being released, press accounts told of small business owners forced to accept skyrocketing premium increases because they feel they cannot change carriers.  For instance, the Wall Street Journal reported: “Tim Sledz, manager of Windwalker Aviation Services in Romeoville, Illinois, is so worried about the future that he has elected to hang on” to his current policy—but was forced to accept a 15 percent premium increase as a result.[vii]  If he had been able to negotiate with other insurance companies, Mr. Sledz may have been able to find a better deal for his workers; instead, he and his employees will be forced to absorb these rapidly rising insurance costs.
  • While small businesses face difficult choices about affording coverage for their workers, labor unions apparently obtained a “backroom deal” during the regulatory process, as the rules would allow collectively bargained plans to switch carriers without violating the new guidelines.[viii]  Even though President Obama admitted in January that the health care deal-making “legitimately raised concerns” about an “ugly process,”[ix] this latest sweetheart deal for unions was not subjected to public scrutiny before being announced.

Speaker Pelosi famously said, “We have to pass the bill so that you can find out what is in it.”[x]  Many American small businesses have already expressed strong concerns about what they have found in these rules.  Small businesses struggling to control rising premiums find their ability to do so limited, not least because they have little ability to shop around for new policies.  Violating any of the restrictive new rules would trigger even higher costs to comply with more federal mandates—again placing small businesses at the mercy of their current insurance companies.  This death spiral of increasing costs, which violates President Obama’s pledge to “save a typical family up to $2,500 on premiums,”[xi] could also cause more firms to drop their coverage entirely, placing those additional costs on the taxpayer’s back.

Any way you slice it—bureaucratic mandates, rising premiums, loss of coverage, an economic drag on business—the rules, and the law they are implementing, represent the farthest thing from true reform.



[i] Interim final rule by Departments of Labor, Treasury, and Health and Human Services regarding grandfathered health insurance status, released June 14, 2010, http://www.federalregister.gov/OFRUpload/OFRData/2010-15278_PI.pdf

[ii] Interim final rule, Table 3, p. 54

[iii] Ibid.

[iv] Paragraph (a)(1)(ii) of the interim final rule would provide that any “new policy, certificate, or contract of insurance after March 23, 2010 (e.g., any previous policy, certificate, or contract of insurance is not being renewed)” would trigger loss of grandfathered status; see pp. 75-76.

[v] “Small Firms Find Changing Insurance Is Trickier” by Avery Johnson, Wall Street Journal June 23, 2010, http://online.wsj.com/article/SB10001424052748703513604575311013340405940.html

[vi] Ibid.

[vii] Ibid.

[viii] Paragraph (f) of the interim final rule would permit collectively bargained plans to make conforming changes to their plan prior to the end of the last collective bargaining agreement in place as of March 23, 2010, and would be permitted to change plan issuers.  The restriction in paragraph (a)(1)(ii) prohibiting a change in carrier would not apply to collectively bargained plans until the last of the collective bargaining agreements in place on March 23, 2010 expires—flexibility not granted to small employers and others purchasing fully insured products.  See pp. 81-82 of the interim final rule.

[ix] ABC television interview with Diane Sawyer, January 25, 2010, transcript available at http://abcnews.go.com/print?id=9659064

[xi] Obama for America campaign document, “Background Questions and Answers on Health Care Plan,” http://www.barackobama.com/pdf/Obama08_HealthcareFAQ.pdf

Washington Post Claims About Donald Berwick Nomination

The Post carries an editorial this morning endorsing Donald Berwick’s nomination to head the Centers for Medicare and Medicaid Services this morning, and in the process included several misleading statements about the confirmation debate.  While the Post’s editorial board is entitled to its own opinion of Dr. Berwick, it is not entitled to its own facts, so it’s worth making three points in response:

  1. The editorial accuses Republicans of taking “an opportunity to re-litigate the health care debate.”  On that count, it’s worth pointing out the process by which the majority used a series of backroom deals to ram through a massive 2,700 page piece of legislation on a party-line vote, and the public outcry it caused.  More to the point, multiple polls taken in recent weeks show majorities favoring a repeal of the health care law – and a poll released just yesterday shows a majority of the country disapproving of President Obama’s handling of health care.  In other words, it’s not Republicans that want to “re-litigate the health care debate” – the American people as a whole do.
  2. The editorial claims that Republicans are “latching on to a few of Dr. Berwick’s statements to wage their campaign.”  But the New York Times – no bastion of conservatism – rebutted that very notion last week: “Administration officials say they are confident that Dr. Berwick will be confirmed, and they say Republicans have taken his comments out of context.  In fact, many of the comments have been repeated, with slight variations, in Dr. Berwick’s articles and lectures over the years.”  In other words, it’s not just a “few” statements that have sparked concerns – it’s Dr. Berwick’s decades of writings.  The New York Times piece also pointed out that Dr. Berwick “has championed efforts to ‘reduce the total supply of high-technology medical and surgical care’” and has supported “a cap on total health spending…on more than one occasion” – both positions that could adversely affect millions of Americans, and which Dr. Berwick has yet to publicly explain, or defend, since his nomination.
  3. The editorial notes that “the Senate Finance Committee has not scheduled a hearing on the Berwick nomination; that may not even happen before the August recess.”  The implication in that statement is that Republicans have prevented a hearing from being called – when in reality nothing could be further from the truth.  The majority has not requested a hearing on Dr. Berwick’s nomination, and the nominee himself has yet to respond to all the due diligence requests made of him.  If the Administration wishes faster action on this nomination, it should start by having its nominee respond to the Finance Committee’s requests for information – because claiming that Republicans have prevented a hearing on the nomination is inaccurate, and a false partisan attack.

Delays and Confusion on High-Risk Pools

USA Today reports this morning on the many states likely to miss the July 1 start-up date for the state high-risk pool program.  (July 1 is itself a delayed implementation date; the law states the program should have begun by last Monday, June 21.)  Some states like Michigan have said they may not be able to get their programs up and running until as late as October, due to lengthy bidding processes, the need for state legislative action, or both.  The Administration claims a detailed list of state risk pools will be available at www.healthcare.gov; however, this website is not yet operational either.

Likewise, the New York Times also highlights the CBO report from last week stating that the health care law’s $5 billion in funding “will not be sufficient to cover the costs of all applicants.”  The article reports that states “would freeze [risk pool] enrollment if necessary to keep within their budgets,” but also notes that “it is not clear who would be legally responsible for claims that remain unpaid after a state’s allotment runs out” – one of the reasons why 20 states chose not to participate in the program.

Politico reports that states who did choose to run their own high-risk pools have obtained language in contracts signed with HHS that indemnifies them from any lawsuits against the risk pool, and clarifies that “they do not have a financial commitment to run the pool if HHS funds run out.”  That is a welcome outcome for the states, if it avoids imposing yet more unfunded mandates on them, but it also doesn’t answer the fundamental question of what happens should the funds prove insufficient.

To be clear: Many Republicans support high-risk pools as a means to offer quality, affordable coverage to individuals with pre-existing conditions.  The prime questions surrounding this program involve implementation and priorities: What happens if (or, more likely, when) the $5 billion in federal funds runs out?  And why did Democrats spend so much money on other, more dubious programs – $15 billion for a jungle gym “slush fund,” and billions more on backroom deals – rather than funding this critically important program properly in the first place?

Revised Bill Summary: Updated Baucus Substitute to H.R. 4213, Extenders Bill

Last night, Sen. Baucus introduced a new substitute.  This version of “Baucus 3.0″ makes changes when compared to “Baucus 2.0,” the substitute introduced last week on which the Senate failed to invoke cloture by a 56-40 vote.  The new substitute DOES include the “doc fix” provisions passed separately by the Senate last Friday as H.R. 3962 – i.e., the six month SGR extension and its pay-fors (IRS-CMS data match and three-day payment rule among them).

The updated substitute extends the Medicaid FMAP assistance provided in the “stimulus,” while reducing the federal match levels.  As a reminder, the “stimulus” provided two categories of enhanced federal funding: an across-the-board increase of 6.2% for all states, along with more targeted assistance focused on states with higher unemployment levels; in both cases the “stimulus” assistance expires on December 31, 2010.  The Baucus substitute would extend the targeted unemployment assistance for a full six months (i.e. through June 30, 2011), while reducing the across-the-board increases – the increase provided to all states for January-March 2011 would be 3.2%, and the increase for April-June 2011 would be 1.2%.

Also of note, the substitute adds a new Section 526, to make inhalation, infusion, and injectable drugs not dispensed through retail community pharmacies subject to the average manufacturer price regime.

The latest text removes the emergency designation from the Medicaid FMAP increase, as well as the statutory PAYGO exemption from the “doc fix” provisions.  Overall, the bill still increases the deficit by $33.3 billion, and the health subtitle increases the deficit by $17.5 billion.

After Sen. Baucus introduced his substitute, Sen. Reid filled the amendment tree and filed cloture on the measure.  As a reminder, barring a unanimous consent agreement, a vote on cloture would occur on Friday, with a vote on passage 30 hours thereafter.
 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-November of 2010.  The legislation also guarantees a further funding “cliff” this December, whereby Medicare payments would be cut by at least 21% absent further Congressional action.  Spends $6.5 billion over five and ten years.

Medicaid Funding:  Includes a six-month extension (through June 30, 2011) of increased federal Medicaid funding provided in the “stimulus.”  Phases down the across-the-board increase in the federal Medicaid match, from the 6.2 percent in the “stimulus” through the end of calendar year 2010 to 3.2 percent in the first calendar quarter of 2011, and 1.2 percent in the second calendar quarter of 2011.  The bill clarifies that states with Section 1115 waivers covering childless adults in effect as of December 31, 2009 qualify for meeting the “stimulus” bill’s maintenance of effort requirements.  The bill also includes a new provision requiring that to obtain the additional six months of federal funding, state chief executive officers must certify “that the state will request and use such additional funds” – language which some may view as a politically motivated stunt.  Spends $16.1 billion over five and ten years.

COBRA Subsidies:  Extends for six months eligibility for COBRA subsidies for individuals laid off through November 30, 2010.  The bill does not extend the length of the subsidy program beyond the current-law 15 months.  The bill designates this spending as emergency appropriations for PAYGO purposes, although it will still add to the deficit.  Raises the deficit by $6.9 billion over five and ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.  Saves $4.2 billion over five and ten years.

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

“Sweetheart Deal:”  Provides $400 million to California to adjust Medicare fee schedule localities – funds that according to the text of the bill are available only to the state of California.  Some may view this provision as providing a “sweetheart deal” to one specific state.  Costs $400 million over five and ten years.

Average Manufacturer Price:  Makes inhalation, infusion, and injectable drugs not dispensed through retail community pharmacies subject to the average manufacturer price regime.  Saves $800 million over five years and $2.1 billion over ten.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus,” and language preventing Medicare providers from un-bundling reimbursement requests.  Includes language regarding affiliated hospitals and provisions in the health care law surrounding distribution of medical residency positions.