Tag Archives: Maintenance of effort

What’s Congress Doing with SCHIP?

Amidst the wrangling over Obamacare, reauthorization of the State Children’s Health Insurance Program (SCHIP) expired on September 30, the end of the federal government’s fiscal year. The two committees of jurisdiction—energy and commerce in the House, and finance in the Senate—each marked up their reauthorization bills last week. But House Energy and Commerce Committee Chairman Greg Walden (R-OR) said Monday the bill would not come to the House floor this week.

What’s the holdup? Why the delays in bringing to the floor for votes a bill whose authorization has already expired?

Even though Republicans proposed a generous—some conservatives might argue too generous—reauthorization of SCHIP, House Democrats object because they don’t want millionaires and billionaires to pay for the new spending on children’s health insurance, and Senate Democrats object because they want to attach tens of billions of dollars in taxpayer subsidies to insurance companies.

I swear to you: I’m not making this up.

A Mixed House Package

The SCHIP reauthorization text varies little between the House and the Senate versions. On that front, conservatives may have qualms with supporting little more than a straight extension of the status quo. The bill extends—albeit for only one year, as part of a more gradual phase-out—enhanced funding to state SCHIP programs. The full 23 percent match increase would end in 2019, as under current law, while states would receive an additional 11.5 percent increase in 2020. Some states have received a 100 percent federal match for their child enrollees due to this Obamacare provision, which is a clear disincentive for states to fight fraud and improper spending.

Moreover, the bill extends Obamacare’s maintenance of effort requirement—limiting states from making changes to their programs—by an additional three years in most cases, from 2019 to 2022. The bill also does not include reforms the House proposed two years ago, which would require states to focus on covering poor children first—the program’s prime emphasis before the 2009 reauthorization signed by President Obama envisioned states expanding their programs to more affluent families.

On the positive side, however, the House did include good reforms to help pay for the new SCHIP spending. It includes several provisions designed to promote program integrity in Medicaid, including one that would effectively ensure that lottery winners, or others who receive large lump-sum payments, do not maintain coverage for this low-income program. The House bill would also increase Medicare means-testing for affluent families, reducing taxpayer subsidies for Part B (outpatient care) and Part D (prescription drug) coverage for individuals making over $160,000, and eliminating the subsidies entirely for individuals making more than $500,000.

Those pay-fors drew Democrats’ ire, and prompted the postponement of consideration on the House floor this week. To put it more bluntly: Democrats are holding children’s health hostage because they object to charging millionaires and billionaires more for Medicare. Should anyone remind them that Obamacare itself also increased Medicare means-testing for wealthy beneficiaries to pay for Obamacare?

In the Senate, a Stalemate

Meanwhile, over in the Senate—which has yet to decide how to pay for the new SCHIP spending—Minority Leader Chuck Schumer (D-NY) demanded last week that the Republican majority “immediately bring this bill to the Senate floor for a vote and include much-needed bipartisan provisions to stabilize the markets, lower premiums for 2018,” and extend other programs.

Schumer made those demands despite two inconvenient truths: Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) haven’t yet reached agreement on a bipartisan “stabilization” bill—and most states finalized their 2018 insurance premiums on September 27, weeks ago. In other words, Schumer wants to enact an agreement that doesn’t exist to achieve premium reductions that can’t happen.

A cynic might surmise that, with his talk of “stabilization” measures, Schumer wants to use SCHIP to sneak through tens of billions of dollars in cost-sharing reduction payments to insurers—a provision that might prove unpopular, and controversial, as a stand-alone measure, but could pass through relatively unnoticed as part of a larger, “Christmas tree”-sized bill.

For conservatives, the current mixed policy outcomes on SCHIP could deteriorate significantly. Weakening the House’s “pay-fors”—which seems bound to happen, given Walden’s further attempts to negotiate with Democrats—could eliminate some, if not most, of the reasons conservatives could see to vote for the measure.

While the policy outcomes seem uncertain, and could range from fair to poor, the political ramifications seem clear. In 2007 and 2008, when President George W. Bush vetoed SCHIP bills due to provisions that would have diverted the program from the low-income children for which it was designed, Democrats organized protests, and ran ads against him. This year, when Democrats are holding up an arguably too-generous SCHIP bill literally because they want to defend the wealthy and insurance companies, Republicans have responded by…negotiating with them.

If one wants reasons behind conservative discontent with Washington, look no further than this bill.

This post was originally published at The Federalist.

CBO’s Assumptions About the Health Care Law

In its re-estimate of the health care law in light of the Supreme Court’s ruling and new cost estimate for repealing the legislation, the Congressional Budget Office made some interesting assumptions that are worth examining in greater detail.

First, CBO opined that “the Supreme Court’s decision upholding the constitutionality of the ACA’s provision requiring most individuals to obtain insurance coverage or pay a penalty tax does not change CBO and JCT’s assessment of the mandate’s effect on coverage.”  Some observers had argued that the Court’s ruling upholding the mandate as a tax rather than a penalty would undermine CBO’s behavioral assumptions — because the mandate can be easily circumvented by paying the tax, and individuals would not feel they were “breaking the law” by doing so.  CBO generally declined to change its assumptions regarding compliance with the mandate in light of the ruling, although it did allow that the Court’s decision will likely result “in an increase in the number of people who will be eligible for hardship exemptions [from the mandate], which will slightly reduce the prevalence of coverage and thus the strength of the social norm to obtain insurance.”

Second, CBO assumed that the law’s Medicaid maintenance of effort requirements “were not directly affected by the Court’s decision” and remain in place.  However, there is significant uncertainty and ambiguity about this assumption.  While the Administration believes the requirements were unaffected by the ruling, some states believe the Court’s decision nullified the maintenance of effort mandates, have said they will not be bound by those mandates, and are prepared to litigate their position accordingly should the Administration attempt to enforce requirements that states believe have been nullified by the Court.

Third, and perhaps most importantly, CBO assumed HHS would give states significant flexibility in determining how they will expand their Medicaid programs:

CBO anticipates that, instead of choosing to expand Medicaid eligibility fully to 138 percent of the FPL [federal poverty level] or to continue the status quo, many states will try to work out arrangements with the Department of Health and Human Services (HHS) to undertake partial expansions.  For example, some states will probably seek to implement a partial expansion of Medicaid eligibility to 100 percent of the FPL, because, under the ACA, people below that threshold will not be eligible for subsidies in the insurance exchanges while people above that threshold will be if they do not have an offer of affordable coverage from an employer and meet other eligibility requirements.  Other states may seek to expand coverage to levels above their existing thresholds but below 100 percent of the FPL….How the current Administration and future ones will respond to states’ interest in pursuing these various approaches is unclear.

This is very much an open question, given that HHS has not opined on the impact of the Court’s ruling — except to deny states flexibility to modify their Medicaid programs.  If HHS takes a similarly absolute “all-or-nothing” approach to the entire Medicaid expansion, CBO’s assumptions could be vastly different indeed.

Finally, as one observer noted, CBO’s score of the law’s repeal “also assumes that a controversial tax on high-cost health insurance plans goes into effect as scheduled in 2018, though critics argue Congress will act to avoid that.”  If Congress does act to avoid that tax, then the law will INCREASE the deficit — because the $111 billion in revenue from this insurance tax on the middle class (to say nothing of the additional $216 billion in various tax-related interactions) outweighs the $109 billion in supposed deficit savings CBO assumes.  It’s pretty ironic that, given candidate Obama’s “firm pledge” not to raise taxes on the middle class, the only thing keeping Obamacare from raising the deficit is a tax increase on the middle class.

Nice Try, Madam Secretary…

Late yesterday afternoon, HHS Secretary Kathleen Sebelius wrote a letter to the nation’s governors addressing the implications of the Supreme Court ruling on Obamacare.  She started out on an optimistic note: “We are committed to providing states with as much flexibility as we can to achieve successful implementation of the many important opportunities provided by this legislation.”

But buried at the end of the letter was language indicating states will NOT have true flexibility to adjust their Medicaid programs.  As NPR reports:

Last night [HHS] sent a letter to all the nation’s governors, noting that “the Court’s decision did not affect other provisions of the law.”  An administration official confirmed that included the requirement that states maintain current eligibility levels until the year 2014.

Governors have made multiple requests for flexibility from such mandates – the earliest of which came on January 7 of last year.  Almost 18 months ago, in February 2011, Secretary Sebelius wrote to them saying she was “continu[ing] to review what authority, if any, I have to waive the maintenance of effort” requirements under the health care law.

While Secretary Sebelius and HHS never provided a clear answer as to whether or not she can waive the Obamacare requirements, the non-partisan Congressional Research Service last year concluded that HHS does have the authority to give states additional flexibility for their Medicaid programs.  And last month’s Supreme Court ruling – which prohibited the federal government from engaging in “economic dragooning” of states – has prompted several states to “assert they have more flexibility to manage other aspects of the [Medicaid] program.”

But Secretary Sebelius and HHS adamantly insist otherwise.  Last year they wouldn’t give states waivers from Obamacare’s onerous requirements – they wouldn’t even admit they had the authority to do so.  Now HHS is insisting that the Supreme Court ruling – which said Obamacare violated the constitution by putting “a gun to the head” of states – does not undo the law’s mandates, thereby preventing states from modifying their Medicaid programs.  The Secretary’s statements to the contrary, that’s NOT flexibility.  And putting more people in a broken Medicaid program is NOT health “reform.”

Flawed Medicaid Study Leads to Flawed Conclusions

Yesterday Bloomberg published an article regarding a new Bloomberg Government study surrounding state spending on Medicaid. The study (subscription required) alleges that Medicaid costs are growing less than state budgets as a whole. However, the study’s headline conclusion only examines state general fund spending on Medicaid, not overall state spending on Medicaid. And the report admits that, if ALL state spending is taken into account, Medicaid spending grew significantly during the past decade:

The increase in state Medicaid spending over the past decade was greater if one includes what the state budget officers’ association calls “other state funding,” which it defines as “other funds and revenue sources used as Medicaid match, such as local funds and provider taxes, fees, donations, assessments”….If one includes spending on Medicaid from other state funds, Medicaid costs grew by 54 percent from 2002 through 2011, one-third more than total statewide expenditures excluding bonds.

In other words, the study’s major conclusion is incorrect; when examining ALL state spending, Medicaid expenditures have increased faster than those on education, corrections, transportation, etc.

The Bloomberg study attempts to justify its focus on general fund spending by stating that other forms of state spending are merely gimmicks designed by states to get additional federal matching funds. It is true that both conservatives and liberals have opposed various provider taxes — where states raise taxes on hospitals and other providers, draw additional federal matching funds, and pass those matched funds right back to providers — as an abusive gimmick. That is why the Bush Administration in 2007-08 proposed several major regulations attempting to crack down on these abuses — regulations which Democrats in Congress blocked through legislative action.

But what the Bloomberg study misses is the fact that new maintenance of effort mandates imposed by the Obama Administration have forced states to resort to provider taxes and other similar “gimmicks” as a way to mitigate the effects of Washington’s additional mandates. Thanks to the mandates in ObamaCare, states cannot raise co-payments, trim beneficiary rolls, or even engage in anti-fraud activities as a way to control rising Medicaid expenditures. Because ObamaCare has taken away states’ freedom to manage their own Medicaid programs in a way that could help contain costs, many states have resorted to provider taxes and other budgetary gimmicks to offset this Washington-mandated spending. According to the Kaiser Family Foundation, 16 additional states have imposed new provider taxes on hospitals between 2009-2012 – actions which reflect states attempting to use any means necessary to alleviate the harmful effects of ObamaCare’s at least $118 billion in unfunded mandates.

Some would argue the solution to this problem would involve Congress eliminating BOTH the Medicaid “tax gimmicks” AND the Medicaid mandates in Obamacare that have forced many states to resort to such gimmicks — not to assume that one washes out the other and there is no problem that needs addressing. Therein lies the Bloomberg study’s critical flaw, in presuming that two Medicaid wrongs — new federal mandates, and the tax gimmicks states have used to mitigate the harmful effects of those mandates — somehow combine to create a policy right.

What You Missed Over the Recess

Just in case you were out of town for some or all of the prior two-week recess, here’s a quick rundown of the major events in health care that took place over the break…

Shocker: Obamacare Will Increase the Deficit:  Medicare public trustee Chuck Blahous released a report last week explaining how, after taking into account Medicare double-counting and other unrealistic assumptions, Obamacare will likely increase the deficit by hundreds of billions of dollars.  The White House’s response to the report noted favorable scores from the Congressional Budget Office – even though CBO itself admitted that the major savings assumptions in the law were unrealistic and unlikely to be sustained over the long term.  It’s also worth noting that Democrats’ claims Obamacare will reduce the deficit come from the same party that said the CLASS Act would be solvent for 75 years – which turned out to be a slight over-estimate, as the program was killed as unsustainable before it ever even got off the ground.

Another Obamacare Flop:  The Administration attempted to trumpet its latest round of accountable care organization (ACO) participants as a remarkable achievement.  However, as National Journal pointed out, the number of participating hospital and doctor groups (59 total) is less than one-fourth of the 270 ACOs the Administration predicted would participate last October – indicating that many providers remain reluctant to embrace the Administration’s top-down, government-centric approach to “controlling” health costs.

Thanks to Obamacare, You Can’t Spell Insurance without I-R-S:  The Hill reported that the Internal Revenue Service is in the process of receiving approximately half a billion dollars from a government “slush fund” to implement provisions of Obamacare.  This development comes after liberals derided Republican claims that Obamacare could result in the hiring of thousands of new IRS employees.  Moreover, the “slush fund” transfers come outside of the usual appropriations process, thus leading to a lack of accountability regarding this new funding, as Ways and Means Committee Chairman Camp pointed out in a letter to the IRS.

Liberal Advocate Admits Medicaid Stigmatizes the Poor…  One analyst at a liberal advocacy group told the Salt Lake City Tribune last week that “Medicaid and SCHIP already have a negative connotation in the community.”  A study by the Manhattan Institute bolstered this claim, as it quantified how Medicaid patients suffer from longer wait times and poorer health outcomes.  According to a recent report by the Medicare actuary, Obamacare will ensnare 25.9 million more Americans in a program that even liberals admit stigmatizes the poor.

…As Conservatives Show a Way to Reform the Program:  Even as liberals admitted that the current Medicaid program carries negative connotations, an editorial in the Wall Street Journal illustrated how the program can be enhanced through state flexibility, thereby improving care for patients and saving money as well.  The editorial highlighted a December study by non-partisan analysts at the Lewin Group on Rhode Island’s global compact waiver.  According to Lewin, the flexibility afforded Rhode Island’s Medicaid program “had a positive impact on controlling Medicaid expenditures,” and when it comes to disabled beneficiaries “reduced expenditures for this population while at the same time generally resulting in improved access to physician services.”  The contrast between flexibility yielding success in Rhode Island and Washington’s top-down mandates is stark – at a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion, thus undermining rather than supporting efforts like Rhode Island’s success story.

New Polls Confirm Obamacare’s Unpopularity:  A new poll of physicians under 40 showed their disapproval of the health care law – more than twice as many young doctors thought the law would have negative effects (49%) compared to positive outcomes (23%), and Obamacare (along with its myriad regulations) was the number one reason 57% of young physicians were pessimistic about the future of American health care.  A separate Fox News poll found that two-thirds of Americans believe the Supreme Court should strike down all of Obamacare (42%) or its unpopular individual mandate (24%).  The Fox poll also found that a majority (56%) of Americans believe President Obama was trying to intimidate the Supreme Court through his “unprecedented” attack on the Court (which fact-checkers debunked as being wildly inaccurate).

Read the Bill and It Won’t Pass:  A majority (55%) of Americans also told last week’s Fox poll they did not believe Obamacare would have passed if every Member of Congress actually read the bill before voting on it.  Recall that multiple Democrats publicly stated that reading the bill was a waste of time, because “we have to make judgments very fast,” and because “we hire experts” to read the bill instead.

Freedom under Renovations; Omen for SCOTUS’ Consideration of Obamacare?  According to the Architect of the Capitol’s office, workers began renovations on the statue of Freedom Triumphant in War and Peace above the Capitol on April 2.  The restoration and cleaning work is scheduled to be completed by mid-May.  Some may find the timing of this work ironic, as the renovations began the week after Supreme Court arguments on Obamacare, and will be completed by the expected June ruling.  Here’s hoping that Freedom is restored – both literally and metaphorically – later this spring.

Summary of President’s Budget Proposals

Overall, the budget:

  • Proposes $362 billion in savings, yet calls for $429 billion in unpaid-for spending due to the Medicare physician reimbursement “doc fix” – thus resulting in a net increase in the deficit. (The $429 billion presumes a ten year freeze of Medicare physician payments; however, the budget does NOT propose ways to pay for this new spending.)
  • Proposes few structural reforms to Medicare; those that are included – weak as they are – are not scheduled to take effect until 2017, well after President Obama leaves office.  If the proposals are so sound, why the delay?
  • Requests just over $1 billion for program management at the Centers for Medicare and Medicaid Services, of which the vast majority – $864 million – would be used to implement the health care law.
  • Requests more than half a billion dollars for comparative effectiveness research, which many may be concerned could result in government bureaucrats imposing cost-based limits on treatments.
  • Includes mandatory proposals in the budget that largely track the September deficit proposal to Congress, with a few exceptions.  The budget does NOT include proposals to reduce Medicare frontier state payments, even though this policy was included in the September proposal.  The budget also does not include recovery provisions regarding Medicare Advantage payments to insurers; however, the Administration has indicated they intend to implement this provision administratively.
  • Does not include a proposal relating to Medicaid eligibility levels included in the September submission, as that proposal was enacted into law in November (P.L. 112-56).

A full summary follows below.

 

Discretionary Spending

When compared to Fiscal Year 2012 appropriated amounts, the budget calls for the following changes in discretionary spending by major HHS divisions (tabulated by budget authority):

  • $12 million (0.5%) increase for the Food and Drug Administration – along with a separate proposed $643 million increase in FDA user fees;
  • $138 million (2.2%) decrease for the Health Services and Resources Administration;
  • $116 million (2.7%) increase for the Indian Health Service;
  • $664 million (11.5%) decrease for the Centers for Disease Control;
  • No net change in funding for the National Institutes of Health;
  • $1 billion (26.2%) increase for the discretionary portion of the Centers for Medicare and Medicaid Services program management account; and
  • $29 million (5.0%) increase for the discretionary Health Care Fraud and Abuse Control fund.

With regard to the above numbers for CDC and HRSA, note that these are discretionary numbers only.  The Administration’s budget also would allocate additional $1.25 billion in mandatory spending from the new Prevention and Public Health “slush fund” created in the health care law, likely eliminating any real budgetary savings (despite the appearance of same above).

Other Health Care Points of Note

Tax Credit:  The Treasury Green Book proposes expanding the small business health insurance tax credit included in the health care law.   Specifically, the budget would expand the number of employers eligible for the credit to include all employers with up to 50 full-time workers; firms with under 20 workers would be eligible for the full credit.  (Currently those levels are 25 and 10 full-time employees, respectively.)  The budget also changes the coordination of the two phase-outs based on a firm’s average wage and number of employees, with the changes designed to make more companies eligible for a larger credit.  According to OMB, these changes would cost $14 billion over ten years.  Many may view this proposal as a tacit admission that the credit included in the law was a failure, because its limited reach and complicated nature – firms must fill out seven worksheets to determine their eligibility – have deterred American job creators from receiving this subsidy.

Comparative Effectiveness Research:  The budget proposes a total of $599 million in funding for comparative effectiveness research.  Only $78 million of this money comes from existing funds included in the health care law – meaning the Administration has proposed discretionary spending of more than $500 million on comparative effectiveness research.  Some have previously expressed concerns that this research could be used to restrict access to treatments perceived as too costly by federal bureaucrats.  It is also worth noting that this new $520 million in research funding would NOT be subject to the anti-rationing provisions included in the health care law.  Section 218 of this year’s omnibus appropriations measure included a prohibition on HHS using funds to engage in cost-effectiveness research, a provision which this budget request would presumably seek to overturn.

Obamacare Implementation Funding and Personnel:  As previously noted, the budget includes more than $1 billion in discretionary spending increases for the Centers for Medicare and Medicaid Services, which the HHS Budget in Brief claims would be used to “continue implementing [Obamacare], including Exchanges.”  This funding would finance 256 new bureaucrats within CMS, many of whom would likely be used to implement the law.  Overall, the HHS budget proposes an increase of 1,393 full-time equivalent positions within the bureaucracy.

Specific details of the $1 billion in implementation funding include:

  • $290 million for “consumer support in the private marketplace;”
  • $549 million for “general IT systems and other support,” including funding for the federally-funded Exchange, for which the health law itself did not appropriate funding;
  • $18 million for updates to healthcare.gov;
  • $15 million to oversee the medical loss ratio regulations; and
  • $30 million for consumer assistance grants.

Exchange Funding:  The budget envisions HHS spending $1.1 billion on Exchange grants in 2013, a $180 million increase over the current fiscal year.  The health care law provides the Secretary with an unlimited amount of budget authority to fund state Exchange grants through 2015.  However, other reports have noted that the Secretary does NOT have authority to use these funds to construct a federal Exchange, in the event some states choose not to implement their own state-based Exchanges.

Abstinence Education Funding:  The budget proposes eliminating the abstinence education funding program, and converting those funds into a new pregnancy prevention program.

 

Medicare Proposals (Total savings of $292.2 Billion)

Bad Debts:  Reduces bad debt payments to providers – for unpaid cost-sharing owed by beneficiaries – from 70 percent down to 25 percent over three years, beginning in 2013.  The Fiscal Commission had made similar recommendations in its final report.  Saves $35.9 billion.

Medical Education Payments:  Reduces the Indirect Medical Education adjustment paid to teaching hospitals by 10 percent beginning in 2014, saving $9.7 billion.  Previous studies by the Medicare Payment Advisory Committee (MedPAC) have indicated that IME payments to teaching hospitals may be greater than the actual costs the hospitals incur.

Rural Payments:  Reduces critical access hospital payments from 101% of costs to 100% of costs, saving $1.4 billion, and prohibits hospitals fewer than 10 miles away from the nearest hospital from receiving a critical access hospital designation, saving $590 million.  The budget does NOT include a proposal to end add-on payments for providers in frontier states, which was included in the President’s September deficit proposal.

Post-Acute Care:  Reduces various acute-care payment updates (details not specified) during the years 2013 through 2022, saving $56.7 billion – a significant increase compared to the $32.5 billion in savings under the President’s September deficit proposal.  Equalizes payment rates between skilled nursing facilities and inpatient rehabilitation facilities, saving $2 billion.  Increases the minimum percentage of inpatient rehabilitation facility patients that require intensive rehabilitation from 60 percent to 75 percent, saving $2.3 billion.  Reduces skilled nursing facility payments by up to 3%, beginning in 2015, for preventable readmissions, saving $2 billion.

Pharmaceutical Price Controls:  Expands Medicaid price controls to dual eligible and low-income subsidy beneficiaries participating in Part D, saving $155.6 billion according to OMB.  Some have expressed concerns that further expanding government-imposed price controls to prescription drugs could harm innovation and the release of new therapies that could help cure diseases.

Anti-Fraud Provisions:  Assumes $450 million in savings from various anti-fraud provisions, including limiting the discharge of debt in bankruptcy proceedings associated with fraudulent activities.

EHR Penalties:  Re-directs Medicare reimbursement penalties against physicians who do not engage in electronic prescribing beginning in 2020 back into the Medicare program.  The “stimulus” legislation that enacted the health IT provisions had originally required that penalties to providers be placed into the Medicare Improvement Fund; the budget would instead re-direct those revenues into the general fund, to finance the “doc fix” and related provisions.  OMB now scores this proposal as saving $590 million; when included in last year’s budget back in February, these changes were scored as saving $3.2 billion.

Imaging:  Reduces imaging payments by assuming a higher level of utilization for certain types of equipment, saving $400 million.  Also imposes prior authorization requirements for advanced imaging; no savings are assumed, a change from the September deficit proposal, which said prior authorization would save $900 million.

Additional Means Testing:  Increases means tested premiums under Parts B and D by 15%, beginning in 2017.  Freezes the income thresholds at which means testing applies until 25 percent of beneficiaries are subject to such premiums.  Saves $27.6 billion over ten years, and presumably more thereafter, as additional seniors would hit the means testing threshold, subject them to higher premiums.

Medicare Deductible Increase:  Increases Medicare Part B deductible by $25 in 2017, 2019, and 2021 – but for new beneficiaries only; “current beneficiaries or near retirees [not defined] would not be subject to the revised deductible.”  Saves $2 billion.

Home Health Co-Payment:  Beginning in 2017, introduces a home health co-payment of $100 per episode for new beneficiaries only, in cases where an episode lasts five or more visits and is NOT proceeded by a hospital stay.  MedPAC has previously recommended introducing home health co-payments as a way to ensure appropriate utilization.  Saves $350 million.

Medigap Surcharge:  Imposes a Part B premium surcharge equal to about 15 percent of the average Medigap premium – or about 30 percent of the Part B premium – for seniors with Medigap supplemental insurance that provides first dollar coverage.  Applies beginning in 2017 to new beneficiaries only.  A study commissioned by MedPAC previously concluded that first dollar Medigap coverage induces beneficiaries to consume more medical services, thus increasing costs for the Medicare program and federal taxpayers.  Saves $2.5 billion.

Lower Caps on Medicare Spending:  Section 3403 of the health care law established an Independent Payment Advisory Board tasked with limiting Medicare spending to the growth of the economy plus one percentage point (GDP+1) in 2018 and succeeding years.  The White House proposal would reduce this target to GDP+0.5 percent.  This approach has two potential problems:

  • First, under the Congressional Budget Office’s most recent baseline, IPAB recommendations would not be triggered at all – so it’s unclear whether the new, lower target level would actually generate measurable budgetary savings.  (In August 2010, CBO concluded an IPAB with an overall cap of GDP+1 would yield $13.8 billion in savings through 2020 – not enough to make a measurable impact on a program spending $500 billion per year.)
  • Second, the Medicare actuary has previously written that the spending adjustments contemplated by IPAB and the health care law “are unlikely to be sustainable on a permanent annual basis” and “very challenging” – problems that would be exacerbated by utilizing a slower target rate for Medicare spending growth.

According to the budget, this proposal would NOT achieve additional deficit savings.

Medicaid and Other Health Proposals (Total savings of $70.4 Billion)

Medicaid Provider Taxes:  Reduces limits on Medicaid provider tax thresholds, beginning in 2015; the tax threshold would be reduced over a three year period, to 3.5 percent in 2017 and future years.  State provider taxes are a financing method whereby states impose taxes on medical providers, and use these provider tax revenues to obtain additional federal Medicaid matching funds, thereby increasing the federal share of Medicaid expenses paid while decreasing the state share of expenses.  The Tax Relief and Health Care Act of 2006, enacted by a Republican Congress, capped the level of Medicaid provider taxes, and the Bush Administration proposed additional rules to reform Medicaid funding rules – rules that were blocked by the Democrat-run 110th Congress.  However, there is bipartisan support for addressing ways in which states attempt to “game” the Medicaid system, through provider taxes and other related methods, to obtain unwarranted federal matching funds – the liberal Center for Budget and Policy Priorities previously wrote about a series of “Rube Goldberg-like accounting arrangements” that “do not improve the quality of health care provided” and “frequently operate in a manner that siphons extra federal money to state coffers without affecting the provision of health care.”  This issue was also addressed in the fiscal commission’s report, although the commission exceeded the budget proposals by suggesting that Congress enact legislation “restricting and eventually eliminating” provider taxes, saving $44 billion.  OMB scores this proposal as saving $21.8 billion.

Blended Rate:  Proposes “replac[ing]…complicated federal matching formulas” in Medicaid “with a single matching rate specific to each state that automatically increases if a recession forces enrollment and state costs to rise.”  Details are unclear, but the Administration claims $17.9 billion in savings from this proposal – much less than the $100 billion figure bandied about in previous reports last summer.  It is also worth noting that the proposal could actually INCREASE the deficit, if a prolonged recession triggers the automatic increases in the federal Medicaid match referenced in the proposal.  On a related note, the budget once again ignores the governors’ multiple requests for flexibility from the mandates included in the health care law – unfunded mandates on states totaling at least $118 billion.

Transitional Medical Assistance/QI Program:  Provides for temporary extensions of the Transitional Medical Assistance program, which provides Medicaid benefits for low-income families transitioning from welfare to work, along with the Qualifying Individual program, which provides assistance to low-income seniors in paying Medicare premiums.  The extensions cost $815 million and $1.7 billion, respectively.

Limit Durable Medical Equipment Reimbursement:  Caps Medicaid reimbursements for durable medical equipment (DME) at Medicare rates, beginning in 2013.  The health care law extended and expanded a previous Medicare competitive bidding demonstration project included in the Medicare Modernization Act, resulting in savings to the Medicare program.  This proposal, by capping Medicaid reimbursements for DME at Medicare levels, would attempt to extend those savings to the Medicaid program.  OMB now scores this proposal as saving $3 billion; when included in the President’s budget last year, these changes were scored as saving $6.4 billion.

Rebase Medicaid Disproportionate Share Hospital Payments:  In 2021 and 2022, reallocates Medicaid DSH payments to hospitals treating low-income patients, based on states’ actual 2020 allotments (as amended and reduced by the health care law).  Saves $8.3 billion.

Medicaid Anti-Fraud Savings:  Assumes $3.2 billion in savings from a variety of Medicaid anti-fraud provisions, largely through tracking and enforcement of various provisions related to pharmaceuticals.  Included in this amount are proposals that would remove exceptions to the requirement that Medicaid must reject payments when another party is liable for a medical claim.

Flexibility on Benchmark Plans:  Proposes some new flexibility for states to require Medicaid “benchmark” plan coverage for non-elderly, non-disabled adults – but ONLY those with incomes above 133 percent of the federal poverty level (i.e., NOT the new Medicaid population obtaining coverage under the health care law).  No savings assumed.

“Pay-for-Delay:”  Prohibits brand-name pharmaceutical manufacturers from entering into arrangements that would delay the availability of new generic drugs.  Some Members have previously expressed concerns that these provisions would harm innovation, and actually impede the incentives to generic manufacturers to bring cost-saving generic drugs on the market.  OMB scores this proposal as saving $11 billion.

Follow-on Biologics:  Reduces to seven years the period of exclusivity for follow-on biologics.  Current law provides for a twelve-year period of exclusivity, based upon an amendment to the health care law that was adopted on a bipartisan basis in both the House and Senate (one of the few substantive bipartisan amendments adopted).  Some Members have expressed concern that reducing the period of exclusivity would harm innovation and discourage companies from developing life-saving treatments.  OMB scores this proposal as saving $3.8 billion.

FEHB Contracting:  Proposes streamlining pharmacy benefit contracting within the Federal Employee Health Benefits program, by centralizing pharmaceutical benefit contracting within the Office of Personnel Management (OPM).  Some individuals, noting that OPM is also empowered to create “multi-state plans” as part of the health care overhaul, may be concerned that these provisions could be part of a larger plan to make OPM the head of a de facto government-run health plan.  OMB scores this proposal as saving $1.7 billion.

Prevention “Slush Fund:”  Reduces spending by $4 billion on the Prevention and Public Health Fund created in the health care law.  Some Members have previously expressed concern that this fund would be used to fund projects like jungle gyms and bike paths, questionable priorities for the use of federal taxpayer dollars in a time of trillion-dollar deficits.

State Waivers:  Accelerates from 2017 to 2014 the date under which states can submit request for waivers of SOME of the health care law’s requirements to HHS.  While supposedly designed to increase flexibility, even liberal commentators have agreed that under the law’s state waiver programcritics of Obama’s proposal have a point: It wouldn’t allow to enact the sorts of health care reforms they would prefer” and thatconservatives can’t do any better – at least not under these rules.”  The proposal states that “the Administration is committed to the budget neutrality of these waivers;” however, the plan allocates $4 billion in new spending “to account for the possibility that CBO will estimate costs for this proposal.”

Implementation “Slush Fund:”  Proposes $400 million in new spending for HHS to implement the proposals listed above.

Obamacare Hits the States, Part III

The website Stateline last week published an analysis of the major issues facing states in 2012, and not surprisingly Medicaid was high on that list.  While the recession hit states hard, Obamacare’s onerous new mandates have combined with the continued economic slowdown to inflict a devastating one-two punch on state budgets:

“Two years ago, Medicaid eclipsed K-12 education as the most expensive item in state budgets.  Since then, it has only kept growing.  Medicaid now comprises 24 percent of state budgets, when federal funds are counted.  That’s up from 22 percent last year, according to the National Association of State Budget Officers.  The upward spiral seems to be continuing.  Even as states get ready to write their budgets for fiscal year 2013, which starts in July in most states, half of them expect to be wrestling with Medicaid shortfalls in their 2012 budgets, according to a survey by the Kaiser Family Foundation.

Making the job for fiscal 2013 even more difficult for states are new federal restrictions and an increasing number of court rulings that limit states’ options for trimming their programs….Other restrictions on states come from [Obamacare], which prevents states from doing anything that would lower enrollment.  In addition, a new federal rule proposed late last year would require states to produce data showing that cuts to hospital and doctor fees won’t make it harder for Medicaid patients to get the care they need….[Under Obamacare,] states are barred from doing anything that would lower Medicaid enrollment below the income levels called for in the national health law’s 2014 Medicaid expansion.  That includes raising premiums and co-pays to levels the federal government considers unaffordable for low-income patients.  That leaves states with relatively few options when it comes to controlling Medicaid costs.  They can reduce provider fees and eliminate optional benefits.”

As the article demonstrates, Medicaid is a large – and growing – share of state budgets, and has increasingly begun to crowd out other potential priorities like education, corrections, transportation, etc.  Yet Obamacare only makes this budgetary mess worse, imposing new unfunded mandates of at least $118 billion.  Thus, even as the states (slowly) start to recover from the budgetary effects of the recession, the budgetary effects of Obamacare will have consequences for years – even decades – to come.

208 Things in Obamacare That Democrats Support

Last week, former HELP Committee staffer John McDonough wrote a list of “50 provisions I ask the media to ask Romney et al. if they are committed to repealing as President.”  McDonough noted that “there are [Obamacare] provisions opponents could pick out to create an alternative list for elimination.”

We know a challenge when we hear one; our list is submitted below, with sections from the statute duly noted.  Remember when reading this list:  We KNOW that President Obama and Democrats all support these provisions in Obamacare – because they all voted to enact them into law.  So members of the media can readily ask President Obama and Democrat Members of Congress why they supported a law that…

  1. Imposes $800 billion in tax increases, including no fewer than 12 separate provisions breaking candidate Obama’s “firm pledge” during his campaign that he would not raise “any of your taxes” (Sections 9001-9016)?
  2. Forces Americans to purchase a product for the first time ever (Section 1501)?
  3. Creates a board of 15 unelected and unaccountable bureaucrats to make binding rulings on how to reduce Medicare spending (Section 3403)?
  4. Pays over $800 billion in subsidies straight to health insurance companies (Sections 1401, 1402, and 1412)?
  5. Requires all individuals to buy government-approved health insurance plans, imposing new mandates that will raise individual insurance premiums by an average of $2,100 per family (Section 1302)?
  6. Forces seniors to lose their current health care, by enacting Medicare Advantage cuts that by 2017 will cut enrollment in half, and cut plan choices by two-thirds (Section 3201)?
  7. Imposes a 40 percent tax on health benefits, a direct contradiction of Barack Obama’s campaign promises (Section 9001)?
  8. Relies upon government bureaucrats to “issue guidance on best practices of plain language writing” (Section 1311(e)(3)(B))?
  9. Provides special benefits to residents of Libby, Montana – home of Max Baucus, the powerful Chairman of the Senate Finance Committee, who helped write the law even though he says he hasn’t read it (Section 10323)?
  10. Imposes what a Democrat Governor called the “mother of all unfunded mandates” – new, Washington-dictated requirements of at least $118 billion – at a time when states already face budget deficits totaling a collective $175 billion (Section 2001)?
  11. Imposes reductions in Medicare spending that, according to the program’s non-partisan actuary, would cause 40 percent of all Medicare providers to become unprofitable, and could lead to their exit from the program (Section 3401)?
  12. Raises premiums on more than 17 million seniors participating in Medicare Part D, so that Big Pharma can benefit from its “rock-solid deal” struck behind closed doors with President Obama and Congressional Democrats (Section 3301)?
  13. Creates an institute to undertake research that, according to one draft Committee report prepared by Democrats, could mean that “more expensive [treatments] will no longer be prescribed” (Section 6301)?
  14. Creates a multi-billion dollar “slush fund” doled out solely by federal bureaucrats, which has already been used to fund things like bike paths (Section 4002)?
  15. Subjects states to myriad new lawsuits, by forcing them to assume legal liability for delivering services to Medicaid patients for the first time in that program’s history (Section 2304)?
  16. Permits taxpayer dollars to flow to health plans that fund abortion, in a sharp deviation from prior practice under Democrat and Republican Administrations (Section 1303)?
  17. Empowers bureaucrats on a board that has ruled against mammograms and against prostate cancer screenings to make binding determinations about what types of preventive services should be covered (Sections 2713 and 4104)?
  18. Precludes poor individuals from having a choice of health care plans by automatically dumping them in the Medicaid program (Section 1413(a))?
  19. Creates a new entitlement program that one Democrat called “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of” – a scheme so unsustainable even the Administration was forced to admit it would not work (Section 8002)?
  20. Provides $5 billion in taxpayer dollars to a fund that has largely served to bail out unions and other organizations who made unsustainable health care promises to retirees that they cannot afford (Section 1102)?
  21. Creates a tax credit so convoluted it requires seven different worksheets to determine eligibility (Section 1421)?
  22. Imposes multiple penalties on those who marry, by reducing subsidies (and increasing taxes) for married couples when compared to two individuals cohabiting together (Sections 1401-02)?
  23. Extends the Medicare “payroll tax” to unearned income for the first time ever, including new taxes on the sale of some homes (Section 1402)?
  24. Impedes state flexibility by requiring Medicaid programs to offer a specific package of benefits, including benefits like family planning services (Sections 2001(a)(2), 2001(c), 1302(b), and 2303(c))?
  25. Requires individuals to go to the doctor and get a prescription in order to spend their own Flexible Spending Account money on over-the-counter medicines (Section 9003)?
  26. Expands the definition of “low-income” to make 63 percent of non-elderly Americans eligible for “low-income” subsidized insurance (Section 1401)?
  27. Imposes a new tax on the makers of goods like pacemakers and hearing aids (Section 9009)?
  28. Creates an insurance reimbursement scheme that could result in the federal government obtaining Americans’ medical records (Section 1343)?
  29. Permits states to make individuals presumptively eligible for Medicaid for unlimited 60-day periods, thus allowing any individual to receive taxpayer-funded assistance ad infinitum (Section 2303(b))?
  30. Allows individuals to purchase insurance on government exchanges – and to receive taxpayer-funded insurance subsidies – WITHOUT verifying their identity as American citizens (Section 1411)?
  31. Gives $300 million in higher Medicaid reimbursements to one state as part of the infamous “Louisiana Purchase” – described by ABC News as “what…it take[s] to get a wavering senator to vote for health care reform” (Section 2006)?
  32. Raises taxes on firms who cannot afford to buy coverage for their workers (Section 1513)?
  33. Forces younger Americans to pay double-digit premium increases so that older workers can pay slightly less (Section 1201)?
  34. Prohibits states from modifying their Medicaid programs to include things like modest anti-fraud protections (Section 2001)?
  35. Includes a special provision increasing federal payments just for Tennessee (Section 1203(b))?
  36. Allows individuals to purchase health insurance across state lines – but only if politicians and bureaucrats agree to allow citizens this privilege (Section 1333)?
  37. Allows the HHS Secretary and federal bureaucrats to grant waivers exempting people from Obamacare’s onerous mandates, over half of which have gone to members of union plans (Section 1001)?
  38. Creates a pseudo-government-run plan overseen by the federal government (Section 1334)?
  39. Removes a demonstration project designed to force government-run Medicare to compete on a level playing field with private plans (Section 1102(f))?
  40. Gives the Secretary of HHS an UNLIMITED amount of federal funds to spend funding state insurance Exchanges (Section 1311(a))?
  41. Creates a grant program that could be used by liberal groups like ACORN or AARP to conduct “public education activities” surrounding Obamacare (Section 1311(i))?
  42. Applies new federal mandates to pre-Obamacare insurance policies, thus proving that you CAN’T keep the insurance plan you had – and liked – before the law passed (Sections 2301 and 10103)?
  43. Prohibits individuals harmed by federal bureaucrats from challenging those decisions, either in court or through regulatory processes (Sections 3001, 3003, 3007, 3008, 3021, 3022, 3025, 3133, 3403, 5501, 6001, AND 6401)?
  44. Earmarks $100 million for “construction of a health care facility,” a “sweetheart deal” inserted by a Democrat Senator trying to win re-election (Section 10502)?
  45. Puts yet another Medicaid unfunded mandate on states, by raising payments to primary care physicians, but only for two years, forcing states to come up with another method of funding this unsustainable promise when federal funding expires (Section 1202)?
  46. Imposes price controls that have had the effect of costing jobs in the short time since they were first implemented (Section 1001)?
  47. Prohibits individuals from spending federal insurance subsidies outside government-approved Exchanges (Section 1401(a))?
  48. Provides a special increase in federal hospital payments just for Hawaii (Section 10201(e)(1))?
  49. Imposes new reporting requirements that will cost businesses millions of dollars, and affect thousands of restaurants and other establishments across the country (Section 4205)?

And instead of including a 50th item on our list, we’re going to include 159 separate items.  These are the 159 new boards, bureaucracies, and programs created by Obamacare.  You can find the list here.

No matter which way you look at it, this list provides 208 easy reasons why the American people still continue to reject Democrats’ unpopular 2700-page health care law.

Eight Ways Obamacare Has Harmed Americans This Year

Yesterday the Administration released a blog post claiming eight ways in which Obamacare is helping Americans.  But in reality, there are far more ways in which the law is wreaking havoc on Americans’ health care and economic security.  Herewith are just eight (plus one!) of the ways in which Obamacare has harmed millions of Americans during 2011:

Higher Premiums:  One of the “success stories” cited in the White House blog post involved a premium increase in Oregon lowered to “only” about 10 percent.  But Candidate Obama repeatedly promised his health care plan would LOWER premiums by $2,500 per family, and do so within his first term.  So a 10 percent premium increase represents yet another broken promise by this Administration.  Sadly, skyrocketing premium increases remain the norm: The price of the average employer-sponsored plan ROSE by more than $2,200 per family since Obama was first elected in 2008, according to studies from the Kaiser Family Foundation.

Jobs Disappearing:  All over the country, firms are having to lay off workers as a result of Obamacare’s tax increases and regulations.  Last month, device manufacturer Stryker announced that it would be shedding “five percent of its workforce over concerns about the impending 2.3 percent medical device tax prescribed by” Obamacare.  And in October, one insurance carrier announced plans to eliminate 110 jobs in Nebraska and Iowa as a “fairly predictable consequence” of Obamacare’s regulations.  That’s a long way from the 4 million jobs Speaker Pelosi claimed Obamacare would create.

Jobs Not Being Created:  Just this week, the owner of the Carl’s Jr. franchise wrote an op-ed in which he discussed the uncertainty surrounding Obamacare, and the fact that his business will reduce capital spending and hiring in anticipation of higher health care costs.  Other experts agree: Investment firm UBS has said Obamacare is “arguably the biggest impediment to hiring,” and the President of the Atlanta Fed said “we’ve frequently heard strong comments to the effect of ‘my company won’t hire a single additional worker until we know what health insurance costs are going to be.’”

Lost Coverage:  The Galen Institute recently released a paper chronicling all the plans that have dropped coverage since Obamacare was enacted into law – literally dozens of plans affecting millions of consumers nationwide.  Sadly, these results are far from atypical; the Administration’s own estimates found that half of all employers – and up to 80% of all small businesses – would lose their current health plan by 2013.

Paperwork Galore:  Already, the Administration has released more than 10,000 pages of regulations and notices regarding Obamacare – and the effects are echoing throughout the health care system.  USA Today recently reported that some medical facilities are actually laying off clinical staff to hire more administrative employees to deal with Obamacare-related paperwork.  And one hospital in Alabama decided to start imposing a new $25 annual fee on its patients to cover the “huge increase in paperwork” and “mountains of new forms” resulting from Obamacare.

Waivers and Favors:  One obvious symbol of Obamacare’s onerous impacts on Americans’ health insurance is the myriad exemptions being granted from the law.  As of July, the Administration approved a whopping 1,578 waivers exempting 3.4 million Americans, many of whom are in union plans, from just some of the law’s mandates.  Even Senate Democrats were forced to send a letter to the Administration asking for a separate waiver from one of Obamacare’s provisions, noting that the law “may cause disruption for farmers and others in the agricultural sector.”

You Can’t Spell Insurance Without I-R-S:  The Wall Street Journal reported on the consequences of just one of Obamacare’s tax increases – restrictions on consumer-directed health accounts like Flexible Spending Arrangements (FSAs) and Health Savings Accounts (HSAs).  New paperwork requirements led physicians to revolt: “‘I am now doing the IRS’s work, and that’s what I resent most,’” said one pediatrician.  And that’s not the only IRS-related provision bogged down in paperwork: An Inspector General report recently revealed that takeup of the small business tax credit has been far short of predictions, possibly because claiming the credit involves filling out seven different worksheets.

Raising Mandates, Raising Costs:  The 15-page guidance released by HHS earlier this month gives states the “flexibility” to impose more benefit mandates, not fewer.  It does so by allowing states to mandate an extremely rich benefit package, and do so without paying for the financial consequences of their decision – because the costs instead will be foisted on federal taxpayers funding insurance subsidies in that state.  At this rate, the Congressional Budget Office estimate of a $2,100 per family increase in individual insurance premiums due to Obamacare could very well be an under-estimate.

States Saddled by Mandates:  The annual State Expenditure Report released by the National Association of State Budget Officers revealed that Medicaid is consuming an ever-larger portion of state budgets, much faster than spending on education, corrections, or transportation.  And the reason why Medicaid is crowding out other portions of state budgets is Obamacare; at a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion.  Earlier this month the non-partisan Lewin Group released an analysis of the Rhode Island Medicaid program’s global compact waiver, revealing that the state saved tens of millions of dollars through flexibility – progress made despite the Obama Administration’s efforts, not because of them.  While other states could achieve similar savings, the Administration has refused governors’ multiple requests for flexibility from the new Medicaid mandates included in Obamacare.

What True Flexibility Looks Like

Earlier this month the non-partisan Lewin Group released an analysis of the Rhode Island Medicaid program’s global compact waiver.  The waiver, approved by the Bush Administration in January 2009, attempts to reduce expenses by giving the state the flexibility to improve the quality of care.  The Rhode Island waiver focuses on promoting home-and-community-based services as a more affordable (and more desirable) alternative to nursing homes, on improving access to primary care through managed care enrollment, and on other similar methods to provide quality care at better cost.  And the Lewin report proves that the waiver resulted in numerous successes:

  • Shifting nursing home services into the community saved $35.7 million during the three-year study period;
  • More accurate rate setting in nursing homes saved an additional $15 million in Fiscal Year 2010 alone;
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million; and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.

Lewin’s final conclusion:

The GW [Global Waiver] initiatives and budget actions taken by Rhode Island had a positive impact on controlling Medicaid expenditures.  The actions taken to re-balance the LTC system appear to have generated significant savings according to our estimates.   The mandatory enrollment of disabled members in care management program reduced expenditures for this population while at the same time generally resulting in improved access to physician services.  Continuing the GW initiatives already undertaken by the state and implementing the additional initiatives included in the GW will result in significant savings for the Rhode Island Medicaid program in future years.

All this progress comes despite the Obama Administration’s efforts, not because of them.  Pages 14-15 of the Lewin report note that maintenance of effort mandates imposed in Obamacare and the “stimulus” prevented Rhode Island from imposing modest premiums on some beneficiaries, even though the approved waiver was supposed to give the state that flexibility.

And therein lies the problem.  While flexibility would allow innovative solutions like Rhode Island’s to take fruit, Washington is imposing new requirements on states instead.  At a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion.

In many states, Medicaid is a fundamentally broken – and fiscally unsustainable – program.  Unfortunately, Obamacare not only did not fix Medicaid’s woes, it is actively impeding states’ ability to fix their own programs using new and  innovative solutions.  It’s one more reason why Obamacare is the furthest thing from “reform.”