Tag Archives: Orrin Hatch

September 30 “Deadline” for Obamacare Repeal Is Fake News

Over the past several days, congressional leaders in both the House and Senate have claimed that a bill by Sens. Lindsay Graham (R-SC) and Bill Cassidy (R-LA) is “our best, last chance to get repeal and replace done.” They have made such claims because the press keeps “reporting” that Republicans’ “power to pass health care legislation through a party-line vote in the Senate expires on September 30.”

Don’t you believe it. The Senate’s 52 Republicans have multiple options open to keep the Obamacare repeal process alive after September 30. The only question is whether they have the political will to do so.

Option 1: Set a Senate Precedent

Democrats started the misinformation campaign regarding a supposed September 30 “deadline.” Politico reported at the start of the month that “the Senate parliamentarian has ruled that Republicans face a September 30 deadline to kill or overhaul the law with only 50 votes, Democrats on the Senate Budget Committee said.”

That assertion carries one big flaw: The Senate parliamentarian does not “rule.” The Senate as a body does—and that distinction makes a big difference. The procedural question centers around when, and whether, budget reconciliation instructions expire.

Budget reconciliation provides an expedited process for the Senate to consider matters of a fiscal nature. Reconciliation’s limits on debate and amendments preclude filibusters, allowing the bill to pass with a simple (i.e., 51-vote) majority rather than the usual 60 votes needed to break a filibuster and halt debate. (For additional background, see my May primer on budget reconciliation here.)

In one of its first acts upon convening in January, Congress passed a budget resolution for Fiscal Year 2017, which included instructions for health-related committees in the House and Senate to produce reconciliation legislation—legislation intended to “repeal-and-replace” Obamacare. But Fiscal Year 2017 ends on September 30, and Congress (thus far at least) hasn’t completed work on the reconciliation bill yet. So what happens on September 30? Does a reconciliation measure fail? Or can Congress continue work on the legislation, because the budget resolution set fiscal parameters for ten fiscal years (through 2026), not just the one ending on September 30?

Earlier this month, the parliamentarian advised Senate staff of her viewpoint that the reconciliation instructions would terminate on September 30—meaning the bill and process would lose their privileged status and access to the expedited Senate procedures. But her opinion remains advisory and not binding on either the chair or the body as a whole.

There is literally no precedent on this particular Senate procedural question of whether and when reconciliation instructions expire. If the chair—either Vice President Mike Pence, Senate President Pro Tempore Orrin Hatch (R-UT), or another Senate Republican presiding—wishes to disregard the parliamentarian’s opinion, he or she is free to do so.

Alternatively, if the chair decides to agree with the parliamentarian’s opinion, a 51-vote majority of Republicans could decide to overturn that ruling by appealing the chair’s decision. In either event, the action by the Senate—either the chair or the body itself—would set the precedent, not the opinion of a Senate official who currently has no precedent to guide her.

Option 2: Pass a New Budget

Because there is no precedent to the question of when reconciliation instructions expire, Republican senators can set a precedent on this question themselves—keeping in mind it will apply equally when Republicans are in the minority. But if senators believe that disregarding the parliamentarian’s opinion—even on a question where she has no precedent to guide her—might jeopardize the legislative filibuster, they can simply pass a new budget for Fiscal Year 2018, one that includes reconciliation instructions to allow for Obamacare “repeal-and-replace.”

While the Congressional Budget Act limits the use of reconciliation to one reconciliation measure (one tax bill and one spending bill, or one with both tax and spending provisions) per budget, it does not limit the number of budgets a Congress can pass in a given fiscal year. Indeed, as the Congressional Research Service notes, the Budget Act as originally written required adopting two budget resolutions per year.

While that requirement has since been changed, Congress could still pass multiple budget resolutions in a given year, along with a reconciliation measure for each. Congress could pass a Fiscal Year 2018 budget resolution with reconciliation instructions for Obamacare repeal this month, complete work on the Obamacare bill, then pass another budget resolution with reconciliation instructions for tax reform.

Political Will

Congressional leaders apparently want to portray the Graham-Cassidy bill as a binary choice—either support it, or support keeping Obamacare in place. The facts turn that binary choice into a false one. Republicans have every opportunity to work to enact the repeal of Obamacare they promised the American people, regardless of the opinion of an unelected Senate official. No legislator should use an arbitrary—and false—deadline of next week to rationalize voting for a bad bill, or abandoning his or her promises altogether.

This post was originally published at The Federalist.

What You Need to Know about Budget Reconciliation in the Senate

After last week’s House passage of the American Health Care Act, the Senate has begun sorting through various policy options for health care legislation. But looming over the policy discussions are procedural concerns unique to the Senate. Herewith a primer on the process under which the upper chamber will consider an Obamacare “repeal-and-replace” bill.

How Will the Bill Come to the Senate Floor?

The bill that passed the House was drafted as a budget reconciliation bill. The phrase “budget reconciliation” refers to a process established by the Congressional Budget Act of 1974, in which congressional committees reconcile spending in programs within their jurisdiction to the budget blueprint passed by Congress. In this case, Congress passed a budget in January that required health-care committees to report legislation reducing the deficit by $1 billion—the intended vehicle for an Obamacare “repeal-and-replace” bill.

What’s So Important about Budget Reconciliation?

The Budget Act lays out specific time limits for debate in the Senate—20 hours of debate—and limits amendments to germane (i.e., relevant) topics. Normally, debate in the Senate is much more free-wheeling, with unlimited debate and amendments permitted on any issue. A senator could offer an amendment on Syria policy to a tax bill, for instance.

Under most circumstances, the Senate can only limit debate and amendments by invoking cloture, which requires the approval of three-fifths of all senators sworn (i.e., 60 votes). Because the reconciliation process prohibits filibusters and unlimited debate, it allows the Senate to pass reconciliation bills with a simple majority (i.e., 51-vote) threshold.

Why Does the ‘Byrd Rule’ Exist as part of Budget Reconciliation?

Named for former Senate Majority Leader Robert Byrd (D-WV), the rule intends to protect the integrity of the legislative filibuster. By allowing only matters integral to the budget reconciliation to pass the Senate with a simple majority (as opposed to the 60-vote threshold), the rule seeks to keep the body’s tradition of extended debate.

What Is the ‘Byrd Rule’?

Simply put, the rule prohibits “extraneous” material from intruding in budget reconciliation legislation. However, the term “Byrd rule” is technically a misnomer in two respects. First, the “Byrd rule” is more than just a longstanding practice of the Senate. After several years of operation as a Senate rule, it was codified into law beginning in 1985, and can be found at 2 U.S.C. 644. Second, the rule consists of not just one test to define whether material is “extraneous,” but six.

What Are the Six Different Types of Extraneous Material?

This chart from Senate Budget Committee staff highlights the six statutory definitions of “extraneous” material, provides some examples of each, and explains how the Senate rules on, and disposes of, material falling under each test.

So the Various Types of ‘Byrd Rule’ Violations Are Not Necessarily Equivalent?

Correct. While most reporters focus on the fourth test—when a legislative provision has a budgetary impact merely incidental to the provision’s policy change—that is not the only type of rule violation. Nor in many respects is it the most significant.

While violations of the fourth test are fatal to the provision—the extraneous material is stricken from the underlying legislation—violations of the third (material outside the jurisdiction of committees charged with reporting reconciliation legislation) and sixth (changes to Title II of the Social Security Act) tests are fatal to the entire bill.

Who Determines Whether a Provision Qualifies as ‘Extraneous’ Under the ‘Byrd Rule’?

As the chart notes, those determinations are made by the Senate Budget Committee chairman—currently Mike Enzi (R-WY)—or the chair, who normally acts upon guidance from the Senate parliamentarian.

How Does One Determine Whether a Provision Qualifies as ‘Extraneous’ under the ‘Byrd Rule’?

In some cases, determining compliance with the rule is relatively straight-forward. A provision dealing with veterans’ benefits (within the jurisdiction of the Veterans Affairs Committee) would clearly fail the third test in a tax reconciliation bill, as tax matters lie within the Finance Committee’s jurisdiction.

However, other cases require a more nuanced, textual analysis by the parliamentarian. Such an analysis might examine Congressional Budget Office (CBO) and other outside scores, to assess the provision’s fiscal impact (or lack thereof), the statute the reconciliation bill seeks to amend, other statutes cross-referenced in the legislation (to assess the impact of the programmatic changes the provision would make), and prior precedent on related matters.

When Does the Senate Assess Whether a Provision Qualifies as ‘Extraneous’?

In some respects, assessing compliance is an iterative process. Often, the Senate parliamentarian will provide informal advice to majority staff as they begin to write reconciliation legislation. While these informal conversations help to guide bill writers during the drafting process, the parliamentarian normally notes that these discussions do not constitute a formal advisory opinion; minority party staff and other interested persons are not privy to the ex parte conversations, and could in time bring her new information that could cause her to change her opinion.

Later in the process, as the reconciliation bill makes its way to the Senate floor, majority and minority leadership staff will gather for more formal discussions to assess which provisions qualify as “extraneous” under the “Byrd rule.” This process, informally known as the “Byrd bath,” allows for all sides to put their cases before the parliamentarian, who will normally provide more definitive guidance on how she would advise the chair to rule.

Do Debates about the ‘Byrd Rule’ Take Place on the Senate Floor?

They can, and they have, but relatively rarely. As James Wallner, an expert in Senate parliamentary procedure, notes, over the last three decades, the Senate has formally adjudicated only ten instances of the fourth test—whether a provision’s fiscal impacts are merely incidental to its proposed policy changes.

Because most determinations of “Byrd rule” compliance (or non-compliance) have been made through informal, closed-door “Byrd bath” discussions in the Senate parliamentarian’s office, there are few formal precedents—either rulings from the chair or votes by the Senate itself—regarding specific examples of “extraneous” material. As a result, the Senate—whether the parliamentarian, the presiding officer, or the body itself—has significant latitude to interpret the statutory tests about what qualifies as “extraneous.”

Can the Senate Overrule the Parliamentarian about What Qualifies as ‘Extraneous’ Under the ‘Byrd Rule’?

Yes, in two respects. The presiding officer—whether the vice president as president of the Senate, the president pro tempore (currently Sen. Orrin Hatch, R-UT), or another senator—can disregard the parliamentarian’s guidance and issue his or her own ruling. Alternatively, a senator could appeal the chair’s decision, and a simple majority of the body could overrule that decision. There is a long history of senators doing just that.

As a practical matter, however, such a scenario appears unlikely during the Obamacare debate, for two reasons. First, some senators may view such a move as akin to the “nuclear option,” undermining the legislative filibuster by a simple majority vote. The recent letter signed by 61 senators pledging to uphold the legislative filibuster indicates that at least some senators in both parties want to preserve the usual 60-vote margin for passing legislation, and therefore may not wish to set a precedent of allowing potentially “extraneous” material on to a budget reconciliation bill through a simple majority.

Second, if the Senate did overrule the parliamentarian on a procedural matter related to budget reconciliation, a conservative senator would likely introduce a simple, one-line Obamacare repeal bill and ask the Senate to overrule the parliamentarian to allow it to qualify as a reconciliation matter. Since many members of the Senate, like the House, do not actually wish to repeal Obamacare, they would likely decline to head down the road of overruling the parliamentarian, for fear it may head in this direction.

Can the Senate Waive the ‘Byrd Rule’?

Yes—provided three-fifths of senators sworn (i.e., 60 senators) agree. In the past, many budget reconciliation bills—like the Balanced Budget Act of 1997—passed with far more than 60 Senate votes, which made waiving the rule easier.

However, Republicans did not agree to waive the rule for extraneous material included in Senate Democrats’ Obamacare “fix” bill in March 2010. That material was stricken from the legislation and did not make it into law. For this and other reasons, it seems unlikely that eight or more Senate Democrats would vote to waive the rule for an Obamacare “repeal-and-replace” bill.

Didn’t Democrats Pass Obamacare through Budget Reconciliation?

Yes and no. They fixed portions of Obamacare—for instance, the notorious “Cornhusker Kickback”—through a budget reconciliation measure that passed through both houses of Congress in March 2010. But the larger, 2,400-page measure that passed the Senate on Christmas Eve 2009 was enacted into law first.

Once Scott Brown’s election to the Senate in January 2010 gave Republicans 41 votes, Democrats knew they could not go through the usual process of convening a House-Senate conference committee to consider the differences between each chamber’s legislation. A conference report is subject to a filibuster, and Republicans had the votes to sustain that filibuster.

Instead, House Democrats agreed to pass the Senate version of the legislation—the version that passed with 60 votes on Christmas Eve 2009—then have both chambers use a separate budget reconciliation bill—one that could pass the Senate with a 51-vote majority—to make changes to the bill they had just enacted.

This post was originally published at The Federalist.

Medicaid and Obamacare

Senators Hatch and Coburn this afternoon released a list of ten reasons – examples of fraud, waste, and/or questionable policies – illustrating why Medicaid needs fundamental reform.  To that can easily be added an eleventh, which comes in the form of an article in this morning’s Los Angeles Times:  In California, a provider organization has sued to block reimbursement reductions from taking effect – less than a week after the federal government approved those reductions.  In other words, a group of trial lawyers has taken it upon itself to play “back-seat driver” after the state passed, and the federal government approved, Medicaid reimbursement changes.

The story illustrates perfectly the ever-tightening vise states are facing with their Medicaid programs:

  • At a time when states face budget deficits totaling a collective $175 billion, Obamacare is imposing new unfunded mandates of at least $118 billion.
  • Because Obamacare prohibits Medicaid programs from altering their eligibility criteria, one of the few levers left for states to achieve fiscal balance comes through reimbursement reductions – yet even these are being micro-managed.
  • The Obama Administration has proposed regulations that would impose more mandates on Medicaid programs seeking to adjust reimbursement levels, forcing states to climb through new bureaucratic hoops dictated by Washington in order to achieve budgetary savings.
  • And the Supreme Court last month heard arguments in a series of cases from California that, if successful, would allow trial lawyers to launch many more suits like the one filed last week – creating uncertainty for states in a tough fiscal environment, and potentially resulting in judges weighing the minute details of provider reimbursement levels in Medicaid programs across the country.

Some of these trends precede Obamacare – but by imposing yet more mandates on broken Medicaid programs, the 2700-page law has only made states’ already difficult fiscal realities worse.  It’s one more example of how the unpopular law does not represent true reform of America’s unsustainable entitlements.

More on Medicare’s (Un-)Sustainability

Further to the CBO Medicare baseline data released last week indicating the Medicare Part A trust fund will become insolvent in 2020, it’s worth comparing the CBO projections of Medicare revenue released in August 2010 with its revised March 2011 baseline.  When it comes to estimated payroll tax revenue, the differences between the two are glaringly apparent.  For instance, in 2014 CBO projects that Medicare will take in over $15 billion less in revenue than it did just last August ($272.5 billion in August 2010 vs. only $257.4 billion in this month’s new baseline).  This disparity in revenue continues throughout the 10-year budget window, and is the primary reason why CBO projects the trust fund will be exhausted by 2020, nine years earlier than the actuary’s estimate last year.

Of course, many would argue that the TRUE test of Medicare’s solvency is its cash flow – i.e., whether or not the Medicare Part A program is serving as a drag on general revenues, and therefore exacerbating our trillion-dollar deficits. (It’s why Democrat claims that “Social Security doesn’t contribute to the deficit” were debunked by factcheck.org.)  Medicare Part A had been projected to contribute to federal deficits “as far as the eye can see” in August 2010; the revised baseline released last week only worsened a an already bad forecast.  But it’s worth highlighting the projected drop-off in payroll tax revenue, for one reason:  CBO’s estimates essentially admit that long-range economic growth, and therefore revenue growth, will be more anemic than projected just seven months ago.

On a related note, Senators Hatch and Sessions wrote to the Medicare actuary today asking him to produce alternative projections in the 2011 trustees report that exclude “double counting” created under the health care law.  As you will likely be aware, budgetary accounting rules assume Medicare savings will be used both to create new entitlements AND to improve Medicare’s solvency, even though in practice both the CBO and the Medicare actuary agree that the Medicare reductions in the law “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date.  The Hatch-Sessions letter merely asks the Medicare actuary to follow a standard President Obama himself alluded to in an interview last year, when he admitted that “You can’t say that you are saving on Medicare and then spending the money twice.”

Afternoon Update on MOE

Wanted to flag an issue coming out of this morning’s Finance Committee hearing:  First, Sen. Hatch released a CRS report confirming that Secretary Sebelius DOES have the authority to waive the Medicaid maintenance of effort requirements in the health care law.  Among the key quotes in the report: “It appears that the Secretary would have a substantial basis upon which to conclude that the specific language of Section 2001(b) of PPACA does not limit her general 1115 waiver authority, presumably allowing her to waive the MOE requirements in Section 2001(b) in furtherance of a demonstration project….It is likely that the courts would accord considerable deference to the Secretary’s interpretation of the provisions in question, and uphold the Secretary’s determination as ‘a reasonable interpretation made by the administrator of an agency.’”  As a reminder, it’s been 76 days (and counting) since Governors made the first of multiple requests for flexibility from such mandates – and the Secretary has yet to give a straight answer as to whether or not she can relieve their massive fiscal burdens by granting flexibility from the mandates.

Setting the Facts Straight on Medicaid Costs

The Center for Budget and Policy Priorities is out this morning with a report claiming that last month’s Hatch/Upton report estimating new unfunded mandates of at least $118 billion is inflated.  The CBPP report criticizes the $118 billion finding on several grounds.  It attacks the Republican compilation of state-based estimates for assuming most or all individuals eligible for Medicaid will enroll in the program – raising questions about why a liberal group wants to assume people will NOT obtain health coverage.  And it also criticizes state-based estimates for assuming Medicaid physician reimbursements will increase due to the law – even though many Medicaid beneficiaries have access problems already, and most programs are not equipped to handle 15-25 million newly enrolled at current payment levels, and even though CMS could be on the cusp of REQUIRING state programs to meet minimum reimbursement levels (See below.).

What’s most interesting though is what the CBPP report OMITS about states’ Medicaid costs – namely, two important ways in which most reports have UNDER-estimated state obligations under the health care law:

CBO May Have Underestimated Medicaid Enrollment Due to An Incorrect Definition of Income

Medicare actuary Rick Foster’s testimony to the House Budget Committee hearing raised this issue, in a significant footnote on page 10:

“In addition to the higher level of allowable income, the Affordable Care Act expands eligibility to people under age 65 who have no other qualifying factors that would have made them eligible for Medicaid under prior law, such as being under age 18, disabled, pregnant, or parents of eligible children.  The estimated increase in Medicaid enrollment is based on an assumption that Social Security benefits would continue to be included in the definition of income for determining Medicaid eligibility.  If a strict application of the modified adjusted gross income definition is instead applied, as may be intended by the Act, then an additional 5 million or more Social Security early retirees would be potentially eligible for Medicaid coverage.”

In other words, if the new definition of income introduced in the law excludes Social Security benefits – and the actuary believes it may – upwards of an additional 5 million early retirees (along with some Social Security disability recipients) would be forced on to the Medicaid rolls.  While officials at the Centers for Medicare and Medicaid Services have yet to opine on the official interpretation of “income” as defined by the law, it’s difficult to see how CMS could change in regulations definitions of income that are based in statute (i.e., the health care law and the Internal Revenue Code), meaning the actuary’s footnote is actually a possible, even likely, scenario.

Staff have confirmed that the Congressional Budget Office did NOT consider this possibility when scoring the bill last March – meaning that this one definitional interpretation could have a significant budgetary impact.  (Likewise, the Urban Institute study cited by CBPP did not assume that Social Security early retirees would be forced into Medicaid, meaning its estimates could well be understated also – see the footnote on page 34.)  An additional 5 million individuals added to the Medicaid rolls would increase by nearly one-third the CBO’s estimate of 16 million individuals covered under the Medicaid expansion.  Moreover, because many of these 5 million additional enrollees would be early retirees (and therefore older and sicker than the population as a whole), CBO’s estimated $60 billion cost to states for the Medicaid expansion could skyrocket.

 

Washington Is Planning to Impose NEW Reimbursement Mandates on State Medicaid Programs Later This Year

In a filing with the Supreme Court dated December 2010, the Justice Department petitioned (unsuccessfully) for the Court NOT to hear a case from California in which several patient advocate and provider groups had sued the state regarding what they view as improperly low Medicaid physician reimbursement levels.  The filing merits particular attention because of the reasons the government asked the Court not to take the case: The government will be issuing rules on Medicaid physician reimbursement levels shortly: “HHS is committed to promulgating a notice of proposed rulemaking in April 2011 and a final rule by December 2011.”  Page 20 of the filing provided a sense of what the rulemaking process might entail, and it sounds as though the rulemaking process will take a comprehensive look at Medicaid provider reimbursement issues:

“The rulemaking may include a determination whether Section 1396a(a)(30)(A) protects interests of providers at all following repeal of the Boren Amendment (note 3, supra); what procedural or substantive requirements the statute imposes on States with respect to beneficiaries; and how the various provisions of Section 1396a(a)(30)(A) and other Medicaid requirements interact.  Insofar as the question petitioner raises implicates concerns about the standards applicable under Section 1396a(a)(30)(A), Pet. 16, the outcome of the rulemaking process may affect the appropriate analysis.”

In other words, it’s possible – perhaps even likely – that on top of the mandates on states not to constrain eligibility standards, HHS will now pile on another federal mandate when it comes to reimbursement levels.  To be sure, Medicaid’s poor reimbursement levels create access problems for low-income beneficiaries in many states.  But one of the reasons why states are looking to reduce reimbursement rates in the first place is because the mandate to maintain eligibility levels prevents them from taking other actions to trim their budget deficits.  So it would appear that the Administration’s solution to a failed government mandate (i.e., Medicaid maintenance of effort requirements) is yet another government mandate on states, this one requiring certain reimbursement levels for states’ Medicaid programs.

Speaker Pelosi famously said we had to pass the bill to find out what’s in it.  Unfortunately, states may soon find out what CBPP omitted from its report – there are as-yet undiscovered ways in which the unpopular measure will place an impossible burden on their already unsustainable Medicaid programs.

Non Answers from the “Most Transparent” Administration

In his exchange with Secretary Sebelius at this morning’s Finance Committee hearing, Senator Hatch noted that two-thirds of Republican written requests for information dating to June 2010 had not received an acknowledgement or response.  In addition, a new report by the Congressional Research Service found that more than three-quarters of rules implementing the health care law were issued WITHOUT public comment.

In the same exchange, Secretary Sebelius also refused to answer the question of whether or not she has the authority to waive the Medicaid mandates imposed in the health care law.  As a reminder, it’s been 76 days (and counting) since Governors made the first of multiple requests for flexibility from such mandates – and the Secretary has yet to give a straight answer as to whether or not she can relieve their massive fiscal burdens by granting flexibility from the mandates.  Conversely, it took only twelve days for the Secretary to respond to Chairman Baucus’ letter about the impact of H.R. 1 – a bill that Democrats admitted had no chance of passing.

More on State Flexibility

Three interesting points on the ongoing debate over states’ Medicaid budgets and flexibility under the health law:

First, liberal commentators in the past few days have made striking admissions that the President’s proposal for state waivers does NOT give states the flexibility to enact conservative health care solutions.  This morning Jonathan Cohn wrote a column including this line: “[Senator] Hatch…and other critics of Obama’s proposal have a point: It wouldn’t allow them to enact the sorts of health care reforms they would prefer.  Likewise, the Post’s Ezra Klein notes that “conservatives can’t do any better – at least not under these rules.”  Both columnists go on to say this lack of flexibility is a good thing – defending the richer benefit mandates that will raise the price of individual insurance by $2100 per family, according to the Congressional Budget Office.  Cohn also goes on to promote a single-payer health care system as a “more efficient” plan that could receive a waiver – “not the sort of health care alternative conservatives have in mind.”  Mind you, some (certainly not all) conservatives might actually support a state like Vermont that seeks to enact a single-payer alternative – so long as states like Indiana or Utah have the flexibility to enact THEIR alternative without meeting new federal requirements.  But Cohn and Klein both admit that the “flexibility” in the President’s proposal only goes one way – towards more government involvement and regulation.

Second, does anyone remember the debate over the Basic Health plan during the Finance Committee markup in October 2009?  You may recall that Sen. Cantwell offered an amendment to the Finance bill – which later became Section 1331 of the statute – allowing states to receive funding to establish programs similar to Washington state’s Basic Health plan.  Well, a New York Times article this morning reported that “Gov. Christine Gregoire of Washington, a Democrat, recently removed 17,500 adults covered under Basic Health.”  It’s an interesting admission that what Democrats once viewed as a de facto government-run plan hasn’t succeeded in controlling costs – either that, or states need more flexibility in managing their health care programs during times of tight budgets (or both).

Finally, if you haven’t had a chance to read the testimony from yesterday’s governors’ hearing yesterday morning, it’s worth taking a few minutes to do so.  Governors Barbour and Herbert both gave specific examples of how they are attempting to innovate within their Medicaid programs, and how Washington bureaucratic requirements – such as Utah’s eight-month-long expedition to get approval to send e-mails to beneficiaries – frequently get in the way.  (Other coverage of the hearing – and the joint Finance/Energy and Commerce report on states’ $118 billion in Medicaid costs – can be found in articles by the New York Times and Washington Post.)

A Review of Deficit Reduction Plans

This Wednesday’s deadline for the fiscal commission to report a deficit reduction plan provides an opportunity to examine the health care components of the three proposals that have been released thus far:

  1. The Simpson-Bowles plan, named for the co-chairs of the fiscal commission, who released their own draft recommendations just after the midterm election;
  2. The Rivlin-Domenici plan, named for former CBO Director Alice Rivlin and former Senate Budget Committee Chairman Pete Domenici (R-NM), who released their own proposal as chairs of an independent commission operating under the aegis of the Bipartisan Policy Center; and
  3. The Rivlin-Ryan plan, which Alice Rivlin and House Budget Committee Ranking Member Paul Ryan released as an alternative to the Simpson-Bowles proposal, as both Dr. Rivlin and Rep. Ryan also sit on the fiscal commission.

CBO has conducted a preliminary analysis of the Rivlin-Ryan plan (the above link includes both the plan’s summary and score), and the Simpson-Bowles plan incorporates CBO scoring estimates where available.  However, it is unclear where and how the Rilvin-Domenici plan received the scores cited for its proposals.  The timing of the plans also varies; the Rivlin-Domenici plan postpones implementation of its plan until 2012, when the authors believe the economy will be better able to sustain a major deficit reduction effort.

The following analysis examines the similarities and differences of the three plans’ health care components in both the short term and the long term.  Keep in mind however that these are DRAFT proposals, which may a) change and b) be missing significant details affecting their impact.  Note also that the summary below is not intended to serve as an endorsement or repudiation of the proposals, either in general terms or in their specifics.

Short-Term Savings

Liability Reform:  All three plans propose liability reforms, including a cap on non-economic damages.  The Rivlin-Ryan and Simpson-Bowles plans both rely on specifications outlined in CBO’s October 2009 letter to Sen. Hatch; both presume about $60 billion in savings from this approach.  The Rivlin-Domenici plan is less clear on its specifics, but discusses “a strong financial incentive to states, such as avoiding a cut in their Medicaid matching rate, to enact caps on non-economic and punitive damages.”  Rivlin-Domenici also proposes grants to states to pilot new approaches, such as health courts; overall, the plan estimates $48 billion in savings from 2012 through 2020.

Prescription Drug Rebates:  Both the Simpson-Bowles and Rivlin-Domenici plans would apply Medicaid prescription drug rebates to the Medicare Part D program.  The Simpson-Bowles plan estimates such a change would save $59 billion from 2011 through 2020, whereas the Rivlin-Domenici plan estimates this change would save $100 billion from 2012 through 2018.  The disparity in the projected scores is unclear, as both imply they would extend the rebates to all single-source drugs (i.e., those without a generic competitor) in the Part D marketplace.  The Rivlin-Ryan plan has no similar provision.

Changes to Medicare Benefit:  All three plans propose to re-structure the Medicare benefit to provide a unified deductible for Parts A and B, along with a catastrophic cap on beneficiary cost-sharing.  The Rivlin-Ryan and Simspon-Bowles plans are largely similar, and echo an earlier estimate made in CBO’s December 2008 Budget Options document (Option 83), which provided for a unified deductible for Parts A and B combined, a catastrophic cap on beneficiary cost-sharing, and new limits on first-dollar coverage by Medigap supplemental insurance (which many economists believe encourages patients to over-consume care).  Conversely, the Rivlin-Domenici proposal provides fewer specifics, does not mention a statutory restriction on Medigap first-dollar coverage, and generates smaller savings (an estimated $14 billion from 2012 through 2018, as opposed to more than $100 billion from the Rivlin-Ryan and Simpson-Bowles proposals).

Medicare Premiums:  The Rivlin-Domenici plan would increase the beneficiary share of Medicare Part B premiums from 25 percent to 35 percent, phased in over a five-year period, raising $123 billion from 2012 through 2018. (When Medicare was first established, seniors paid 50 percent of the cost of Part B program benefits; that percentage was later reduced, and has been at 25 percent since 1997.)  The Rivlin-Ryan and Simpson-Bowles plans have no similar provision.

“Doc Fix:  The Simpson-Bowles plan uses the changes discussed above (i.e., liability reform, Part D rebates, and Medicare cost-sharing), along with an additional change in Medicare physician reimbursement, to pay for a permanent “doc fix” to the sustainable growth rate (SGR) formula.  The Simpson-Bowles plan would generate the final $24 billion in savings necessary to finance a permanent “doc fix” by establishing a new value-based reimbursement system for physician reimbursement, beginning in 2015.

The introduction to the Rivlin-Domenici plan notes that it “accommodates a permanent fix” to the SGR, but the plan itself does not include specifics on how this would be achieved, nor what formula would replace the current SGR mechanism.  Likewise, the Rivlin-Ryan plan does not directly address the SGR; however, the long-term restructuring in Medicare it proposes means the issue of Medicare physician reimbursement would become a moot point over several decades.  (See below for additional details.)

Other Provisions:  The Rivlin-Domenici plan would impose an excise tax of one cent per ounce on sugar-sweetened beverages; the tax would apply beginning in 2012 and would be indexed to inflation after 2018. (This proposal was included in Option 106 of CBO’s December 2008 Budget Options paper.)  The plan estimates this option would raise $156 billion from 2012 through 2020.

The Rivlin-Domenici plan also proposes bundling diagnosis related group (DRG) payments to include post-acute care services in a way that allows hospitals to retain 20 percent of the projected savings, with the federal government recapturing 80 percent of the savings for a total deficit reduction of $5 billion from 2012 through 2018.  Finally, the Rivlin-Domenici plan proposes $5 billion in savings from 2012 through 2018 by removing barriers to enroll low-income dual eligible beneficiaries in managed care programs.

The Simpson-Bowles plan includes a laundry list of possible short-term savings (see Slide 35 of the plan for illustrative savings proposals) in addition to the savings provisions outlined above that would fund a long-term “doc fix.”  Most of the additional short-term savings proposed would come from additional reimbursement reductions (e.g., an acceleration of the DSH and home health reductions in the health care law, and reductions in spending on graduate medical education), or from proposals to increase cost-sharing (e.g., higher Medicaid co-pays, higher cost-sharing for retirees in Tricare for Life and FEHB).

Long-Term Restructuring

Employee Exclusion for Group Health Insurance:  In its discussion of tax reform, the Simpson-Bowles plan raises the possibility of capping or eliminating the current employee exclusion for employer-provided health insurance.  (The Associated Press wrote about this issue over the weekend.)  One possible option would eliminate the exclusion as part of a plan to lower income tax rates to three brackets of 8%, 14%, and 23%; however, this proposal presumes a net $80 billion per year in increased revenue per year to reduce the deficit.  The plan invokes as another option a proposal by Sens. Gregg and Wyden to cap the exclusion at the value of the FEHBP Blue Cross standard option plan, which would allow for three income tax rates of 15%, 25%, and 35%, along with a near-tripling of the standard deduction.  Separately, the Simpson-Bowles plan also proposes repealing the payroll tax exclusion for employer-provided health insurance as one potential option to extend Social Security’s solvency.

The Rivlin-Domenici plan would cap the exclusion beginning in 2018, at the same level at which the “Cadillac tax” on high-cost plans is scheduled to take effect in that year.  However, the proposal would go further than the “Cadillac tax” (which would be repealed) by phasing out the income and payroll tax exclusion entirely between 2018 and 2028.  (This proposal would also prohibit new tax deductible contributions to Health Savings Accounts, on the grounds that health care spending would no longer receive a tax preference under any form.)  Notably, the Rivlin-Domenici plan accepts that some employers might stop offering coverage from this change to the tax code, and projects some higher federal spending on Exchange insurance subsidies as a result; however, if more employers drop coverage than the authors’ model predicts, the revenue gain from this provision could be entirely outweighed by the scope of new federal spending on insurance subsidies.

Although Rep. Ryan has previously issued his “Roadmap” proposal that would repeal the employee exclusion, the Rivlin-Ryan plan does NOT address this issue.

Medicare:  The Rivlin-Domenici program would turn Medicare into a premium support program beginning in 2018.  Increases in federal spending levels would be capped at a rate equal to the average GDP growth over five years plus one percentage point.  Seniors would still be automatically enrolled in traditional (i.e., government-run) Medicare, but if spending exceeded the prescribed federal limits, seniors would pay the difference in the form of higher premiums.  Seniors could also choose plans on a Medicare Exchange (similar to today’s Medicare Advantage), with the hope that such plans “can offer beneficiaries relief from rising Medicare premiums.”

The Rivlin-Ryan proposal would turn Medicare into a voucher program beginning in 2021.  (Both the Rivlin-Domenici premium support program and the Rivlin-Ryan voucher program would convert Medicare into a defined benefit, whereby the federal contribution toward beneficiaries would be capped; the prime difference is that the premium support program would maintain traditional government-run Medicare as one option for beneficiaries to choose from with their premium dollars, whereas the Rivlin-Ryan plan would give new enrollees a choice of only private plans from which to purchase coverage.)  The amount of the voucher would increase annually at the rate of GDP growth per capita plus one percentage point – the same level as the overall cap in Medicare spending included in the health care law as part of the new IPAB.  Low-income dual eligible beneficiaries would receive an additional medical savings account contribution (to use for health expenses) in lieu of Medicaid assistance; the federal contribution to that account would also grow by GDP per capita plus one percent.

The Rivlin-Ryan plan would NOT affect seniors currently in Medicare, or those within 10 years of retirement, except for the changes in cost-sharing described in the short-term changes above.  However, for individuals under age 55, the plan would also raise the age of eligibility by two months per year, beginning in 2021, until it reached 67 by 2032.

While the Rivlin-Domenici and Rivlin-Ryan plans restructure the Medicare benefit for new enrollees to achieve long-term savings, the Simpson-Bowles plan largely relies on the health care law’s new Independent Payment Advisory Board (IPAB) to set spending targets and propose additional savings.  The Simpson-Bowles plan suggests strengthening the IPAB’s spending targets, extending the IPAB’s reach to health insurance plans in the Exchange, and allowing the IPAB to recommend changes to benefit design and cost-sharing.  The plan also suggests setting a global budget for all federal health spending (i.e., Medicare, Medicaid, exchange subsidies, etc.), and capping the growth of this global budget at GDP plus one percent – the same level that IPAB capped spending in Medicare.  If costs exceed the target, additional steps could be taken to reduce spending, including an increase in premiums and cost-sharing or a premium support option for Medicare.  The plan also suggests overhauling the fee-for-service reimbursement system, or establishing an all-payer model of reimbursement (in which all insurance carriers pay providers the same rate) if spending targets are not met.

Medicaid:  The Rivlin-Domenici plan suggests that in future, Medicaid’s excess cost growth should be reduced by one percentage point annually.  The plan implies some type of negotiation between states and the federal government over which services in the existing Medicaid program that the state should assume and fund and which services the federal government should assume and fund.  While specifics remain sparse, the overriding principle involves de-linking Medicaid financing from the open-ended federal matching relationship as a way to reduce future cost growth by one percentage point per year.

The Rivlin-Ryan plan converts the existing Medicaid program into a block grant to the states, beginning in 2013.  The size of the federal block grant would increase to reflect growth in the Medicaid population, as well as growth in GDP plus one percent.  The costs of the new Medicaid expansion would be covered according to current law through 2020; in 2021 and succeeding years, the Medicaid expansion would be rolled into the block grant.

The Simpson-Bowles plan includes conversion of Medicaid into a block grant as one option to generate additional savings; however, it does not explicitly advocate this course of action.

CLASS Act:  The Rivlin-Ryan plan would repeal the CLASS Act.  The Rivlin-Domenici and Simpson-Bowles plans do not discuss any changes to this program.  This is the ONLY provision in the three deficit reduction plans that proposes elimination of any part of the health care law’s new entitlements.

This Morning’s Berwick Hearing By the Numbers

This morning’s Finance Committee hearing featuring testimony by CMS Administrator Donald Berwick adjourned almost as quickly as it began due to a series of votes on the Senate floor.  It’s worth noting that this morning’s vote series was already scheduled at the time the hearing was announced last week – meaning the scheduling conflict was easily preventable, had the majority chosen another time for the hearing.  Here’s a quick look at how the hearing shaped up:

10:03 – Time hearing began

10:27 – Time questioning began

11:23 – Time hearing adjourned

56 – Total minutes for questioning

4 – Number of Republican Senators able to question Dr. Berwick (Grassley, Hatch, Bunning, and Ensign)

Compare these numbers to the universe of material about which Senators may wish to query Dr. Berwick:

2,700 – Pages in the health care law (including reconciliation legislation and Indian Health Service provisions)

4,103 – Pages of regulations implementing the health care law released between March 23 and September 23

Thousands – Pages of Dr. Berwick’s controversial speeches, journal articles, and other writings over the past 30-plus years

Given the plethora of potential questions and the modicum of time Senators had to ask them, there’s one other key number to keep in mind:

November 29 – Date the Senate returns from Thanksgiving break

Will Chairman Baucus call a follow-up hearing to give all Senators a fair opportunity to ask questions – and if so, when?  As Dr. Berwick himself would say, “‘Some’ is not a number, ‘soon’ is not a time…”