The Wonk Room

Newt Gingrich’s Health Group Pretends Health Bill Exempts Members Of Congress From Public Option

Newt Gingrich’s for-profit Center For Health Transformation is sending around a petition email asking “whether members of Congress writing such legislation would actually enroll themselves in a new government-run healthcare option.” “Please sign below if you agree with Congressman Fleming that members of Congress who vote for a government-run healthcare plan should participate in the plan themselves and you agree with us to broaden this to include congressional staff,” the Center asks:

As health legislation continues to be debated, one has to ask whether members of Congress writing such legislation would actually enroll themselves in a new government-run healthcare option. Current draft healthcare legislation exempts members of Congress from the public plan option, allowing them to keep their existing plans.

Congressman John Fleming (LA-04) is asking this very question noting that public servants should be accountable and responsible for what they are advocating. He has created a resolution calling on members of Congress who support a public option to enroll themselves and encourage their colleagues to do the same. We support this resolution and broaden it to include congressional staff as well.

Of course, the Tri Committee discussion draft in the House does not specifically exempt federal employees — who receive coverage through the Federal Employees Health Benefits (FEHB) Program — from enrolling in the new public plan. Rather, the legislation treats the American government — the largest employer in the country — like any other large employer: it can enroll its employees in the Exchange (where they can choose a public health insurance option) after a period of 2 years.

From a logistical point of view and to those concerned about continuity of care, moving the 160 million Americans who receive employer-sponsored benefits into new plans would be a costly nightmare. The goal is to reduce immediate shifts but still preserve choice. For this reason, the House Tri Committee health care bill phases in participation in the Exchange when it goes into operation in 2013:

- Individuals and employers with 10 or fewer employees in 2013
- Individuals and employers with 20 or fewer employees in 2014
- Individuals and employers with more than 20 employees in 2015

On the whole, this argument is particularly disingenuous. Republicans are arguing that the public option would eliminate employer-sponsored coverage while undermining provisions designed to allow Americans to keep what the have. During mark-up of the HELP Committee’s legislation Sens. John McCain (R-AZ) and Tom Coburn (R-OK) went so far as to introduce amendments that would require members of Congress (and Congressional staff) to enroll in the public option.

Blue Dogs Won’t Vote For What They Support

The fifty-member Blue Dog Coalition has written a letter to House Speaker Nancy Pelosi (D-CA) revealing “strong reservations” about the Tri Committee’s health care bill. “After reviewing the draft tri-committee health care reform proposal, we believe it lacks a number of elements essential to preserving what works and fixing what is broken,” the letter reads:

- Deficit Neutrality: “Paying for care reform must start with finding savings within the current delivery system and maximizing the value of our health care dollar before we ask the public to pay more.”

- Delivery System Reform: “The discussion draft fails to include adequate structural changes that will succeed in lowering costs and increasing value.”

- Rural Health: “We must not fail to address the underlying problems and inequities that plague rural providers.”

- Public Option: “A Medicare-like” public option would negatively impact hospitals, doctors and patients…using Medicare’s below-market rates would seriously weaken the financial stability of our local hospitals and doctors.”

Democrats have already committed themselves to fully funding health care reform and the President has identified $632 billion worth of savings from within the system. Rahm Emanuel, who visited the Capitol twice this week to discuss health care proposals with House Democrats, has said Obama would prefer that money to pay for the legislation come from within the health care system — as he argued in a letter to Sens. Baucus and Kennedy — and OMB Director Peter Orszag is urging lawmakers to include “further cuts in the Medicare and Medicaid payments that hospitals receive for treating the uninsured. In fact, according to a CBO estimate of the Tri Committee bill, the draft would save some $500 billion from Medicare cuts.

More importantly, the letter contains an inherent contradiction: the Blue Dogs want to find more savings within the system — they’re asking for Delivery System Reforms and “maximizing the value of our health care dollar” — but they’re also asking the bill to spend more on rural health and physician reimbursement. And they are reluctant to support any legislation that moves us towards that goal, causes providers to lose revenue, or regulates the system to improve efficiency.

Consider their objection to a “Medicare-like” public option that reimburses providers 5 to 10 percent above Medicare rates. According to MedPAC, Medicare rates are adequate and consistent with the efficient delivery of services. In fact, over-payments by private insurers to health-care providers drives up overall costs. “Hospitals which didn’t rely on high payment rates from private insurers ‘are able, in fact, to control their costs and reduce their costs when they need to’ and ‘combine low costs with quality,’” Glenn Hackbarth, the chairman of MedPAC, said during recent testimony in front of the House Ways and Means Committee. Moreover, if the public plan pays bloated market rates, it will fail to offer lower premiums within the Exchange, and would cause the government to spend more money on subsidies.

Thus, as Pelosi said yesterday, “squeeze out what you can from the system — savings, savings, savings. … Otherwise the bill is endless.” In this case, the Blue Dogs are slowing down an effort that implements their principles for reform.

Republicans Work To Undermine Affordability Measures In Kennedy Health Bill

During today’s mark-up session of the HELP Committee’s health care proposal, Republicans introduced at least seven amendments designed to lower the subsidies available to Americans who purchase coverage through the Exchange. Sens. Mike Enzi (R-WY) and Judd Gregg (R-NH) both argued that Americans above 250 percent of the Federal Poverty Level (FPL) — or $45,775 for a family of 3 — could easily afford health care coverage:

- Enzi 200: To eliminate subsidies for those above 250 percent of poverty
- Enzi 201: To eliminate subsidies for those above 250 percent of poverty
- Enzi 202: To provide for reductions in subsidies
- Enzi 211: To limit subsidies to those below 250 percent of poverty.
- Enzi 251: To limit subsidies to those below 250 percent of poverty
- Gregg 223: To limit subsidies to those below 200 percent of poverty.
- Roberts 203: Limiting Premium and Cost-Sharing credits to people below 200% of FPL

Watch a compilation:

In reality, millions of Americans at about 250% FPL are struggling to afford skyrocketing health care costs. A recent study concluded that medical debt contributed to 62 percent of U.S. personal bankruptcies in 2007 — and 78 percent of bankruptcy filers had health insurance but “still were overwhelmed by their medical debt.“ One in five Americans had trouble paying their health care bills in 2007 and even moderate levels of out-of-pocket spending — spending that is as low as 5 or 10 percent of family income —created medical bill problems.

Health care reform must end medical debt and medical bankruptcy, but Republican affordability measures are simply insufficient. The question of affordability is two-fold: which income levels do we subsidize and how much subsidies should the eligible families receive. While the cost of living varies widely across the country, on average, a family of three would need at least $37,919 – or about 200% FPL – to afford their basic necessities not including health care costs. So families up to 200% need to be subsidized, but who else?

Well, researchers suggest that families that spend more than 5-9% of their gross income on health care begin confronting affordability problems. As Karen Pollitz points out, “depending on what premiums are charged for qualified health benefit plans” subsidies capped above a certain level “may prove to be insufficient to ensure affordable health care for all Americans.” Congress “might consider instead a rule that no individual or family will have to pay more than 10 percent of income on health insurance premiums….cutting subsidies off entirely at an arbitrary income level can leave families vulnerable,” she says. Families at approximately 500% FPL ($110,250 for a family of four), however, can typically afford the cost of coverage.

Of course, the entire goal of reform is to slow the growth of health care costs and lower premiums for families. In this sense, subsidizing coverage — that is, making sure that every family can afford to access needed services — is a way of saving money in the long haul. After all, the billions we’re spending on subsidies is a small fraction of the $40 trillion we’re projected to spend on health care in the next ten years if we fail to slow the growth of spending.

Is Compromising With The Health Industry Bad For Health Care Reform?

This week, at least two separate articles — on in the New York Times and the other in the Washington Post — argued that the controversy surrounding the recent compromises between the health insurance industry and the Obama administration actually retarded reform efforts:

- The short-term political benefits are clear. Senior White House officials say the deals are building momentum that will help propel the health care legislation past potential opponents in the private sector and on Capitol Hill…But some lawmakers said the deals, while seemingly helpful, could raise false expectations by obscuring how much the industry is demanding for its concessions. [NYT, 7/7/2009]

- No single development appeared likely to kill Obama’s signature domestic agenda item, but the relentless barrage of challenges that seemed to hit hourly served to demonstrate why no president since Lyndon B. Johnson has been able to enact large-scale health legislation. [Washington Post, 7/9/2009]

The new deals should be openly scrutinized, but they also suggest that the health insurance industry is betting that the momentum is on the side of reform. As Jonathan Cohn has pointed out, “the drug and hospital industries are making a more important pledge: They are suggesting they will go along with legislation that changes the way they are paid.” Not only do lawmakers now have the industry playing on their side — as a posed to running attack adds — but they have also have $235 billion to invest in the system.

The back and forth we hearing about the details of each agreement is a legitimate consequence of progress. Only those who believed that the legislative process would be a smooth and seamless ride, can interpret the current process as incredibly troublesome. After all, the legislative process will produce many proposals, different amendments and varying coalitions. The challenge, for both conservatives and progressives, is to resist the knee-jerk over-reaction that characterize every minor disagreement or compromise as a death blow to reform. It’s what democracy looks like.

House Democrats Considering Surtax As Part Of Plan To Pay For Health Reform

House Ways and Means Committee Chairman Charles Rangel (D-NY)

House Democrats on the Ways and Means Committee are reportedly considering a two percent surtax that “would apply to individuals with adjusted gross income of more than $200,000 and couples over $250,000″ to help finance health care reform. The committee needs to “come up with $600 billion in new taxes to deliver on President Barack Obama’s goal of sweeping changes to the nation’s health care system” and this tax is just one option for raising the needed revenue.

Remember that in order to pay for approximately $1.5 trillion worth of health care reform, most progressives propose a mix of sources, including reducing excessive or wasteful spending in Medicare and Medicaid and modernizing the health system by implementing electronic health records and instituting payment reform. Additional revenue from the employer mandate and new taxes would generate more than $400 billion. This basket of pay-fors provides Congress with a menu of options, making fully financed health care reform more probable.

The proposed surtax would target adjusted gross incomes (AGI), or all earnings before subtracting for itemized deductions and exemptions. According to calculations from Citizens for Tax Justice (CTJ), about 2.4 percent of taxpayers would be affected by the proposed surtax.

The benefits of using a surtax to pay for reform are two-fold:

1) Because it is calculated directly from AGI, the new tax would not add greater complexity to the tax code.

2) It’s fairer than raising the income tax rate, because AGI is inclusive of income from capital gains and dividends, which are taxed at a much lower rate than work income.

Under the CTJ calculations, a household making about $250,000 would see an average tax increase of $536, while a household making $1.5 million would see an increase of almost $19,000. The tax would raise about $375 billion over the next decade (the House version is only looking for approximately $250 billion), and “would target those Americans who received the bulk of the benefits from the tax cuts enacted during the Bush years.”

However, unlike the Obama administration’s proposal to limit itemized deductions for the richest Americans in order to raise money or capping untaxed employee health benefits, a surtax doesn’t address already existing problems in the tax code. As Matthew Yglesias explained, “when possible, it’s better to raise money by broadening the tax base — curbing loopholes, deductions, and exemptions — than by simply raising the rates.” If a surtax is seriously being considered by Congress, it makes little sense to simultaneously dismiss the proposals to limit deductions or cap benefits out of hand.

– Pat Garofalo and Igor Volsky