Thursday, August 2, 2007

SCHIP Reauthorization and High Stakes Politics

Everyone agrees that the State Children’s Health Insurance Program (SCHIP) needs to be reauthorized.

But Washington couldn’t have made such a simple idea any more complicated or controversial.

So far:
  • The Senate has come to a bipartisan agreement, supported by lots of Republicans, that would increase spending by $35 billion, add another three million kids to the six million already covered, pay for it with a 61 cent tobacco tax, and streamline the program more along its original lines.
  • The House is struggling to approve a much larger $60 billion expansion and pay for it with both a tobacco tax and cuts to private Medicare plans that would equalize them with traditional Medicare over a three year phase-in beginning in 2009. The House bill also deals with other health care issues like the upcoming physician fee cuts.
  • President Bush has said both proposals go too far toward creating government-run health care and he has promised to veto both.
  • Republicans are working with Democrats in the Senate in an attempt to have the votes to override a presidential veto. They might have the votes in the Senate and are less likely to have the needed two-thirds in the House.

The Congress is set to leave town at the end of this week and not come back until after Labor Day.

Where is this going to come out?

First, SCHIP will be reauthorized. Most likely, Bush and the Congress, led by Republican Senators who include Grassley and Hatch, will work out a deal by the end of September that will likely expand the current SCHIP program in the $15 - $20 billion range and pay for it with a smaller tobacco tax—and not Medicare Advantage cuts.

The House bill is just an exercise that goes way beyond anything that is possible in the Senate.

Failing that, the program will be continued at present levels using a “continuing resolution.” No one will let it die when it sunsets on September 30th. In this scenario, SCHIP would get punted to the year-end omnibus reconciliation that the Democrats will have far more control over.

The Congress is ready to cut private Medicare payments. Congress needs the Medicare Advantage money to forestall the upcoming 10% physician fee cuts.

The House SCHIP bill is valuable in that it shows the health plan industry the worst case scenario for private Medicare cuts—no sooner than 2009 and a three-year phase-out of payments above traditional Medicare.

But we won’t get to the physician fee cuts and private Medicare payments until the year-end omnibus budget bill where the Democratic committee chairmen will have total control of the Congressional budget process.

The most likely outcome is that the Senate will drive a less dramatic cut to Medicare Advantage than the House wants—looks to me like a four to five year phase-out with the possibility that Private Fee For Service rates in urban areas would be frozen—all starting no sooner than 2009.

To make things even more interesting, Bush has also threatened to veto about all the Democratic spending bills.

Just how far President Bush is willing to go in this budget showdown with the Congress will become evident in how the SCHIP negotiations between the White House and Republican Senators turn out. If they can’t get a SCHIP deal done, we will be headed toward a big budget showdown between the President and the Congress. That is something that Republicans are really worried about—they have to face reelection even if Bush doesn’t.

If cooler heads prevail we will have lots of compromises that will include the necessary Medicare Advantage cuts to pay for other provider needs—particularly the docs.

If cooler heads don’t prevail, we will have one hell of a budget mess.

SCHIP will tell us if Bush is in the mood to deal or not.

Earlier Post on the Senate SCHIP compromise: Bush Reaffirms Veto Threat Over SCHIP Despite Strong Republican Support for Bipartisan Compromise—What’s Really Going On Here?
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