Earth to Republicans: You Are In Big Political Trouble Over the Ryan Medicare Plan

Update: The Wyden-Ryan Medicare Plan - Paul Ryan and Ron Wyden Blow the Medicare Reform Debate Wide Open!

It should now be clear to Republicans they are in trouble over the Ryan Medicare plan.

Yesterday, they lost a seat in a solid Republican New York House district. Their candidate had benefited from lots of money and House leadership attention. The big issue was the Ryan Medicare plan.

All month, Republican Presidential candidates have been walking a tightrope over the Ryan plan--don't embrace it but don't criticize it either for fear of offending the base who will drive the primary outcomes next year. You only had to watch the Gingrich implosion to see what happens if you fall off that tightrope.

Next the Senate will take up the Ryan budget. Senate Democrats can’t wait for a vote on it and are making the Ryan Medicare plan the central issue. Already, at least three Senate Republicans have said they will not vote for the House budget over the Medicare issue. Leader McConnell, sensitive to its political vulnerability, has told Senators they are free to vote their conscience on this one.

Apparently, Republicans don’t understand that they didn’t win the 2010 elections so much as the Democrats lost them. Their fixation on appeasing the right wing of their party misses the critical point that it is independent voters who make the difference in winning or losing an election.

In 2006 and 2008, independents went Democratic. In 2010, they abandoned the Democrats for the Republicans out of concerns for where the Dems were taking the county—not the least over health care.

But an apparent arrogance among Republicans that their 2010 victory was more about them than a rejection of the Democrats quickly led the House to pass Ryan’s budget and Medicare plan with all but four Republican votes. They seemingly never considered the possibility that dismantling Medicare, as we know it, needed to be pre-sold to voters. Now, those House Republicans are hanging out on one giant limb the Democrats can’t wait to cut off in the next election.

That House vote has put Republican presidential candidates and Republican Senators in a really tough spot: Keep independent swing voters happy by backing way from the Ryan plan but offend the Republican base, or support the Ryan plan by giving those House members now out on that limb political cover for their ill considered vote and suffer their own longer-term political consequences?

Ryan’s Medicare plan has been called courageous and farsighted. It may be more foolish and hardly good policy.

Readers of this blog know of my criticisms of the Affordable Care Act particularly over its lack of cost containment—the fundamental health care issue we face.

Ryan’s Medicare plan is poor politics and it is poor policy.

It is poor politics because it is nothing but a cost shift strategy. It is poor policy because it is nothing but a cost shift strategy.

It is hardly courageous. Apparently Republicans have no more courage to face the cost issue—and the politically powerful provider community—than Democrats do.

Now, for those of you ready to criticize these comments for my “lack of understanding of defined contribution health care policy,” please read this first: Defined Contribution Health Care—The Conservatives' Silver Bullit

The Lightweight Romney Health Plan

Mitt Romney has outlined his new health plan. He outlined five key steps in an op-ed in USAToday. Here is a summary:

Step 1: Give states the responsibility, flexibility and resources to care for citizens who are poor, uninsured or chronically ill.who are poor, uninsured or chronically ill.

Step 2: Reform the tax code to promote the individual ownership of health insurance.

Step 3: Focus federal regulation of health care on making markets work…For example, individuals who are continuously covered for a specified period of time may not be denied access to insurance because of pre-existing conditions. And individuals should be allowed to purchase insurance across state lines, free from costly state benefit requirements. Finally, individuals and small businesses should be allowed to form purchasing pools to lower insurance costs and improve choice.

Step 4: Reform medical liability. We should cap non-economic damages in medical malpractice litigation.

Step 5: Make health care more like a consumer market and less like a government program. This can be done by strengthening health savings accounts that help consumers save for health expenses and choose cost-effective insurance.

It looks to me like his health care outline is more intended to make conservative Republicans happy then to really propose ways to reform America’s health care system.

There isn’t one new idea here and it all comes straight from the 2010 Republican campaign playbook.

I have a number of questions:

1. We all seem to agree that the biggest problem is the cost, and therefore the affordability, of health care. Where’s the cost containment in his plan?
2. He talks about giving states the “resources” to take care of the uninsured and the poor. Just what resources, how much money, and where will that money come from?
3. He wants to reform the tax code to permit individual ownership of insurance. But the real premium support most working Americans get is from their employer. When an employer provides health insurance it does so by paying an average of 70% of the cost–worth about $9,000 for family health insurance today. The health insurance tax benefit is worth perhaps 20% of that cost for most workers. How does Romney intend to make an individual system as effective in supporting the purchase of health care? How much support is he willing to provide and where will the money come from?
4. He proposes guaranteeing insurability for those who are continuously covered. But to be continuously covered, an individual has to be able to afford the insurance. How will he assure consumers not just have access to insurance but also affordability?
5. He proposes allowing people to purchase insurance across state lines so that they have access to lower cost insurance. Just which state has low cost and affordable health insurance?
6. He proposes that individuals and small business be able to form purchasing pools to lower costs and improve choice. Presumably, the only difference from these pools and those now offered by insurance companies are that his pools would be exempt from state benefit mandates. How would he protect the existing small group and individual markets from “cherry picking” as the healthy would be enticed to leave the existing state-regulated pools while the sick remained where they could get more comprehensive coverage?
7. He proposes medical malpractice reform. Experts generally believe the kind of reform he is proposing would lower the country’s health care bill by about $60 billion a year. However, that is only about 3% of our annual costs. What other cost containment proposals does he have?
8. He says that his market reforms, such as expanding Health Savings Accounts (HSAs), will drive down costs. HSAs, in various forms, have been around for 20 years–since 2004 in their present form. Yet the free market has only embraced HSAs as a very small part of the system—about 10% of the market. Why does he believe the tinkering with their plan design he is proposing will quickly make them a significant part of the market or make them more affordable?
9. What about Medicare? The Romney op-ed in USAToday doesn’t even contain the word, Medicare. His speech in Michigan today only made a passing reference to the Ryan Medicare plan, while promising a plan of his own in the future.
10. What about Medicaid? He briefly mentions block grants for the states. But how much money would he give the states compared to what they have now?

It looks to me like Romney’s newest health care plan is more about embracing the conservative Republican “free market” campaign talking points list of aging health care ideas in order to prove his bona fides in the primary states, more than it is a serious health care reform proposal.

I doubt even the “Tea Party” Republicans, it is meant to please, will buy it.

Neither the Republicans Nor the Democrats Want to Face the Provider Cost Problem But Both Want to Dump the Problem on the Consumer

A key piece of Paul Ryan’s deficit reduction plan is to change Medicare as we know it. It appears his bold Medicare premium support proposal is failing to gain traction--it is dead as part of any deficit reduction deal this year. Worse, his Medicare proposal looks to be giving Democrats lots of political ammunition for the 2012 elections.

What lies at the heart of Ryan’s Medicare difficulties is that he would all but abandon future seniors (those now under age-55) to a health care system whose age-adjusted premium support would increase each year only at a rate equal to the increase in the consumer price index while their health care costs would likely continue to increase far faster.

Simply, Ryan just shifts the future burden of uncontrolled Medicare health care costs from the federal government to the senior. That will solve a big part of our federal deficit problem but hardly help people.

Yes, he offers a defined contribution health care solution with the promise of invigorating the markets and making costs lower. But we have had a form of Medicare premium support and private competition for years (Medicare Advantage) and there isn’t a lot of evidence the market can get the cost control job done on its own. (See: Defined Contribution Health Care—The Conservatives' Silver Bullet)

The Democrats have had a field day scaring people over the Ryan proposal because, quite frankly, the Ryan plan gives them a lot of legitimate ability to do so. I guess the definition of a terrible policy proposal is one your opponents can successfully attack without having to mislead people.

But Ryan isn’t the only one guilty of trying to put consumers into a health care system that limits federal spending by shifting the excess cost burden from the government to the consumer.

I call your attention to Jim Capretta’s recent column at Kaiser Health News. Here is a key paragraph:

Ryan's critics have focused particular attention on his plan's indexation of the Medicare "premium support credits" to the CPI in the years after 2022, suggesting that this idea is somehow beyond the pale. But this is sheer hypocrisy on their part because the indexing of government-financed premium credits below cost growth is in the president’' plan too, and yet not a complaint has been heard about that from its advocates. That's right. After 2018, if the aggregate governmental cost of premium credits and cost-sharing subsidies provided in the state-run exchanges exceeds about 0.5 percent of GDP (a condition that the Congressional Budget Office says will be met), the recently-enacted health law requires the government's per capita contribution to health plan premiums in the exchanges to rise more slowly than premiums. The administration actuaries interpret the law to mean that the government's contributions toward coverage will rise with GDP growth after 2018. CBO appears to have a different interpretation. Still, under all interpretations and projections, it's clear that the exchange credits in the new law will not keep pace with expectations of rising health costs. And that's exactly what the president is now saying is so wrong with Ryan's Medicare plan.

In fairness, Capretta also makes the broader point that he believes the Ryan plan would create the rigorous competition Medicare needs to control costs.

But in my mind, the real issue here is that both Ryan and the Democrats have made the same mistake.

Both are mostly avoiding the fundamental health care problem in the first place—chronic escalation in costs much higher than either GDP growth or the consumer price index. Neither side has offered a bold plan designed to change the current fee-for-service provider payment incentives that just keep fueling these unaffordable costs. Neither side seems either willing or capable of taking on the provider.

But both are willing to control future federal spending by dumping the excess health care cost problem on the consumer.

I don’t think we are going to have a real health care debate in this country until the voter/consumer/patient comes to understand the long-term threat they face from health care costs that show no sign of abating and they demand that the politicians aim for a solution not on their backs but on the backs of the people sending them these bills.

Recent post: What It Will Take to Bring America’s Health Care Costs Under Control––We Have to Change the Game

There Aren't Enough Rich People To Pay For Medicare And Medicaid!

I hear more and more of my progressive friends arguing, in the context of deficit reduction, that we should be raising taxes before getting aggressive about reducing the cost of Medicare and Medicaid -- as well as Social Security.

To a point, I agree.

This country is in such a hole that it is senseless to deny that at least some new taxes will be needed to pay for all of the nation's bailouts and accumulated debts.

For instance, progressives would like to end the $1 trillion cost over ten years of the Bush tax cuts for those making more than $250,000 a year.

I also believe that ending those tax cuts is necessary.

But if you're looking to better understand the budget policy choices we face, I highly recommend the March 2011 Congressional Budget Office study, "Reducing the Deficit: Spending and Revenue Options." The CBO prices out about all of the budget options.

Here's a chart from that study:
















It says that federal revenue, as a percentage of gross domestic product , has averaged 18 percent since the 1970s -- a level that sustained both economic growth and a big government pretty well. At least, until entitlement costs, for which health care is one of the main drivers, started to skyrocket.

If you believe that it is appropriate to pay what we now pay for health care in this country, then yes, we will need lots more taxes. But, on the other hand, why would you raise taxes to pay for something everybody says has a cost that is unnecessarily sky-high? Wouldn't the solution be to fix the cost problem?

Raising taxes is not going to solve the problem of out-of-control entitlement costs. Even huge tax increases on the rich won't get the job done.

After the 1990s combination of the hot economy and President Bill Clinton’s tax increase, federal revenue as a percentage of GDP rose to about 21 percent -- high by historic standards. Then the policies of President George W. Bush came along and dropped that share to about 16 percent -- low by historic standards, and arguably either boosting the economy or helping to create the economic bubble and big deficits. The Great Recession then further pushed federal revenue to a modern-era low -- about 15 percent.

According to the CBO, federal revenue will again rise to the Clinton-era level of about 21 percent of GDP -- but that is when the two-year extension of the Bush tax cuts expires for everybody.

Looks to me like those who argue the Clinton-era taxes were too high are right. Looks to me like those who argue the Bush-era tax cuts are unsustainable are right. Looks to me like those who argue that our current deficit is partly driven by lower revenue because of the recession are right.

To keep federal revenue at the apparently reasonable historic level of about 18 percent of GDP, we probably do have to give back at least some of those Bush tax cuts -- but it should not be necessary to end the Bush reductions that benefitted the middle class. And, we should also expect that some part of this revenue shortfall would be solved when the economy gets back on track.

If all of these steps were taken, it appears that we would be on the way to striking the right balance.

But, for those who think the deficit problem can be solved by just taxing the rich, let me point out another piece of startling information backed up by the CBO's study of policy choices. Replacing the 10-year, $1 trillion Bush tax cut for those people making more than $250,000 a year with a combination of lower income and capital gains taxes would still be worth $1 trillion! As the CBO options paper points out, that works out to an average of about $100 billion a year during each of the next 10 years.

That is a lot of money -- but not compared to the 2011 deficit that is estimated to be $1.6 trillion. Or the many $1 trillion deficits still to come.

Even if we were to raise the top rate to 45 precent for people making at least $1 million a year, and 49 percent on incomes of $1 billion, we would raise only $900 billion over the next decade, according to Citizens for Tax Justice -- again only a small part of the projected deficits.

So, raising taxes on rich people, by itself, hardly makes a dent.

What is making a dent -- really a fiscal train wreck -- is the out-of-control cost of our entitlements, particularly the health care entitlements.

Here is another chart based upon CBO numbers (that appeared in the recent Ryan Budget proposal:























This chart shows the impact the entitlements -- particularly Medicare -- will have on the federal budget if federal revenue were to hold at the historic level of about 18 percent of GDP. Anything above the black line is a deficit.

Now, remember, this is just entitlement spending. The rest of the federal budget -- interest on the debt, defense spending and every other department and agency would have to get loaded on top of this mountain!

Folks, we can't tax our way out of this mess.

There aren't enough rich people to do it.

This column first appeared at Kaiser Health News.

The Budget Fight: It Will Be A Long Hot Summer, and Fall, and Winter…

The good news is that Democrats and Republicans are finally seriously engaged over the country’s fiscal crisis.

And, each side is presenting a starkly different course for the voters to choose from.

When it comes to the health care entitlements, Republicans want to cut the health care entitlement benefits and therefore ease the pressure on federal spending.

Obama wants to largely leave the programs in place and raise taxes--about $1 in tax increases for $2 every dollars in cuts.

Neither touches Social Security. Obama wants to make cuts to the Pentagon's budget—the Republicans don't.

The solution Republican House Budget Chair Paul Ryan (R-WI) has presented for controlling Medicare and Medicaid costs is almost entirely a cost shift strategy. While I would agree that means testing and defined contribution approaches to making health care consumers more cost conscious should be part of the solution, this is about all Ryan is proposing.

I worry that Ryan and the Republicans are just sticking future seniors with the problem—uncontrolled health care costs—without doing anywhere near enough to create a more cost effective health insurance and delivery system for them to have a chance of finding affordable health care.

I worry less about the Republican proposal to block grant Medicaid payments to the states. While this is just another cost shift strategy that limits federal spending at the expense of the states, at least the states have the ability (and then the incentive) to implement Medicaid cost containment policies--state by state--that give them the chance of actually reducing costs and delivering affordable care. States also have to balance their budgets every year--a real incentive the feds don't have!

The President said all of the right things about health care in his budget and debt speech yesterday. But this President has been saying the right things, while telling us we can’t kick the entitlement can down the road any longer, since he took office. And, then he just kicks the entitlement can down the road.

The only promising health care proposal I heard from the President yesterday was his proposal to strengthen the Medicare Cost Board (the IPAB), which the Affordability Act created last year. But even that was far more tepid a proposal than it needs to be. He would only sharpen the trigger—invoking the Board if spending began to exceed GDP growth by one-half a percent rather than the current one percent. What he really needed to do was expand the breadth of its powers, to include things like the benefit structure, and to get it working sooner—it now can’t impact health care spending before 2015—2020 for hospitals.

Neither the Republicans nor the President have done anything near enough in their proposals to counter the chronic unsustainable rise in health care spending that is just going to continue without systemic change to the way providers and insurers are paid.

Republicans pretty much just shift costs to seniors and the states. Obama pretty much just shifts the costs of these unaffordable programs to the “rich” through bigger taxes.

I doubt Ryan's Medicare cost shift strategy has much of a chance politically. The President will have all he can do to keep both Democrats and Republicans, under pressure from the provider special interests, from repealing the Medicare cost board as it now exists.

Whatever the political outlook for either side, we are about to see another budget and deficit showdown/crisis around Memorial Day—this one over raising the debt ceiling.

The two sides couldn’t have more different approaches to the problem—but neither really have solutions.

When the two sides get past what will quickly become the debt ceiling crisis—likely no more smoothly than they did the recent government shut-down crisis over the 2011 budget, then it will be on to the 2012 budget fight and the same stark differences and lack of real health care solutions.

This summer's debt limit, and the fall's 2012 budget confrontations, will be herculean fights.

Too bad these fights won’t be over how to solve the problem.


More on the Republican Health Care Proposal: The “Path to Prosperity”—Where’s the Health Care Cost Containment?

On controlling costs: What It Will Take to Bring America’s Health Care Costs Under Control––We Have to Change the Game

What It Will Take to Bring America’s Health Care Costs Under Control––We Have to Change the Game

Last week, I posted that I was disappointed in Paul Ryan’s health care budget proposal because it lacked cost containment ideas other than the usual conservative reliance upon the market and defined contribution health care.

In my last post, Why ACOs Won’t Work, I argued that the latest health care silver bullet solution, Accountable Care Organizations (ACOs), are just a tool in a big tool box of care and cost management tools. But, like all of the other tools over the years like HMOs and IPAs, they won’t be used as they were intended because everybody—providers and insurers—can make more money in the existing so far limitless fee-for-service system.

How do you make the American health care system efficient?

You change the game.

You can’t let the $2.5 trillion health care industrial complex any longer make money just getting bigger. The new game has to be one that only pays out a profit for results—better care for a budget the country can live with. There are lots of tools available to do that. ACOs, capitated HMOs, disease management, enormous data mines, electronic patient data systems, and so on.

How do you change the game?

Generally, it will have to be an unavoidable policy imperative that will have to make the giant and powerful health care industrial complex shift to a more efficient and sustainable platform. They gotta have a reason that is unavoidable.

There must be no other choice for them but to play the game differently with new rules that make profit possible only if they make quality care affordable for America.

And, it has to be a policy change. As I have said here before, the conservative notion that the market can, by itself, accomplish this is every bit as naive as the liberal argument we just need a government payer to make things instantly better. There is no evidence in the under-65 market or in Medicare Advantage that the market can do it by itself. There is also no evidence that the giant single payer system we now have—Medicare—has done it.

I also have no illusions about how hard this will be—that recent history is evidence that accomplishing such a game changing policy is all but impossible. The recent health care debate and the lack of cost containment in the Affordable Care Act (I wouldn’t have called it that), makes that clear. Even as this country faces annual deficits of over a trillion dollars and an accumulated $14 trillion dollar debt there is no appetite for real health care solutions—witness the Ryan plan and the Congress’ inability to tackle the Medicare doc payment mess.

Just look at the one thing in the Affordable Care Act that might at least begin to put us on a path to affordable care—the Medicare Independent Payment Advisory Board (IPAB). It would take policymaking for Medicare payments out of the hands of the Congress starting in 2015—2020 for hospitals—and put those decisions with an independent expert board.

But already one Republican and Democratic “deficit hawk” after another is trying to kill the IPAB before it even starts mostly because the health care industrial complex wants it dead. These politicians argue these are decisions that should be left to elected officials. You might also find it interesting to know that the Republican leading the charge for the repeal of the IPAB, Representative Phil Roe (R-TX), received $91,000 in campaign contributions from providers in the last election cycle—double that of the next category of givers on his list (contractors).

A couple of years ago, I suggested a way to get the attention of the health care industrial complex and change the game was to tie the tax deductibility of health insurance offerings to that network of insurers, doctors, hospitals, drug companies, and other providers’ ability to meet cost targets (the Affordability Model). Either control costs or lose the tax incentives for consumers and employers to buy your services and therefore your ability to compete for business. That would get their attention.

That would change the game.

So, if in the face of all of these recent failures to really tackle costs, is there any hope policymakers will be able to give us a game changer?

I will remind you of a post I did last fall. In it I quoted former Fed Chairman Alan Greenspan. When asked if he thought we could ever implement the kind of tough budget medicine called for by the Deficit Commission chairs he replied, “The only question is, is it before or after a bond market crisis.”

This country is headed for a health care budget. The only question is will it be forced on us just before or just after the bond crisis. Just before or just after the rest of the world tells us they aren’t going to subsidize this American fiscal mess—largely driven by our health care costs—any longer.

Then the question will be about whether we have the sense to rationally manage that health care budget with all of these tools we have been developing for 20 years or will the politicians, in the midst of a real crisis, just impose expedient and arbitrary (as in ration care) budget solutions?

I hope the path we will then take is to change the game in a rational way.

Why ACOs Won’t Work

First, I think Accountable Care Organizations (ACOs) are a great idea. Just like I thought HMOs were a good idea in 1988 and I thought IPAs were a good idea in 1994.
The whole notion of making providers accountable for balancing cost, medical necessity, appropriateness of care, and quality just has to be the answer.

But here’s the problem with ACOs: They are a tool in a big tool box of care and cost management tools but, like all of the other tools over the years like HMOs and IPAs, they won’t be used as they were intended because everybody—providers and insurers—can make more money in the existing so far limitless fee-for-service system.

I see the $2.5 trillion American health care system as a giant health care industrial complex. It just grows on itself and sucks in more and more money. Why not? The bigger it gets the more money we give it.

How do you make it efficient? You change the game. You can’t let it any longer make money just getting bigger. The new game has to be one that only pays out a profit for results—better care for a budget the country can live with. There are lots of tools available to do that. ACOs, capitated HMOs, IPAs, disease management, enormous data mines, Electronic Patient Data Systems, and so on.

But, here’s the rub. There isn’t a lot of incentive for payers and providers to do more than talk about these things and actually make these tools work. Right now they can just make lots more money off the fee-for-service system. They demand more money and employers and government and consumers are willing to just dump more money into the system. Sure they complain about it but they just keep doing it.

On the heels of the “Patients Rights Rebellion” (or maybe better titled the Provider Rights Rebellion) in the late 1990s, a CEO of one of the biggest health plans told me, “We’ve had it. We tried to manage care. Actually got results. Then consumers and employers and the politicians all sawed the limb off on us. Screw it. Back to fee-for-service. We can make more money doing that and not take all of this heat. They won’t admit it but that is what they [patients, employers, and politicians] really want.”

ACOs won’t succeed in the near term any more than capitated HMOs and IPAs accomplished anything in their day because there is no reason—no imperative—for the health care industrial complex to want them to succeed.

Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?

Oh, there will be some providers—particularly hospital administrators—who can’t wait to build an ACO but probably more because they want another excuse to corner the primary care docs as a marketing channel for their growing system. But spend millions to develop an ACO so they can get less money? Only in the policy wonk netherland does that compute.

The only people on the ball when it comes to this ACO idea are the anti-trust lawyers and with good reason.

In my next post, I will talk more about how we might change the game so that these tools can work.

Update October 2012
POLITICO Pro Health Care's team leads an interactive conversation focusing on the role and future of ACOs and their impact on providers and patients featuring Dr. Donald Berwick, former President and CEO, Institute for Healthcare Improvement, and former administrator, Centers for Medicare and Medicaid Services; Joseph F. Damore, FACHE, Vice President, Premier Inc.; Bruce M. Fried, SNR Denton; Karen Ignagni, President and CEO, America's Health Insurance Plans; Robert Laszewski, Health Policy and Strategy Associates.
Link to the video here

The “Path to Prosperity”—Where’s the Health Care Cost Containment?

Paul Ryan’s overview of his proposed 2012 Budget Resolution contains an honest and compelling description of America’s debt and deficit spending dilemma.

Every American should read it.

As I read through his discussion of the huge hole we’re in and the imperative to fix it, he had me thinking that we finally have a politician willing and ready to deal with the problem. But when I got to the end of the document, I felt like there was a missing chapter—the one with the controversial and politically problematic but necessary bad news solutions.

In Ryan’s document, his proposed solutions for unsustainable entitlement spending in Medicare, Medicaid, and Social Security each get a few paragraphs with little in the way of detail. The Affordable Care Act gets fixed by simply repealing it.

Beyond his defined contribution market ideas for Medicare, he only mentions tort reform and eliminating the Medicare physician fee cuts (at a cost of $350 billion over ten years) without reforming the Medicare docs payment system.

From what I see, Ryan’s solution to the federal entitlement budget mess is to largely shift the problem to individuals and the states.

Let me be clear, I agree with much of the direction Ryan takes. None of this will be solved without doing things like raising eligibility ages (to 67 for Medicare), means-testing, giving Medicare and Medicaid beneficiaries incentives to spend theirs and taxpayer health care dollars more wisely and giving the states the Medicaid flexibility they need to master the biggest part of their budgets—as well as ending one unfunded federal Medicaid mandate imposed on the states after another.

Ryan deserves a lot of credit for putting these things on the table—where Democrats have already begun to demagogue them.

But the conservative notion that if we just create more robust health care markets and our health care funding challenges will just all painlessly go away, is naive. Just like it is naive for liberals to argue that all we need is a single-payer health care system--or a "public option"--to fix it all. Decades of a single-payer Medicare system have not proven that approach capable of solving the problem on its own any more than decades of a private insurance/managed care system for those under age-65 have proven the market on its own capable of solving the health care cost problem. Nor have private Medicaid insurance plans that have helped the states control costs proven to be, by themselves, the silver bullet.

And, Ryan ignores a huge “elephant in the room” when he argues that giving seniors “premium-support” to subsidize their private Medicare purchases will lead to a more cost effective program. If that were the standalone solution, why after 20-years aren’t private Medicare Advantage plans cheaper than the traditional Medicare program?

When it comes to health care, it looks to me like Ryan has done what the Democrats did last year when they passed the Affordable Care Act—he fell way short on the real issue: Controlling costs.

When Democrats and/or Republicans are willing to face the cost issue and fundamentally begin to change the financing system and the perverse incentives that payers, providers and consumers now deal with every day then we will finally begin to talk about solutions.

You will know it the minute they do. Those finally held responsible for controlling costs will be screaming about the dislocation real reform will cause.


You might also find David Whelan's Forbes article, on the topic of liberal objections to a voucher system, of interest: Paul Ryan's Medicare Plan Sounds Just Like Zeke Emanuel's Voucher System


What might cause Democrats and Republicans to finally face the health care cost issue head-on? Prior post: Will it Be the Bond Market That Finally Forces Serious Health Care Financing Change?

So How Are Democrats and Republicans Different?

Just how is the way Wisconsin Republicans have handled the political confrontation over worker rights different than the way Washington, DC Democrats handled last year's health care vote?

With apologies in advance to Ezra for taking some liberties with his column yesterday evening in the Washington Post:

What happened in Wisconsin [Washington DC] tonight [last March]
By Ezra Klein [Bob Laszewski]

Here's what just happened [last March] in Wisconsin [Washington, DC]: The rules of the state's [U.S.] Senate require a quorum [60 votes] for any measures that do [don't] spend money. That's how the absence of the Senate's Democrats [the election loss in Massachusetts] could stymie Gov. Scott Walker's [the Democrat's efforts] to block [pass] the proposed budget law [the new health care bill] -- it spent [parts didn't spend] money, and thus it needed a quorum [60 votes].

But in a surprise move earlier today [after the Massachusetts loss], Wisconsin's [Washington's] Senate Republicans [Democrats] rewrote the bill [using reconciliation rules] and left out all the parts that spent [didn't spend] money. Then they quickly convened and passed the new law, which included the provisions stripping most public-employee unions of their collective bargaining rights [a bill that dramatically impacted 14% of the economy and the delivery of everyone's health care] but excluding everything in the law [by crafting a special a reconciliation bill leaving everything out that] that spent [didn't spend] money.

What happens [happened] next? Expect the protests over the next few days [ensuing months] to be ferocious. But unless a judge [the Supreme Court] rules the move illegal -- and I don't know how to judge the likelihood of that -- Walker's [the Democrat's] proposed [new health] law will go forward. The question is whether Walker and the Republicans [Obama and the Democrats] who voted for it will do the same.

Polls in Wisconsin [across the country] clearly showed that Republicans [Democrats] had failed to persuade the public of their cause. Walker's [Obama's, Reed and Pelosi's] numbers dropped, while Democrats and unions [Republicans and the Tea Party] found themselves suddenly flush with volunteers, money and favorable media coverage. And they plan to [did] take advantage of it: Eight Wisconsin Republicans have served for long enough to be vulnerable to a recall election next year, and Democrats have already begun gathering signatures. Now their efforts will accelerate. "We now put our total focus on recalling the eligible Republican senators who voted for this heinous bill," said Mike Tate, chairman of the Wisconsin Democratic Party. "And we also begin counting the days remaining before Scott Walker is himself eligible for recall." [The Republicans scored the biggest off-year election victory in a lifetime.]

Fixing America's Health Care Reimbursement System

This post is authored by Brian Klepper and first appeared at Kaiser Health News:

A tempest is brewing in physician circles over how doctors are paid. But calming it will require more than just the action of physicians. It will demand the attention and influence of businesses and patient advocates who, outside the health industrial complex, bear the brunt of the nation's skyrocketing health care costs.

Much responsibility for America's inequitable health care payment system and its cost crisis is embedded in the informal but symbiotic relationship between the Centers for Medicare and Medicaid Services and the American Medical Association's Relative Value System Update Committee -- also known as the RUC. For two decades, the RUC, a specialist-dominated panel, has encouraged national health care reimbursement policy that financially undervalues the challenges associated with primary care's management of complicated patients, while favoring often unnecessarily complex, costly and excessive medical services. For its part, CMS has provided mostly rubber-stamp acceptance of the RUC's recommendations. If America's primary care societies noisily left the RUC, they would de-legitimize the panel's role in driving the American health system's immense waste and pave the way for a more fair and enlightened approach to reimbursement.

As it is, though, unnecessary health care costs are sucking the life out of the American economy. Over the past 11 years, health care premium inflation has risen nearly four times as fast as the rest of the economy. Health care costs nearly double those in other developed nations have put U.S. corporations at a severe competitive disadvantage in the global marketplace.

Many health care experts believe that half or more of all health care expenditures -- the costs of bloated transactional processes as well as inappropriate procedures, service sites and prescription drug levels -- provide no value. For perspective, this year we'll unnecessarily spend nearly $1.5 trillion on health care, an amount equivalent to the budget deficit. Though we continually have given physicians and the health care industry a pass on this issue, its impact can be understood as the difference between our national prosperity and decline.

The current system's under-valuing of primary care is one of three structural flaws -- the other two are fee-for-service reimbursement and a lack of cost, quality and safety transparency -- that produce excess spending and block the health care sector from working as a true market. Overwhelming evidence shows that allowing physicians to serve as patient advocates and guides throughout the entirety of care results in better outcomes at significantly lower cost. Recently, patient-centered medical homes, super-charged primary care practices, have demonstrated measurable cost and quality successes, also proofs of the approach. These facts are indisputable and are, by the way, the reason why America's corporations are stepping up the use of on-site primary care clinics.

Meanwhile, a spate of recent articles about the RUC have produced swift, strong responses within key circles. They have been passed virally among primary care physicians. Discussions have begun with people who might have influence over the process. And sensible changes in this advisory system seem possible.

Seizing that opportunity would first require mobilizing primary care doctors to demand that their professional societies, such as the American Academy of Family Physicians and the American College of Physicians, abandon the RUC. Then these physicians also would call on CMS to replace it with a more independent advisory panel. That effort would also launch a national discussion about how to more fairly value and pay for America's health care.

But one man's waste is another's income. The current reimbursement system handsomely serves most of the health care industry: health plans; hospitals; specialists; and drug, device and technology firms. Threaten that revenue stream, and those organizations would direct their considerable resources to its protection. In 2009, records show that some members of Congress collected $1.2 billion in health care lobbying contributions - more than it had ever received from an industry on an issue - from health care interests. America's 250,000 primary care physicians are simply no match for the combined power and influence of the rest of the health care industry.

In an influence-driven government like ours, it is the non-health care business sector that has the organization and leverage necessary to drive the health care changes America so desperately needs. The health care industry represents one dollar of every six dollars in the U.S. economy, but industries outside health care represent the other five. If American businesses, led by groups like the National Business Group on Health, the Pacific Business Group on Health, the Business Roundtable, the National Retail Federation, the U.S. Chamber of Commerce and the National Federation of Independent Business were to advocate for the same policies in national health care reimbursement policy that their members are often implementing in their own on-site clinics, it would have a dramatically positive impact on the nation's physical and economic health.

Ironically, health care reform specifically avoided addressing the carnage that has been wrought by the RUC. If America's primary care physicians, backed by the nation's corporations, all working out of enlightened self-interest, were to focus on addressing this one structural defect, the corrective impact on our health system would be greater than all the reform bill's cost-reduction provisions combined.

Brian Klepper is an independent health care analyst, Chief Development Officer for WeCare TLC Onsite Clinics and the editor of Care & Cost. His new site, Replace the RUC, provides extensive background on the issue.

The Republicans Had Better Get Organized on Health Care

If the past week is any indication, the Republicans will have real trouble come 2012 trying to convince voters they have a plan to fix the American health care system.

Last weekend, President Obama endorsed the Wyden-Brown bill that would give the states the opportunity, in 2014, to take their share of the almost $1 trillion the new health law collects and use it to craft an alternative health care plan to their liking.

With Republicans now controlling the “trifecta” in 16 states—the governorships as well as the state legislatures—it is a very interesting offer.

I found an editorial this week in the Wall Street Journal criticizing the offer puzzling.

In an editorial titled, “Obama’s Health Waiver Gambit—the White House offers the mirage of state flexibility," they wrote:

Mr. Obama's new faith in federalism is trailed by his customary rhetorical asterisk. Any state that the Administration decided deserved a waiver would still need to cover the same number of uninsured, and its coverage would still need to include the same comprehensive benefits and be as "affordable" as the Administration says it should be. That is, it must be as heavily subsidized.

So perhaps states could opt out of some consumer or employer mandates, which is a minor release valve. But they would still need to find other mechanisms to achieve the same liberal priorities, which in practice leaves little room to innovate—especially for a straight tax deduction or credit to purchase individual coverage or alternative insurance designs like high-deductible or value-based plans.

Say what? Getting rid of the individual mandate—the thing Conservatives are focusing their Constitutionality challenges on—is only an offer to jettison “a minor release valve?”

It looks to me like the WSJ is saying conservatives would not be able to cover as many people as well as the Democrats are on their way to doing under the Affordability Act.

First, let me remind you that the CBO has estimated that the new law would only cover about two-thirds of the uninsured. And, that the standard of coverage demanded by the new law sets the “Silver Plan” as the standard—essentially a typical comprehensive major medical plan with a $1,000 deductible. And, let’s not forget that the Affordability Act would require a family of four making $65,000 a year to pay $6,175 in out-of-pocket annual premiums net of any federal subsidy—hardly what the WSJ called, “heavily subsidized” premiums.

The WSJ laments that there isn’t enough “room to innovate” with tax credits and high deductible plans.

Why not? Why can’t a Republican tax credit plan be devised using the Democrats money pot? I see no reason an actuarially equal conservative high deductible plan that gave any excess Democratic cash to consumers in the form of deposits to Health Savings Accounts can’t be crafted that is financed with tax credits. And, all of those Republican governors’ complaints about Medicaid? Here is the block grant of all block grant offers!

Could a Democratic HHS Secretary play games and deny a state an actuarially sound conservative alternative? Sure but after the offer the President put on the table this week, suffer lots of political consequences doing it.

Could the Democrats rig the game by demanding things like too rich a definition of the standard benefits? Sure. But a Republican governor could also put a more reasonable plan on the table and dare a Democratic HHS Secretary to reject it.

Just how would a Democratic HHS Secretary deny a state any reasonable health care alternative experiment that had just passed both houses of the state legislature and had been signed by the governor?

It is notable that more liberal states like Vermont and Oregon look like they are ready to take up this challenge by crafting even more liberal health plans for their states. You have to give the liberals credit--at least they walk their talk.

By embracing Wyden-Brown, President Obama has offered the Republicans a put up or shut up political challenge: Show me how you can cover as many people as well as we did.

The Republicans are afraid of this challenge? The Republicans don’t think they know how to cover two-thirds of the uninsured for the same money the Democrats are spending? The don’t think they can craft a consumer-driven plan with a health savings account for the same money it will take to provide the “Silver Plan?” They think telling a family of four making $65,000 a year that still has to pay $6,175 for a plan with a $1,000 deductible that they are still too “heavily subsidized”?

If I had been advising the Republicans this week I would have told them that focusing on criticizing the benefit side of the new health care law, as they all did, was the wrong strategy.

Where they could have been critical of the President’s challenge, and still been consistent with their past arguments and objections to the new law, would have been to point out that the $1 trillion Democratic money pot they would have to use to fund their alternative comes from the new law’s tax increases and Medicare cuts they opposed last year. In essence, they could have pointed out that they still oppose having to fund their version of health care with the “fruit from an objectionable tree.”

I still think it’s tantamount to immoral to raise $500 billion over ten years in taxes to pay for this, and not go after the real problem of cost, when about everyone believes there will be many trillions of dollars of waste in our health care system over those same ten years.

But for one Republican after another to admit that they couldn’t take their state’s share of a trillion dollars and use it to craft a health care system that covered their portion of the 32 million more people, using the new law’s modest “Silver Plan” as the standard of coverage, and still leaving big gaps in premium support for the middle class, that was startling to watch.

They better have a health care plan they believe in come 2012.

They also had better be able to explain it.

Defined Contribution Health Care—The Conservatives' Silver Bullet

Conservatives are in a full court press these days telling us the answer to America’s out-of-control health care costs—and our fiscal crisis—is to move Medicare, Medicaid, and the tax code subsidy for private insurance to a defined contribution system.

Instead of the federal government defining a benefit and then shouldering the cost of whatever that promise leads to (today’s defined benefit plan), many conservatives are suggesting that we gradually move to a system where the government only promises an annual payment (or tax credit) for health care in the form of a voucher and then the consumer uses it (arguably more efficiently) to buy one of many health plans competing for their business.

First, let me tell you that I think defined contribution health care is generally a good idea. For too long the federal tax system and Medicare policy has subsidized careless health care spending.

Many worry that defined contribution health care would lead to poor people getting second-class health care because they would not be able to afford more than the voucher allows them. That is a legitimate concern and while that outcome can be tempered it cannot likely be eliminated. But that also occurs today, as many seniors have nothing more than a combination of Medicare and Medicaid while the wealthier can afford much better supplemental insurance. And, it will occur in the future under the Affordability Act because the new federal health care subsidies are based on the more limited plans available.

But I will also tell you that it is naïve to think the way to control health care costs is to simply move to a more market-oriented defined health care system.

We’ve had forms of defined contribution health care in the health benefits business for at least 20 years. It has long been common for employers to fix their contribution and then offer a cafeteria-like set of health plan choices. Not only has that approach not controlled costs, it has become somewhat passé as many employers have been disappointed with the results and more recently gone back to consolidating their health plan offerings.

Many conservatives cite the Federal Employees Health Benefit Plan (FEHBP) as an example of a defined contribution program that has worked. It is very well run. But just where is the full cost of a federal worker’s health benefits under control, sustainable, and affordable or measurably lower than any other large employer?

The argument goes that if consumers have vouchers then health plans will compete with each other to control costs and make health care more affordable. Well, isn’t that what has been going on in all of these defined contribution employer plans over the years? And, just where are the affordable plans?

And, isn’t this what the Medicare Advantage program of private choices has been about? It has been operating in one form or another for more than 20 years. And, once again, where are the private plans that are less costly than Medicare? Hasn’t the recent health care debate been about the extra payments, above the cost of standard Medicare, that these plans have been receiving?

The health care industry actually took a pretty impressive run at offering health plans that worked hard to control costs back in the post-Clinton Health Plan period of the mid and late 1990s. The insurers did such a good job of screwing down the provider costs and limiting “unnecessary” care that we got the “Patient Rights Rebellion” (or maybe it was the “Provider Rights Rebellion”).

When employers and consumers actually had the chance to choose lower cost plans with more limited networks and tighter cost controls they rejected them. When that was all there was available to employees, they rebelled and employers ran from them. The result was a movement away from pure HMO plans in the late 1990s and a return to fee-for-service models.

What makes conservatives think the consumer/voter won’t rebel again when they figure out the voucher doesn’t give them the health care they think they are entitled to? What makes the conservatives think the politicians won’t chicken out and just keep increasing that voucher at unaffordable levels just like they now keep bailing out the less powerful physician lobby?

I think defined contribution health care is a productive tool that has a lot of potential to make consumers more careful purchasers and health plans more cost effective sellers of insurance—when it is part of a more comprehensive approach to unavoidable cost containment and value-based purchasing—when we also say no.

But then I guess I can be criticized for believing in “Death Panels.”

But defined contribution health care as a standalone strategy to fix what ails the American health care system without having to face real limits on what we pay and what we pay for? That is naïve.

But that argument does have some political appeal to the right (albeit not to the left) because it offers a somewhat painless solution—you still have the right to have whatever you want and no one is going to take away or limit anything you have today. Magically, we’ll all be enlightened purchasers happily cognizant of the health plan offering us both the lowest cost and the best brain surgery in town and everyone will have affordable health insurance.

To me, hearing a conservative say the answer to America’s health care (and deficit) problem is a defined contribution health care system that reinvigorates the markets is as naïve as hearing a liberal saying that a single-payer government-run health care system will magically give everyone the health care they need for an affordable price.

Will the Congress Change the Health Care Law During the Next Two Years?

No. But I expect the Patient Protection and Affordability Act to be “relitigated” in 2013, to one degree or another.

I recently posted on the controversy over the individual mandate. I suggested a number of alternatives to the mandate—including my own ideas.

I was asked if I really thought the Congress would change the individual mandate in the short term.

As I have posted before, it will be the Democrats who will be calling for repealing the individual mandate and replacing it with an alternative—particularly the vulnerable Senators up for reelection in 2012.

Ironically, it will be the Republican opponents to the new health law and the individual mandate who will block them. The Republicans are not about to take the Democrats off the political hook the very unpopular individual mandate represents for them. Republicans are also not about to remove the potential ticking Constitutional time bomb the mandate presents—it could take the whole law down.

Until we hear from the Supreme Court and get the results of the 2012 elections we are going to hear a lot of rhetoric from both sides but I don't see any changes to core pieces of the legislation. Yes, the Congress will likely repeal the peripheral revenue raising 1099 provision and there could be some current budget cuts HHS is going to have to work around.

But the early provisions of the bill—things like keeping your kids on your policy until age-26—will continue until we at least here from the Supremes.

But in 2013, I see the potential to revisit the law:

• If the Supreme Court throws it all out—not likely but not impossible—we will have to start over.
• If the Supreme Court overturns only the individual mandate—not likely but very possible—the imperative to fix that will open the entire bill up to changes as part of the bigger deal that will be required for both sides to come to agreement. The conservatives would want more in exchange for their votes than to just fix this one piece.
• Even if the Republicans sweep the elections—the White House and both houses of Congress—I can’t see how they will have 60 Senate seats and compromise will be needed for some critical non-budget changes with or without a Supreme Court ruling.
• If the Republicans only make modest gains or even lose seats (this election shouldn’t be taken for granted by either side), Democrats will still be facing an unpopular individual mandate and at least have some political incentive to do some fixing—most of those polled believe the law at least needs some improvement. Although, a big Democratic victory would likely mean no incentive for them to open the law up again in 2013 to any fundamental change.
  

So, yes, I don't see any changes to the individual mandate or any other core element of the new health care law before 2013.

But it looks to me like we are only two years away from some critical Congressional votes on the new health care law. In that context, the debate has begun and it isn't just a theoretical exercise.

In an earlier post, I outlined a number of areas where I thought Democrats and Republicans could eventually come to an agreement:

Improving The Health Law In 2011: Realistic Ways To Reach Bipartisan Compromise

Alternatives to the Individual Mandate—Some Are A Lot Better Than Others

With Constitutional challenges to the individual mandate now threatening the very life of the new health care law, Republicans aren’t the only ones that would like to see it jettisoned and replaced with something better.

And it isn’t just the Constitutional challenges that are prompting a second look. The mandate doesn't work politically and it doesn't maintain the integrity of the market because either most middleclass families in the individual market would be exempted from it anyway or have to pay fines that are a small fraction of the cost of the insurance.

That has led to discussion of a number of alternatives:

The Medicare Part D Approach
Increase the premiums for people who sign up after they are first eligible for the rest of their life.

But I doubt this scheme has a lot to do with the success of the senior drug program. The drug benefit is a huge value and it only costs seniors about $25 per month. As a result most have signed up and the risk pool has been a good one—irrespective of the penalty for late enrollees.

The problem with this approach for comprehensive health insurance is that health insurance costs a great deal more—perhaps $1,000 a month for a family. How much of a penalty would you charge for the rest of the person’s life? An extra $100? That likely wouldn’t be enough of a penalty to encourage participation—especially if people can opt in and out of the system whenever they get sick. $500 for the rest of their life? Not practical.

Would you only charge the penalty for a few years? Even charging an extra $500 a month for a few years wouldn’t come close to off-setting the cost of a major claim—people would quickly calculate they could make money waiting and gaming the system.

The old underwriter in me will tell you that you can never charge enough of an anti-selection premium. The more you charge for the risk that you will only get the sickest people, the fewer and the sicker the people who will sign up. It just becomes one big game and a vicious cycle.

And, what would prohibit people from just getting in and out of the system every time they got sick? How would you even keep track of the penalties each time they reentered?

This has the potential to become a heavily gamed system that would only lead consumers to become cynical about the whole process.

Limited Open Enrollments
Allow people to sign-up for guaranteed issue health insurance only once a year—perhaps each January 1st.

The problem here is that a person who doesn’t sign up on January 1 and then gets sick in September has only a three-month wait for coverage. Knowing that the insurance is available each January 1 creates an inequitable, and likely, insufficient system to encourage participation. This system would be open to being gamed instead of being a real incentive to become part of the insurance pool.

Create an open enrollment every two years? That would be criticized as too long a wait to have any kind of insurance—both for pre-existing conditions as well as coverage for new conditions. Create an open enrollment period on the first anniversary of the first time a person is first offered insurance? That would be an administrative nightmare.

Voluntary Health Insurance and the Ability to Sign-up Whenever You Like—But With Responsibility
A Mandatory and Uniform Waiting Period Before Pre-Existing Conditions Are Covered for Late Enrollees.

I have suggested this approach before. My sense is that this is the simplest to understand, easiest to administer, and most effective in terms of creating the broadest possible insurance pool.

Simply, people could sign up for guaranteed issue health insurance when they first became eligible for it at work or in the exchange. Buying health insurance would not be mandatory—no individual mandate.

Besides being able to sign up for insurance when they were first eligible, people could sign up for it any other time they wished—a month later, a year later, whatever—and they would be covered at standard rates.

But if they did not sign up for insurance when they were first eligible, their pre-existing conditions would not be covered for a minimum period—perhaps one or two years. Such a system would also have the advantage of providing coverage for any new health problems and would cover all members of a family--neither of which would be immediately covered under the two alternatives.

Such a system would be easy to understand—you can sign up any time but if you don’t do it right away your pre-existing conditions aren’t going to be covered for a long enough time that you are better off entering the pool right away.

Such a system would be relatively easy to administer—the insurance industry already knows how to administer late enrollments and pre-existing conditions provisions.

Such a system could be completely voluntary—no individual mandate and no Constitutional challenge.

Such a system would be far more popular than the individual mandate because it wouldn’t be mandatory and it would be equitable—sign up whenever you like but you will be responsible for your actions if you later get sick and expect immediate coverage.

Some have argued, are even continuing to argue today, that only the individual mandate can force people to buy coverage--particularly younger people.

But that misses two critical points:

1. The individual mandate is in big Constitutional and political trouble--all of the academic arguments in favor of the mandate may not matter.
2. The way to get people covered is to provide affordable coverage--which the new act does not do for too many.

We really don’t need a mandate if health insurance is affordable for everyone. There are no mandates today that people buy coverage when it is offered at work and we have an excellent and efficient risk pool--and that is true for even the youngest consumers. But that is because the employer so heavily subsidizes the cost of coverage that it is a great deal for consumers.

The problem with the Affordability Act is that the coverage is not affordable for most middleclass families would have to buy it on their own.

So long as that is the case, there is no alternative but to have a strong incentive to buy the coverage. But it does not have to be an individual mandate.

Things Are About to Get Ugly—-Republicans Plan to Defund the Health Bill Next Week

Word is that House Republicans will attach an amendment to the latest federal spending bill that will cut-off funding for the health care bill.

The last Congress never finalized a budget for the current fiscal year—the feds have been operating under a series of continuing resolutions. The most recent one will expire on March 4th. If another resolution is not agreed to, much of the government has to shutdown.

House Republicans, under heavy pressure from their base, have decided to take the Democrats on over the new health care law by cutting all remaining funding for implementation of the law in the current 2010 fiscal year (October to October).

Democrats, under the same heavy pressure from their base to protect the bill, aren’t about to let them do that. While the Republicans can accomplish this in the House—and will next week—they don’t have the votes in the Senate and they don’t have the President’s pen.

Now, I know the Republicans won the last election and they control the House. But what is their end game here?

Shut the government down until the Democrats agree to suspend the health care law? With Democrats under the same intense pressure from their base to protect the new law at all costs, they aren’t going to agree to do that.

With the polls showing the country evenly split on this law, about the only political outcome either side will accomplish is to show their base just how macho they are.

Just where might a compromise occur? HHS can have half the money it needs? That won’t make the Republican base happy.

Where will this end?

As George W Bush used to say, don’t get into a war unless you have an exit strategy.

Has the Florida Judge Stopped the New Health Care Law in Its Tracks?

Reading page 75 of today's Florida opinion it sounds like that is his intent:

(5) Injunction

The last issue to be resolved is the plaintiffs’ request for injunctive relief enjoining implementation of the Act, which can be disposed of very quickly.

Injunctive relief is an “extraordinary” [Weinberger v. Romero-Barcelo, 456U.S. 305, 312, 102 S. Ct. 1798, 72 L. Ed. 2d 91 (1982)], and “drastic” remedy [Aaron v. S.E.C., 446 U.S. 680, 703, 100 S. Ct. 1945, 64 L. Ed. 2d 611 (1980)(Burger, J., concurring)]. It is even more so when the party to be enjoined is the federal government, for there is a long-standing presumption “that officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.” See Comm. On Judiciary of U.S. House of Representatives v. Miers, 542 F.3d 909, 911 (D.C. Cir.2008); accord Sanchez-Espinoza v. Reagan, 770 F.2d 202, 208 n.8 (D.C. Cir.1985) (“declaratory judgment is, in a context such as this where federal officers are defendants, the practical equivalent of specific relief such as an injunction . . .since it must be presumed that federal officers will adhere to the law as declared by the court”) (Scalia, J.) (emphasis added).

There is no reason to conclude that this presumption should not apply here. Thus, the award of declaratory relief is adequate and separate injunctive relief is not necessary.

Presumably, this applies only in the 26 states that brought the suit. And, of course we should expect the Appeals Court with jurisdiction over this judge to rule on his finding--including the possibility of an emergency order keeping the law in effect during the appeals. But what happens to the early benefits of the law in the meantime?

More uncertainty over the implementation of the new health law.

You can download the complete opinion here.

Now We Have Real Uncertaintly--The Entire Health Law Ruled Unconstitutional!

We all knew the question of the constitutionality over the new health care law was going to be taken up by the Supreme Court.

We knew that because the law inexplicably lacked a severability clause a judge could throw the whole thing out if the individual mandate were to be found unconstitutional and critical to the legislation.

And, we expected this Florida judge would likely rule against the law in some way.

Up to today, we knew that one federal judge had ruled that only the individual mandate was unconstitutional while two other federal judges had upheld the law.

But, I will suggest that the market's uncertainty about implementing the Affordability Act just went up exponentially with a second federal judge ruling against it. And, there is nothing like the whole thing being thrown out in a suit 26 states have brought.

It will likely be 18 months before we get a final Supreme Court ruling--not to mention a number of Appeals Court Rulings in the meantime. Will they uphold the entire law, throw it all out, or just the individual mandate? Four federal judges have put at least those choices on the table.

If you are a provider, do you now spend millions of dollars developing an Accountable Care Organization? Do you build that new building or make a big technology purchase? If you run an insurance company do you make a big strategic bet on exchanges or now marginal markets?

We really don't know any more this afternoon then we knew this morning.

But the uncertainty index just took a huge jump!

It Will Be Democratic Senators Leading The Charge To Fix Or Improve The New Health Law

I wrote this Kaiser Op-Ed before today's federal court ruling, that held the entire health care law unconstitutional because of the individual mandate. Now that two federal judges have held the individual mandate unconstitutional, this one overturning the entire law because of it, I have to wonder just how long the Democrats are going to wait before they try to amend the Affordability Act in order to jettison the individual mandate that threatens the whole thing.

When the House of Representatives roll was called Jan. 19, only three Democrats joined with House Republicans in voting to repeal the new health law. This development was notable in that it meant most of Democrats who voted against the overhaul the first time around, and were reelected to Congress in November, voted not to repeal it this time -- evidence that they may be sensing that support for the health overhaul hardening. A quick examination of public opinions offers evidence as to why this idea might be taking hold.

First off, recent polls have shown public perception of the overhaul may be improving. Although the country is still evenly divided in its overall feelings toward the new law, a recent Washington Post-ABC News poll found that less than one in five want the whole thing repealed. Similarly, a Kaiser Family Foundation poll released the day of the President's State of the Union address found that, though about half of Americans remain opposed to the measure, most aren't as supportive of repealing, replacing or defunding it as congressional Republicans are. (KHN is a program of the Kaiser Family Foundation.)

Another recent poll, this one by Fox News, found only 27 percent of those asked wanted the whole law repealed while 34 percent wanted parts of it repealed and 20 percent wanted it expanded. And within Fox's collection of numbers, one specific finding jumped out. Only one in seven of those polled by Fox News want the health law to remain as it is. In other words, for now at least, the country seems to be settling on "fix or improve" attitude toward what we have.

Backed by findings like these, Democrats in Congress seem just as convinced defending the bill is a winning issue as Republicans are certain they have the high ground in trying to scrap it.

But what do voters want in the run-up to the 2012 elections? Cooperation.

A recent USAToday poll found that 80 percent of those asked said the President Barack Obama and the Republicans should work to pass legislation they can agree on -- even 70 percent of Democrats agreed with that. Eighty-three percent said that it is extremely important for House Republicans to pass legislation that both parties agree on -- including 77 percent of Republicans.

More than another bitter and protracted health care debate in 2011, what Americans want the Congress to focus on is policies that will lead to more jobs. While I expect a number of House committees to hold lots of health care hearings in the next few months, I also expect Republicans to begin to move on to other issues rather than spend the whole year on health care.

Back home, most House Democrats are not on the defensive over the new health care law. But that is not always the case with Senate Democrats. With a disproportionate number of their seats in play in 2012 -- and with Sen. Kent Conrad, D-N.D., already deciding not to run again -- it will be the Senate Democrats up for reelection who most want to look like they are being the constructive ones. The individual mandate may be one of the areas on which they focus their attention.

My sense is that what many Americans, particularly swing voters, want to hear most about health care is that Democrats and Republicans found a way to work together to make the new law better -- not repeal it, but not leave it as it is either.

Ironically, I expect it will be these vulnerable Democratic senators, not Republicans who still think they have a winning issue bashing the new law, who will be the most eager to fix or improve the measure.

"Quit the RUC"

Brian Klepper and David Kibbe have a notable column at Kaiser Health News arguing that the American Medical Association's Relative Value Scale Update Committee (RUC) is specialist dominated and steers health care resources away from primary care:

Not surprisingly, the Committee’s payment recommendations have consistently favored specialists at the expense of primary care physicians. More striking, however, is CMS’ rubber stamping of about 90 percent of their suggestions, even though, in their last three service reviews, the RUC urged payment increases six times more often than decreases.

This arrangement has played out well for specialists, but the health system consequences have been catastrophic. One significant result has been a primary care shortage. Specialists now earn, on average, $135,000 a year and $3.5 million over the course of their careers more than their primary care colleagues. The income disparity has driven all but the most idealistic medical students away from primary care.

You can read the entire column here.

The House Health Care Repeal Vote, the National Debt, and the Imperative for Democrats and Republicans to Compromise

This week's House health care repeal vote is little more than a political stunt--everyone knows the effort will die in the Senate.

But, when the day is done the only way for the Republicans to do anything with the new health law will be to work out a compromise—repeal before the 2012 elections is impossible and it isn’t very likely after the 2012 elections. Even if the Republicans sweep the White House and both houses of Congress in 2012, it is highly unlikely they will have the 60 Senate votes needed for a full repeal.

So, in the end, a compromise will be needed.

During the past week, more than one Democrat has indicated an interest in at least looking at compromise amendments to the health care bill—particularly on the individual mandate. But so far, Republicans are showing no signs of being interested in fixing what they say is a bill so bad it should only be repealed.

The House vote will take place against a backdrop of increasing debt and enormous fiscal challenge. In recent days, the national debt passed the $14 trillion mark—that is $45,300 for every person in the country!

Half of our national debt was added in just the last six years. The debt was “only” $7.6 trillion in January 2005 and $10.6 trillion the day President Obama was inaugurated just two years ago.

Last year the deficit was $1.7 trillion and the estimate is for the deficit to be $1.3 trillion this fiscal year—40% of this year’s budget is unpaid for.

The estimate is that the federal government will hit the statutory debt ceiling by the end of March or early May. Lots of newly elected conservatives want to use the required vote to increase it as their first salvo against deficit spending. The problem is that we are going to need to raise the ceiling or face default on our debt.

This debate will be a thorny one for both sides: “The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance the government's reckless fiscal policies.” That was a statement on the Senate floor by Senator Obama on a prior debt-ceiling vote (to $9 trillion) in 2006.

It is not possible to have a conversation about getting America’s fiscal house in order without talking about health care—the single largest driver of federal spending. How both sides get around to talking about health care cost containment having punted on that issue for the last two years will be interesting to watch.

And, neither side can deal with the national debt until they are willing to get serious about working together on the health care entitlements.

In a recent post, I listed a number of places both sides could compromise on improving the Affordability Act:

1. Eliminating the individual mandate and replacing it with freedom of choice with responsibility – The existing mandate gives many families the choice of paying a fine they can't afford or paying even higher and more unaffordable insurance premiums. Because the penalty doesn't apply when family premiums reach 8 percent of income, which will be the case for many, it isn't even a very effective individual mandate.

Instead, a compromise could make guarantee issue health insurance entirely voluntary. If it is purchased when the consumer is first eligible -- such as when the exchanges are first available or at the time of a new job -- the consumer would not be subjected to underwriting or preexisting condition rules. The compromise, though, should let consumers purchase and use their health insurance at any other time. But if they didn't purchase coverage when they were first eligible, any preexisting condition would be subject to a two-year waiting period.

2. Eliminating the benefit mandates in the new law and creating a free market of health insurance choices, but with a standardized baseline for ease of comparison – Eliminate all of the benefit mandates in the new law requiring individual market and exchange consumers to purchase only plans that are yet to be outlined in what will be hundreds of pages of regulations. Instead, a compromise could have only two new benefit requirements. One could be a standard plan, which would take the law's existing "silver plan" and use it as a baseline. Every insurer would have to offer this coverage on the exchange or in the individual market. But insurers could also offer consumers any other plan design, so long as they told consumers the relative actuarial value the other plans had to the standard plan. The second would be a health savings account. Every insurer would have to offer an HSA-style program and state its value relative to the standard plan. Consumers who would be eligible for premium subsidies would have any premium savings deposited in a health savings account.

3. Eliminating the "Cadillac" tax on high cost health insurance plans and introducing elements of a conservative defined contribution approach to the existing liberal defined benefit legislation – With exchange premium subsidies already based upon the value of the new law's silver plan (and they should continue to be), the compromise could limit the employer deduction for health insurance, as well as the individual income tax exemption for employer-provided health insurance, to the cost of the standard plan (currently the silver plan) in any year. Phase this limit in over a period of seven-years -- to 2018, when the "Cadillac" tax was to take effect. As a result, tax policy would continue to support comprehensive coverage but also provide real incentives for consumers to buy wisely.

4. Using the budget gains from limiting the existing health insurance tax preference to pay for such things as improving the now inadequate insurance subsidies for the middle-class, permanently fixing the Medicare physician payment issue, or for reducing the deficit. In 2008, the CBO calculated a 10-year savings of $450 billion by limiting health plan tax preferences to the 75th percentile of premiums then paid by employers.

5. Letting states have the flexibility to experiment with alternatives by enacting the proposal by Sen. Ron Wyden, D-Ore., and Sen. Scott Brown, R-Mass., that would move up to 2014 the year in which states can submit proposals to the Secretary of the Department of Health and Human Services to implement their version of health care reform. The law already allows states to petition the federal government to use the overhaul's money to enact their own plans so long as they cover as many people as the new law would have -- but not until 2017.