Douglas Holtz-Eakin, Author at ��ϳԹ�� News

What Repeal Is Not About

Douglas Holtz-Eakin — Tue, 18 Jan 2011 18:33:25 +0000

With the House of Representatives poised to vote on the repeal of the Patient Protection and Affordable Care Act, there has been a flurry of commentary regarding what is at stake. First and foremost, the law itself is not at risk this week. Regardless of the action in the lower chamber, no sane observer believes that a repeal vote will pass the Senate or ever be signed by President Barack Obama.

Despite this, defenders of the law have launched a massive disinformation initiative regarding the vote. So, in the interest of dispassionate evaluation, let us step back for one moment and review the situation.

First, this is not about . Yes, repeal would roll back the specific provision of the health law in this regard. But there is nobody on either side of the debate who favors the inability of those with costly, pre-existing medical ailments to obtain insurance. There are deep disagreements over the best way to reach this goal, but the basic objective is, and always has been, shared on both sides of the aisle.

Similarly, a repeal vote is not about defending insurance companies. Conservatives have no love of insurers and many of their proposed reforms would have forced insurers to compete much more vigorously for the business of Americans. For this reason, many (if not all) insurers are nervous about the notion of repeal as it puts at risk the easy access to customers engendered by the measure’s individual mandate.

More generally, repeal is not about being happy with the status quo. It is easily forgotten that at the start of the health care reform debate in January 2009 there was a bipartisan agreement that health care reform was needed. And there was consensus that real reform would provide insurance for more Americans. So like that of New York Times columnist Paul Krugman who said of the Republican leadership: “They’re against reform because it would cover the uninsured – and that’s something they just don’t want to do” are just nonsense and shameful.

This brings us to what a repeal vote is about: real health care reform. In January 2009, all sides agreed that the central tenet of health care reform was to control the growth of health care spending. And it is now well understood that the health law fails this test, as witnessed by the of dispassionate experts ranging from the Congressional Budget Office to the Obama administration’s actuary. So, with the overhaul’s framework, the health care cost spiral will continue. Repeal is about moving to reforms that will control costs.

Worse, the law sets up two new open-ended entitlement programs that will feed at the trough of excess cost growth and fuel the already-explosive growth in federal spending, deficits and debt. Repeal is about caring enough for the next generations to not destroy the foundation of their prosperity and saddle them with our debts.

Finally, repeal is hopefully about a new era in politics. Many candidates ran for office promising to reverse this measure. They ran in an environment in which the top three issues where jobs, controlling federal spending and accountability. To not hold a vote for repeal would be to deny their accountability to the voters who put them in office. It would be to deny the importance of controlling federal spending. And it would be to deny the importance of pro-growth policies, especially in the one-sixth of the economy most riddled with inefficiency: the health care sector.

Real health care reform that delivers quality care at lower cost and controlling explosive federal spending and debt — that is what the repeal vote is about.

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Health Reform: Here We Go Again

Douglas Holtz-Eakin — Mon, 23 Aug 2010 12:29:00 +0000

Consistency may emerge as the only merit of the health care reform circus. Damaging, poorly developed policies and a broken process characterized passage of the health law, the Patient Protection and Affordable Care Act. Implementation is shaping up in the same vein. Consider the latest controversy over “medical loss ratios”. The MLR measures how much of premiums insurers pay out for medical care (versus, say, administrative cost). The new law requires that insurers have an MLR of at least 80 percent for individuals and small businesses, and 85 percent for large employers, or pay a refund to beneficiaries.

The health overhaul delegated to the National Association of Insurance Commissioners the job of defining medical care expenses and a myriad other details associated with the MLR computation. But the law was clear on at least one point: Sec. 2718 of the new law says unambiguously that the MLR is supposed to be calculated “excluding Federal and State taxes and licensing or regulatory fees.”

So it was a bit shocking to see Sen. Max Baucus, D-Mont., and five other committee chairmen to Health and Human Services Secretary Kathleen Sebelius and assert that “Federal taxes and fees in this context is meant to refer only to Federal taxes and fees that relate specifically to revenue derived from the provision of health insurance coverage that were included in the [health reform legislation].” And it was outright amazing to see President Barack Obama schedule, and then abandon, talking to the NAIC annual convention.

The episode is revealing on both its substance and the process.

To begin, there is no defense for including taxes in any measure of available resources as part of an MLR. Whether used to measure dollars available for payments for medical expenses or devoted to administrative costs, taxes are simply not available for those purposes and must be excluded six chairmen notwithstanding.

Worse, including taxes raises the threat of damaging and inappropriate double taxation. Most health plans are required to pay federal income taxes as well as payroll taxes. If these taxes paid to the federal government are not excluded from the premium revenue, the health plans’ MLR will be paying a potential double tax or rebate on the same net income: first paying taxes to the federal government and then a rebate to consumers using the same dollars. Double taxation is wrong in principle and in practice may be the death knell for smaller insurers.

But it doesn’t end there. MLRs have typically varied greatly across market segments and geography, something the NAIC has become familiar with during state-based reviews of rate filings. The health law federalizes the MLR and employs a blunt one-size-fits-all approach that does not permit review and fine-tuning of its impacts. Is the real agenda to create a federally-run public utility instead of a vibrant private health insurance industry?

Federalizing the MLR may have collateral consequences. Originally Americans were promised that they could keep insurance with which they were satisfied. Now separate rulemaking has revealed that even modest changes in benefit designexactly the kind of changes insurers may be forced to undertake to satisfy the MLR regulationsmay disqualify policies’ grandfathered status and violate the Obama administration’s promise.

Finally, the very presence of a federal MLR will threaten desirable innovations. The easiest way to satisfy the MLR requirement will be to spend money on those activities that bureaucrats have already blessed. But what happens if an insurer invests in an innovative tracking procedure for the chronically ill? Is this medical spending? Or an administrative outlay? The reform may exacerbate the problems of a health care sector that has lagged woefully behind the remainder of the economy in productivity growth.

But the process is just as important as the policy nuts and bolts.

The aggressive interjection of Congress into the rule-making process so soon after passage of legislation is unprecedented. The appearance of the president being prepared to do so as well puts an exclamation point on the politicization of what is intended to be a fact-finding and due diligence exercise. Given that the MLR is merely the first of hundreds of such efforts, the scope for political re-litigating of the new law is astounding. This breeds uncertainty that is undesirable for the insurance business.

The health law’s shortcomings in controlling health care costs and damage to the federal budget outlook are understood. But the economic consequences of greater uncertainty and reduced innovation are only now becoming clear.

Douglas Holtz-Eakin is president of the American Action Forum. Michael Ramlet is coordinator for Operation Healthcare Choice at the American Action Forum.

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Losing the Real Health Care Debate

Douglas Holtz-Eakin — Wed, 16 Dec 2009 18:28:22 +0000

The fractious, divided nature of the Democrats’ majority in Congress continues to extend the health care debate – and excite the press, who are enthralled by every “11th hour” compromise. Still, Democrats’ internal squabble over the public option will cause them to miss their fourth (or is it fifth?) artificial deadline this year. It also provides a convenient distraction from the real story: poll after poll shows that, in the court of public opinion, Democrats have lost the debate and lost badly.

True, 63 percent of the public still believes that the health care system needs major changes or a complete overhaul according to George Washington University’s Battleground poll. But 64 percent think that Obamacare does not address their priorities, the largest of which is the cost of health care.

It’s no surprise that no one outside the Beltway is drinking the health care Kool-Aid. Democrats’ bills are riddled with contradictions and fiscal gimmicks and the more the public learns about the legislation, the less they like it.

Nowhere is this more apparent than in the legislation’s Medicare provisions. For weeks, it has become increasingly clear that if Democrats actually follow through on their plans to cut $400 billion from health care support for the elderly, seniors will see sharp cuts in their benefits and reduced access to doctors and hospitals.

This is unlikely. But if Democrats cave to the pressures to keep up entitlement spending and simply further raise taxes to pay for subsidies for the uninsured, they’ll rob future generations of their dollars, economic vitality and hope for a more prosperous future.

The “doc fix” is a real-time example. Under both the House and Senate legislation, Medicare physician reimbursements are slated for a hit of over 20 percent starting in 2011. But House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have both advanced over $200 billion in new spending to rescind the cuts, blowing a hole in the budget along the way.

Democrats seem to believe nobody will notice. But the key constituency those 55 and older is watching closely. According to a survey released Friday by Resurgent Republic, fully 81 percent oppose the cuts to Medicare in the health legislation, which is the heart of the supposed funding mechanism. And 68 percent expect health care reform to increase the bloated deficit.

The public knows cynical bait-and-switch politics when it sees it. While embracing the program as a “sacred trust” between generations, Democrats are using across-the-board Medicare cuts to fund a new health care entitlement for the middle-class uninsured. While claiming deficit reductions, the reality is just the opposite: The Congressional Budget Office estimates that the coverage provisions subsidies, Medicaid expansions, and tax credits in the Senate bill would rise at about 8 percent annually, bending the cost curve up. While raiding one broken entitlement to fund the start-up of another, Democrats are luring new beneficiaries into the train wreck.

It is a $2.5 trillion house of cards, with Medicare at the center, poised to collapse and bring the economy down with it.

Democrats want to argue that even if their reforms are costly, we’ll end up with a better health care system. Will it really be better? Fifteen million Americans would be thrust into Medicaid, further crowding out private coverage. Their providers and hospitals would receive just a fraction of the costs of the care they provide for millions of new patients. The CEO of Johns Hopkins Medicine says the expansion could have “catastrophic effects” on the safety net care for low-income Americans.

Dozens of new committees, commissions, and panels would drown health care providers in yet more red tape, adding to the administrative headaches that plague providers now.

Using the metrics the public cares most about, the Democrats would worsen, not improve, the status quo. True, they do cover millions of uninsured but in the most expensive, bureaucratic way possible.

It’s not too late for responsible policymakers to choose a different course. Entitlement and delivery system reforms could genuinely bend down the cost curve and make existing insurance less of a burden. As savings are generated, they can gradually be used to expand coverage through high quality private health insurance.

A separate track should focus on insurance system reforms and the creation of high-risk pools that can offer coverage to the uninsured with the highest needs. The approach would cost a fraction of the legislation in Congress and responsibly expand the nation’s safety net programs. This two-tiered approach is more honest, avoids playing shell games with Medicare funding, and meets the real health care concerns of Americans.

While the press obsesses over Senator Reid’s arm-twisting route to 60 votes, voters recognize that the Democrats’ partisan legislation will lock the country into an unsustainable spiral of debt or taxes. On Main Street, Democrats have lost the real debate and that’s why it looks increasingly like their efforts will fail.

Douglas Holtz-Eakin is former director of the Congressional Budget Office and a fellow at the Manhattan Institute

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The House Bill Could Have Been Avoided

Douglas Holtz-Eakin — Sun, 08 Nov 2009 20:13:00 +0000

House Vote: Reviews Are In

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I watched Saturday night’s House vote with mesmerized horror. The good news is that it did not degenerate into a re-run of the vote for Medicare Part D an all-night mixture of retail politics and Mafioso strong-arm tactics. Instead, Speaker Pelosi kept her brass knuckles hidden behind closed doors, the proceedings were dominated only by rhetorical excess, and the proceedings moved forward like clockwork.

Unfortunately, the remainder of the spectacle was a bit hard to digest. The most obvious problem is that this is a bad bill. While one might be tempted to write it off to a triumph of good intentions over good legislation, the House bill has too many transparent flaws to be defensible. Let us review:

(1) It does not bend the cost curve. As noted by the Congressional Budget Office, it does not reduce the pace of health care spending growth. Even worse, Administration actuary Richard Foster concludes that it bends the cost curve the wrong way. In this way, the Pelosi bill betrays the basic promise of health care reform: providing quality care at lower cost. No legislation should pass the Congress that does not meet this test.

(2) It is budgetarily dangerous. The bill sets up a new entitlement spending program that grows at 8 percent annually as far as the eye can see faster than the economy will grow, faster than tax revenues will grow, and just as fast as the already-broken Medicare and Medicaid programs. It also creates a second new entitlement program the so-called CLASS Act that Senate Budget Chairman Kent Conrad correctly identified as a Ponzi scheme.

The United States is already living off the questionable generosity of China and other international lenders. The federal budget is already projected to run enormous deficits for the next decade, tripling the national debt by 2019. The Congress has already displayed no capacity to address Social Security, Medicare and Medicaid. Every member of Congress that supported this bill (as well as the American Medical Association and AARP who sold their integrity for this bill) should be writing a letter of apology to America’s children.

(3) It is budgetarily dishonest. One reason the Democrats were able to sell the bill is that it uses every budget gimmick and trick in the book: leave out inconvenient spending, back-load spending to disguise the true scale (the Senate Budget Committee minority estimates that the first 10 years of full implementation will cost $2.4 trillion so much for $900 billion or less), front-load taxes, let inflation push up tax revenues, promise spending cuts that will never materialize the list goes on. The only thing less transparent than the budget treatment was the process of developing the bill.

(4) It is economically dangerous. The bill has been sold as help for the uninsured, and the polling suggests that people are expecting relief in 2010. Instead, the bill will levy taxes and fees that simply cannot improve a precarious economic situation. It will undertake insurance market reforms that will raise the premiums of those that already have insurance, especially small businesses. As noted above, it invites a U.S. debt crisis. And the reality is that it offers no real insurance subsidies or expansions until 2013.

I could go on to dissect additional follies, but the basic point is simple: we need for our elected leaders to do better than this.

The second, and ironic, aspect of the proceedings was that they were probably also dangerous to the political health of Democrats. The bill is structured so that the first several years are nothing but bad news. Higher taxes, higher fees and misguided insurance reforms will not shower good news on America. No real sign of the misguided Medicaid expansions and debt-financed subsidies until 2013. It is a recipe for electoral backlash. As I watched, it kept running through my head: “What are these Democrats thinking? How could they get the pandering so wrong?”

The third and most troubling recurring aspect was the partisanship (although I personally can’t wait for the spectacle of Democrats’ claiming bipartisan support by cornering the single vote of Republican Ahn Cao). Republicans will now be dead-set on doing a u-turn. If so, the U.S. will achieve neither health care reform nor real health insurance reform and will have expended enormous political energy in the process. This is the worst of all outcomes.

It could have been so easily avoided. With the right leadership, a bi-partisan merger of the Republican alternative and the coverage expansions in the bill itself could have been augmented with real delivery system reforms. Alas.

On to the Senate.

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