Vapor Agreement

So the latest bright idea from the closed room meetings on Capitol Hill … expand government-run health plans. Now that's creative!

Senate Majority Leader Harry Reid announced that 10 Democratic senators met for a day and came up with this brilliant idea in their plans to transform one-sixth of our economy. But it is becoming clear that they produced nothing more than a vapor agreement and that the leadership is still struggling to get to 60 votes.

But liberals were gleeful about the warmed-over idea of allowing people down to age 55 to buy in to Medicare. Rep. Anthony Weiner, D-NY, called it "the mother of all public options … Expanding Medicare is an unvarnished, complete victory for people like me who support a single-payer system. Never mind the camel's nose — we got his head and neck in the tent."

"Panic and recklessness"

  • The Washington Post took on the idea in a scathing editorial yesterday called "Medicare Sausage" that was quoted repeatedly on the floor yesterday. "The only thing more unsettling than watching legislative sausage being made is watching it being made on the fly … The irony of this late-breaking Medicare proposal is that it could be a bigger step toward a single-payer system than the milquetoast public option plans rejected by Senate moderates as too disruptive of the private market."

  • The Wall Street Journal continued the bombast today: "It's hard to imagine a better illustration of the panic and recklessness stringing ObamaCare along in the Senate than the putative deal that Harry Reid announced this week."

A Medicare buy-in has all the same problems that a public plan does, especially below-cost payment rates. And constituencies mobilized instantly:

  • The Mayo Clinic sent a letter saying, "Any plan to expand Medicare, which is the government's largest public plan, beyond its current scope does not solve the nation's health care crisis, but compounds it. … This scenario follows the typical pattern for price controls — reduced access, compromised quality and increasing costs anyway."

  • Even the American Medical Association opposed it: "A Medicare buy-in program would adversely impact American society by putting people into a government program that is going broke … We would add millions of more patients to a program where it is difficult for a new enrollee to get an appointment with a physician," according to AMA President J. James Rohack, M.D.

  • Hospital associations mobilized and told member hospitals to contact their senators immediately, The American Hospital Association said: "Adding millions of people to these programs at a time when they already severely underfund hospitals is unwise and should be opposed."

    The Federation of American Hospitals said it is "is strongly opposed to this proposal … A Medicare Buy-In would involve Medicare rates; would be controlled by CMS; and would crowd out older workers with private coverage who may choose early retirement as a result."

Joe Antos and I wrote a piece for The Wall Street Journal in September with the top ten reasons why Medicare should not be a model for reform. It's relevant again now.

And no one has the vaguest idea how the other part of the vapor agreement would work — a new non-public option run out of the Office of Personnel Management in Washington. Here's a piece I wrote on Tuesday for National Review as that idea surfaced.

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Polls: And then more poll numbers started rolling in. Yesterday's CNN result was the worst yet, showing that the American people oppose the Senate's health reform effort. It found 61% oppose and only 36% support the efforts.

The National Federation of Independent Business came out strongly last week against the Senate bill, saying it "is short on savings and long on costs, is the wrong reform, at the wrong time and will increase healthcare costs and the cost of doing business.” And a new coalition of leading business organizations, including the National Association of Manufacturers, the U.S. Chamber of Commerce, the National Retail Federation, and many others said it "will lead to higher costs and increased burdens on small businesses. The bill will cause greater damage to our economy and health care system …[and] will impose new burdens on small businesses.”

In the face of this opposition, how on earth are they going to move forward with a bill that still has major problems in the two weeks before Christmas with vulnerable senators facing certain public backlash in election battles next year?

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Rick Foster weighs in: The chief actuary of the Centers for Medicare and Medicaid Services yesterday released his office's assessment of the Senate bill, and it contains more bad news for Sen. Reid.

Foster found that the Senate bill would bend the cost-curve UP, not down, over the next decade and that the new taxes on drugs, devices, and health insurance plans will increase prices and health insurance premium costs for consumers.

As with the House bill, he says that if the legislation is successful in limiting Medicare's cost growth to a level below medical price inflation, providers "could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the Medicare program (possibly jeopardizing access to care for beneficiaries)."

And he issued stern warnings about the accounting gimmicks (my word) being used to pretend the bill doesn't add to the deficit. The combination of alleged lower spending plus tax increases make it appear, because of budget accounting rules, that Medicare's Part A trust fund would be in better shape under the Reid bill. But he warns, "In practice, the improved Part A financing cannot be simultaneously used to finance other Federal outlays (such as the coverage expansion under [the Reid bill]) and to extend the trust fund."

He says elsewhere that making the cuts to Medicare that Reid's bill includes would "represent an exceedingly difficult challenge."

This is very strong language for actuaries.

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Senate on drugs: The Senate got tangled up in a debate over drug importation, debating an amendment offered by North Dakota Democrat Byron Dorgan. This amendment would import price controls from other countries and jeopardize the safety of the drug supply for the American people, in addition to decimating the reward for continued investment in new drugs.

Jack Calfee of AEI has an excellent new piece out that explains more about the many potential repercussions. Even the Obama administration's FDA commissioner has weighed in against it.

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Innovation: O
ur conference on Wednesday on "The Value of Innovation in Health Care" could not have been better! Our speakers gave a wealth of examples about how important it is that any reform initiatives nurture the innovation that is the hallmark of American medical care. I have run out of space here, but I will write more about the conference in the future.

In the meantime, you can access the agenda, PowerPoints, and webcast here. It was the best conference of the season — anywhere!

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This week's clip of the week comes from the Galen Institute's Value of Innovation in Health Care conference, held on December 9 in Washington. The conference featured speakers with varied roles in the field of health care and policy, from Reps. Jeff Fortenberry, Michael Burgess, M.D., Phil Gingrey, M.D., and former FDA head Dr. Andrew von Eschenbach, to leaders in biomedical engineering, health technology, and health services implementation.

This clip features Rep. Paul Ryan, one of two keynote speakers at the conference. Congressman Ryan discussed the current health care reform proposals on Capitol Hill, and their impact, specifically with regard to health innovation.

Special thanks to the Congressional Health Caucus for the use of their audio-visual equipment.


Senate Health Care Reform Spells Trouble for Nebraska

Grace-Marie Turner, Galen Institute
Omaha World-Herald, 12/06/09

Nebraska's interests have become the nation's interests as the health reform debate reaches a critical stage in Washington, D.C., and U.S. Senator Ben Nelson is one of a handful of key players who will determine whether the legislation helps or harms the state and the nation, Turner writes. Sen. Nelson voted to allow the debate to proceed and his next crucial vote will be deciding whether to close the debate. Turner describes some of the considerations that are crucial to Nebraska — and the nation — including exploding costs, cuts in payments to hospitals, losing your current coverage, and increasing future health care spending. Read More »

More Nutty Ideas from the Senate

Grace-Marie Turner, Galen Institute
National Review Online: Critical Condition, 12/08/09

Faced with opposition among a few key Democrats to creating a new government health plan, the latest bright idea that Senate negotiators have come up with is to have the federal government's Office of Personnel Management (OPM) run a new national health plan, Turner writes. But it gets worse. OPM would negotiate terms with private insurers, and then create a network of new non-profit groups that don't yet exist to run the program. This latest proposal, along with the ideas of putting tens of millions more people on Medicare and Medicaid, are simply different guises for expanding government control over the health sector. Read More »


All's Not Fair in Health Reform Bills

Douglas Holtz-Eakin, Manhattan Institute
The Boston Globe, 12/10/09

Health care reform has been cloaked in an aura of moral ascent, but the actual bills are unimaginably unfair, Holtz-Eakin writes. He explains the example of "Jane, a primary breadwinner making $48,000 (in 2016) to support her family of four. If Jane is offered insurance by her employer that meets the test, she must accept it or pay a fine. That means Jane ends up paying for the entire cost of, say, a $14,100 policy, according to some economists. Then she pays the premiums out of pocket and the remainder indirectly because employers offer reduced paychecks to offset the cost of their share of health insurance. Now, meet Julie, who also makes $48,000 and is not offered insurance at her job. Julie heads to the newly created exchange to purchase the same policy. But it costs her only $5,300. The rest — about $9,000 — comes from federal subsidies. Fair?" he asks. No, we answer. Read More »

The American Enterprise Institute hosted an event last week on "Are the Current Health Reform Bills Fair?" The event featured James Capretta of the Ethics and Public Policy Center, John Sheils of the Lewin Group, and Gene Steuerle of the Urban Institute. AEI's Joe Antos moderated the event. Video and conference materials are available here.

Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional

Randy Barnett, Nathaniel Stewart, and Todd Gaziano
The Heritage Foundation, 12/09/09

The individual health insurance mandate is truly unprecedented, Heritage experts write. The federal government has never required all Americans to buy any good or service. The mandate to buy health insurance does not regulate the health care or insurance markets; it regulates the doing of nothing. If Congress really had the power to regulate such inactivity, there would be no limit to its power. Congress could mandate the purchase of anything. Yet, the Supreme Court recently made it clear it will strike down federal statutes based on such unlimited assertions of power. Senators' and Representatives' highest obligation is fidelity to the Constitution, which does not allow a personal health insurance mandate, the authors conclude. Read More »

Debate: Don't Buy Into Medicare Buy-In

Sally Pipes, Pacific Research Institute
Sphere, 12/09/09

The proposal to allow Americans as young as 55 to be allowed to buy in to Medicare, which would add about 2 million to 3 million people to the Medicare rolls, would be disastrous for America's fiscal — and physical — health, Pipes writes. Already, the program is deep in debt, and expanding Medicare to an even greater swath of the population would drown the federal budget in even more red ink. Further, expanding Medicare will exacerbate cost-shifting and result in higher health care prices for tens of millions of patients. Americans should see the buy-in proposal for what it truly is — an expensive backdoor p
ath toward government-controlled health care. Read More »

Squaring Healthcare with the Economy

Thomas P. Miller, American Enterprise Institute
Council on Foreign Relations, 12/08/09

Leading versions of health care legislation before Congress this year remain more likely to weaken U.S. economic competitiveness, at the margin, than to improve it, Miller writes. We should do better in improving the value of health care services. However, the pending bills mostly promise more care and more insurance, with little essential health reform in return. Partially shifting the high cost of health benefits from one set of pockets — employer payrolls — to the pockets of taxpayers (which include business firms and their customers) will neither reduce their net claim on the overall economy nor strengthen incentives to produce better health outcomes at lower costs. The current bills unfortunately would set us back in that regard. Their most likely results would be further spikes upward in government spending, unfunded entitlement obligations, federal budget deficits, tax burdens, and regulatory drag on the economy; and tighter squeezes on investment, innovation, and human capital development. Read More »

The Medical Bill You Need to See

Ezra Klein
The Washington Post, 12/08/09

Health care coverage is not a benefit, Klein writes. It's a wage deduction. When premium costs go up, wages go down. When premium costs go down, wages go up. Yet workers don't know that. In fact, the information is hidden from them. That means that cost control seems like all pain and no gain, which makes it virtually impossible for Congress to pass. Perhaps the easiest way to dramatize the issue for workers would be to attach health care costs to each paycheck. If employers listed the cost of health care alongside the bite taken by payroll taxes, it would be much clearer to workers that health care coverage was coming out of their wages, not out of their employer's largess. That, at least, could help them see the costs of the system more clearly, which is, unfortunately, something that all the congressional debate isn't helping anyone do. Read More »

You Will Lose Your Private Health Insurance

Robert Tracinski
RealClearPolitics, 12/10/09

The biggest power-grab in the Senate bill is the government takeover of the entire market for health insurance, Tracinski writes. The bill requires all new policies to be sold on a government-controlled exchange run by a commissioner who is empowered to dictate what kinds of insurance policies can be offered, what they must cover, and what they can charge. It so comprehensively wrecks private health insurance that pretty soon a "public option" will seem like the only alternative. If the Left's goal is to impose socialized medicine in America, this bill does it in the most callous and destructive way possible. It smashes private health care — then leaves us stranded in the rubble, at which point we will be expected to come crawling back to the same people who caused the disaster and ask them to save us. Read More »

The Health Insurance Reform Debate

Scott Harrington
American Enterprise Institute, 12/08/09

Harrington provides an overview of the U.S. health care debate and reform bills in the House and Senate, with a focus on proposals that deal directly with health insurance. Main points:

  • If a public plan were to base reimbursement on Medicare rates, with or without a modest markup, the plan would shift costs to and increase the potential crowd-out of private health plans, and it would threaten the financial stability of some hospitals and physicians.
  • Even with negotiated rates and other suggested safeguards, equal competition between private insurers and a public plan is infeasible. A public plan would hold less capital than private insurers and ultimately be backed by taxpayers. It would not pay the taxes that private insurers pay. For those reasons alone, a public plan could have a cost advantage of five percent or more.
  • Proposed subsidies for the creation of government-authorized, non-profit health insurance cooperatives would likewise create some risk of ongoing subsidies by taxpayers and crowd-out of other plans.


Read More »


Can a Medicare Commission Bend the Nation's Health Care Cost Curve?
National Center for Policy Analysis Event
Tuesday, December 15, 2009
Washington, DC

Grace-Marie Turner on the Stuart Varney Show
FOX Business Television Broadcast
Wednesday, December 16, 2009
1:00pm EST

Grace-Marie Turner appearing on Stossel
FOX Business Television Broadcast
Thursday, December 18, 2009
8:00pm EST

Grace-Marie Turner on the Small Business Advocate Show
Small Business Radio Broadcast
Friday, December 18, 2009
7:20am EST