Health Care Reform: The Senate, the President and the Truth

In an effort to salvage some hope for the flagging Senate health reform bill and to provide sustenance for the neutered Harry Reid, President Obama convened all Democratic senators at the White House earlier this week for a strategy session.  Per Mr. Obama, this activity was not a roll call to establish a majority but moreover, a time to convene his party and to find “common ground” on the issues that have stalled the passage of the bill.  In all likelihood, the session was more about damage control for Senate democrats and the President as well as a time to eulogize the now deceased public option/Medicare expansion.

 After the conclusion of the meeting, Mr. Obama gave a quick press conference, saying little more than he was, “ pleased with the progress, issues remain that will be worked out, passage is certain and in the end, the bill meets the broad outline that he provided in his speech to the Joint Session of Congress”. Mr. Obama also took the opportunity to reinforce the White House party-line regarding the Bill’s success in reducing waste and efficiency, covering 30 million people presently uninsured, reducing the deficit (the largest single piece of deficit reducing legislation according to Mr. Obama) and reforming health insurance practices (eliminating pre-existing conditions, life-time maximums, and prohibiting insurers from dropping coverage due to claim experience).  Mr. Obama effectively chastised any of the Bill’s critics stating that (summarized), ‘contentions that the Bill doesn’t reduce the deficit or that it raises taxes and is hurtful to small business’ were fabrications, designed to undermine the good of health care reform’.  At one point, Mr. Obama even stated that “not one single health care economist” disagreed that the Bill would be good for the U.S. health economy and the economy in general.  He further claimed that the CBO, being the non-partisan expert that it is, supported the Bill’s positive impact on the deficit and that it does in fact, “slow the trajectory of health care spending in the U.S.”.

 In so much as I dislike disagreeing with the claims of the President (it seems somewhat unpatriotic to basically call the President a liar), I feel in this case, it is imperative to re-direct the President’s statements with the facts. 

  • Fact: The CBO scoring of the Bill only projects a ten year period.  In the Bill, the revenue from all taxes begins immediately as do the Medicare cuts while the actual spending or expenditure side is phased-in gradually beginning in year 3.  When fully phased-in, according to the CMS Office of the Actuary, the Bill actually produces a greater deficit than the present system.  If Mr. Obama is referring to the “revised” Bill (whatever that may be) sans the public option, the CBO has yet to score the final version as no such Bill has been produced.  One final point here: The Congressional Budget Office is far from truly non-partisan and historically, inaccurate in its projections – historically low.  I doubt that in this one instance, the CBO has become conservative and is factoring its projections on the “high side”.  I think former British Prime Minister Benjamin Disraeli said it best: “There are three types of lies – lies, damn lies, and statistics”.
  • Fact: The Bill raises taxes substantially including on small businesses, particularly any small business that has revenues above $500,000 and is organized as an LLC, a Subchapter S, a partnership, service corporation or sole proprietorship.  Each of these designations requires the owner to essentially pay income taxes on the net revenue of the business at the owner’s personal tax rate.  Small businesses that presently don’t offer health insurance to their employees will face a penalty or begin to provide a health plan for their employees.  Apparently, Mr. Obama thinks that the taxes within the Bill will only affect wealthy individuals, forgetting that small business owners may in fact, fall into this classification.
  • Fact: No health care economists, not one, are in disagreement that the Senate bill is good for the U.S. health care economy and the economy in general?  He must mean just the one’s he’s talked to.  Being a health care policy and economics guy myself, I can safely state that the Bill is far from good for the health care economy and far from good for the U.S. economy.  There is nothing in the Bill that reduces the cost of health care, save Medicare cuts which are frankly, one time and I’d be surprised if they are not eventually, sooner rather than later, reduced or eliminated by Congress.  Congress has a history of not being able to maintain spending reductions in entitlement programs too far back and too deep in number to list.  The Bill dramatically expands Medicaid yet provides no reforms to Medicaid or for that matter, sufficient funding resources to the states to cover the expansion.  Medicaid, as I have written before, is a ridiculously structured program, rife with benefit and service gaps and inefficiencies on a state by state basis.  This provision alone is justification of my argument that the Bill is far from beneficial for the U.S. health care system.  The Bill also raises, yes raises, the cost of health insurance for most individuals not income qualified to receive a subsidy.  How can higher cost health insurance be good for the health care economy let alone the U.S. economy?  I seem to think that an individual, paying more his/her health insurance as a percentage of their income, has fewer dollars to invest or spend, hurting not helping the overall economy.  Finally (though not totally as I could go on for pages), the Bill contains 2,000 pages with hundreds devoted to new regulations and new charges given to the Secretary of Health and Human Services to write new regulations; all focused on health care.  Mind you, all of these new regulations are on-top of, existing regulations as the Bill plainly states repeatedly, that the regulatory process is in addition to, the requirements already in-place.  Again, perhaps I am a bit callous and cynical but I hardly think that the addition of hundreds upon hundreds of new regulatory provisions creates any value for a system already enmeshed in regulation and bureaucratic inefficiencies.  Medicare and Medicaid are already laden to the point of bursting with regulation and bureaucracy and the Senate bill adds more.  Good for the health care system and health care economy?
  • Fact: The Bill does nothing to “bend the cost curve” , again unless one  believes that Congress has the will-power collectively to stick to Medicare spending reductions and is willing, as will certainly be required, to periodically adjust downward, Medicare and Medicaid spending as required.  In reality, this is such an illogical conclusion and preposterous claim on the part of Mr. Obama that it seems hardly worth the effort on my part to point out the obvious flaws.  For example, unless Mr. Obama or any politician or group of politicians can alter the demographic shift occurring in the U.S., Medicare can’t possibly keep from growing arithmetically.  The reality is that the Senate bill changes nothing fundamentally about Medicare, its funding or its benefit and reimbursement structures save the one time spending reductions which, again I doubt seriously that Congress will maintain over time.  The core set of issues with Medicare are simple. First, it is and will remain a system that reimburses more for more complex care and increased utilization, particularly at the institutional level. Nothing within the Senate bill changes this reimbursement system paradigm. Second, there are more people achieving the benefit age due to the aging demographic than there are non-beneficiaries paying into the system.  Nothing within the Senate bill changes this fact or alters the age to attain the benefit.  Third, the combination of an aging demographic and a populous that is living longer, often with disability or chronic conditions that pre-ordain additional use of the presently configured health system under the present benefit structure, will with certainty, lead to additional utilization.  Again, nothing in the Senate bill changes this fact or frankly, even shifts resources toward better reimbursement for primary care, additional funding of any magnitude for chronic disease management or for any innovations or care models that have proven to reduce unnecessary and expensive utilization.  In short, the Bill does nothing to fundamentally change how healthcare is paid for or delivered and without such changes, “bending the cost curve” is frankly, a preposterous and unsupported claim.

 The cold reality is that the Senate bill is nothing more than the House bill politically contrived to survive passage in the Senate where hopefully for Mr. Obama and his party’s sake, the conference process can craft a final bill that can be passed and serve as a political victory for Democrats and the President.  Factually, the Senate bill, like the House bill, does nothing to reform health care or the health system, to reduce the level or trajectory of federal health care spending, or to improve the quality and reduce the costs of health care in the U.S.  One thing that is factually correct is that in any shape or form remotely similar to what is presently presented in the House or Senate, the final legislation will lead to more dollars spent for healthcare in the U.S. from all sources and no improvement whatsoever in quality or access as a result; in the end, a rather dismal tradeoff for such an expensive proposition.

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