17 January 2011

Some health care related policy and politics

Reading the blogs this morning, and seeing a lot of health care policy stuff out there:

Polls from Marist and the AP show that although opposition to the PPACA remains high among conservatives, the support for full repeal is not. The AP poll found that only about 25% of respondents favor repeal, while 20% favor leaving it as is, and 43% favor expanding the law so that it does more. As in previous polls, people like the rules prohibiting insurers from discriminating based on pre-existing conditions, and the individual mandate remains unpopular. Similarly, the Marist poll found a small majority want the health care reform act to be left in place or expanded. Does this mean the law is becoming more popular? I don't think so -- it remains deeply polarizing along ideological lines. But the take-home point from these polls might be that the intensity of opposition is easing now that the election is over, and that some of the top-line "opposition" to health care reform is, and always has been, from the left, believing that it should do more.

Nevertheless, House Republicans are ready to begin their symbolic attempt to repeal the law. I don't begrudge them their gesture: it was a clearly stated campaign promise. However, it is pretty telling that despite the Republicans' ostensible concerns about the deficit, they make no effort to find any offsets from the $230 billion cost of repealing the PPACA. While we know it's just a bit of political theater, since repeal has zero chance at the present time, the GOP hypocrisy on the deficit is nothing new. GOP policy priorities never have to be paid for, it seems, whether they be Medicare Part D or tax cuts or health care repeal. John Boehner made the curious argument that the CBO cost estimate for the cost of repeal was unreliable, since the "doc fix" costs were not included (a long-standing criticism of the PPACA from the right). Paul Krugman took advantage of his column today to shred that line of criticism, once again. It's worth quoting at some length:

Republicans have a small problem: they claim to care about budget deficits, yet the Congressional Budget Office says that repealing last year’s health reform would increase the deficit. So what, other than dismissing the nonpartisan budget office’s verdict as “their opinion” — as Mr. Boehner has — can the G.O.P. do?

The answer is contained in an analysis — or maybe that should be “analysis” — released by the speaker’s office, which purports to show that health care reform actually increases the deficit. Why? That’s where the war on logic comes in.

First of all, says the analysis, the true cost of reform includes the cost of the “doc fix.” What’s that?

Well, in 1997 Congress enacted a formula to determine Medicare payments to physicians. The formula was, however, flawed; it would lead to payments so low that doctors would stop accepting Medicare patients. Instead of changing the formula, however, Congress has consistently enacted one-year fixes. And Republicans claim that the estimated cost of future fixes, $208 billion over the next 10 years, should be considered a cost of health care reform.

But the same spending would still be necessary if we were to undo reform. So the G.O.P. argument here is exactly like claiming that my mortgage payments, which I’ll have to make no matter what we do tonight, are a cost of going out for dinner.

There’s more like that: the G.O.P. also claims that $115 billion of other health care spending should be charged to health reform, even though the budget office has tried to explain that most of this spending would have taken place even without reform. [...]

The key to understanding the G.O.P. analysis of health reform is that the party’s leaders are not, in fact, opposed to reform because they believe it will increase the deficit. Nor are they opposed because they seriously believe that it will be “job-killing” (which it won’t be). They’re against reform because it would cover the uninsured — and that’s something they just don’t want to do.

Emphasis added. I take issue only with Krugman's conclusion, that Republicans don't want to cover the uninsured. The real reason for the intensity of GOP opposition to health care reform is because it was a big win for the other team, and in the zero-sum world of electoral politics, a win for Team Blue is a loss for Team Red. The way to get back in power, beyond simply riding the economy, is to try to avenge that loss by repealing it. If the GOP was actually serious about health care reform -- which they manifestly are not -- they would be offering amendments to the law to improve it rather than blocking bipartisan fixes. They would be proposing an alternative rather than a return to the status quo. The primary goal of the modern GOP is the acquisition of power, not in governance, so they focus on repeal as a means to recover from the political wilderness.

However, the House GOP is ready to get to work protecting the profits of their allies in the insurance industry. Rep Carter (R-TX) is preparing a resolution to block implementation of regulations which would require insurers to spend at least 80% of premium dollars on medical costs. It, too, is a long-shot to pass, but the fact that the first priority of the GOP is to ensure that insurers can continue to spend as much as they like on CEO pay, profits and administrative overhead is also a telling sign of where their true intentions lay.

Austin Frakt at the Incidental Economist provides evidence that the individual mandate in Massachusetts is working as intended -- that the rate of uninsurance is very low (about 2%) and that adverse selection, or people gaming the system is so low as not to ba a problem. This is informative as to what should happen in 2014 when the PPACA is implemented nationally. He goes on to point out that this is not to say that the mandate will decrease costs or improve access to care -- those are separate issues that the mandate was not intended to directly address. 

On an unrelated note, I can't help but comment on the fact that Starbucks' is introducing a new larger-size drink, the "Trenta." At nearly a liter in size, it exceeds the average capacity of the human stomach. I leave it to you to decide what, if anything, that says about the state of American civilization.


  1. Super sized coffe. Just add on whipped cream, three sugar packs ,and falvoured syrup and you may as well be eating an entire Big Mac meal in terms of calories.
    And yeah, the GOP is all about symbolic crap to make them seem all Tea-party-ish.

  2. Trenta--just because we can, doesn't mean we should.

    Maybe it's our own fault for letting them get away with making up their own language for sizes.

  3. Repealing Obamacare Will Not Increase the Deficit
    === ===
    [edited]: The Congressional Budget Office says that repealing the national health care law would reduce net government spending by $540 billion from 2012 - 2021. That is the cost of the new provisions, minus Medicare cuts.

    $770 billion in new taxes would also be repealed. Keeping PPACA would supposedly raise $770 in new taxes minus $540 increased spending, producing $230 billion more income for the government.
    === ===

    Democrats give the impression that the PPACA produces efficiencies, thus reducing the deficit. In reality, it is a big spending bill with even bigger additional taxes. Repealing it will "cost money" only in the sense that large tax increases would be repealed.

    This contradicts the sales pitch for the bill, that there would be increased efficiencies, preventive care, and more efficient administration, all acting to reduce the cost of providing health care per capita.

  4. @Andrew, does it seem weird to you, that you are suggesting that repealing taxes cannot increase the deficit? I mean, isn't it possible that by reducing revenue, a figure that represents the difference between expenditures and revenue would go up?

    D = Exp. - Rev.

    If Rev. is reduced, the D will increase, right?

    So, the headline should say, "Repealing Obamacare Will Increase the Deficit, but in a Way We Don't Care About."

  5. Andrew,

    Also bear in mind that one of the largest funding sources (i.e. taxes) is the excise tax on high-cost insurance plans. The goal of this tax is not only to raise revenue, but also to discourage excess growth in health care spending. While PPACA will certainly not be the final word on how to restrain the runaway costs of health care, this is an important provision to that end.

    To your point regarding efficiencies, PPACA certainly does contain many efficiencies. Most notably is it cuts many (250, IIRC) billions of dollars in wasteful overpayments to medicare advantage carriers, and is expected to restrain future growth in medicare spending to the tune of $500 billion. Note that this is not a "cut" in that it does not change the guaranteed benefit level enjoyed by beneficiaries. It is a huge increase in efficiency. Yes, there are taxes to go along with this -- nobody has ever denied this. But contra your claim, yes, the deficit will be higher in a counterfactual world without the PPACA

  6. To JimII,

    I am puzzled. You say I suggest "repealing taxes cannot increase the deficit". I merely explain that the $230 B deficit-reducing effect of PPACA as claimed here comes from increasing taxes, not from creating efficiencies. PPACA increases spending by $540 B, and increases taxes even more by $770 B. It is not hard to raise or lower taxes. It is hard and not demonstrated that PPACA increases the efficiency of medical services.

    To shadofax,

    shadofax: "PPACA cuts many (250, IIRC) billions of dollars in wasteful overpayments to medicare advantage carriers"
    AMG: That may be a cut in wasteful government overpayments. I'm in favor of that. That might be a reduction in waste, fraud, and abuse, but is not an increased efficiency in medical delivery. I would call it an increased efficiency in government.

    shadofax: "PPACA is expected to restrain future growth in medicare spending to the tune of $500 billion. Note that this is not a "cut" in that it does not change the guaranteed benefit level enjoyed by beneficiaries."
    AMG: I am interested in reviewing the thoughtful, detailed paper in which our government officially explains both the projected costs and the savings to be achieved. Do you know of such a paper?

    The government and CBO have been terrible at projecting the future costs of government programs. To me, the phrase "is expected to restrain future growth" is not convincing. Cutting future costs by $500 B without reducing benefits would be great. Is there a detailed explanation about how the government will do this? Again, one formally presented by our government?

    shadofax: "Yes, there are taxes to go along with this -- nobody has ever denied this."
    AMG: You didn't mention the increased taxes in your post, so I added this to the discussion.

  7. Andrew: let me google that for you.

    Here is the PDF which details ths expected cost savings in future health care expenditures. Page ten and eleven address the direct statutory reductions in payments. These are not discretionary cuts -- they are in statute, and Congress would have to pass a new law to prevent them from going into effect. Obviously, no Congress can prevent a future Congress from changing (or repealing) the law, but short of that, these savings are locked in.

    Note also that the offical score for the IPAB is only scored as saving a few billion dollars (the CBO was quite cautious on this measure) while many health care economists feel that this is the most important structural change in medicare in decades.

    Now, it's an open question whether this will do enough to bring the future increases in spending down to sustainable levels -- most observers agree that it is not enough. It's possible to imagine a reform bill which could have done moer to cut expenditures, with deeper and sooner cuts, but not one which could have passed last March.

    But the fact that the law doesn't do enough is not synonymous with a law that doesn't do anything. (And again, I point out that it was due to GOP demagougery that many of the more effective cost controls were eliminated from consideration.)

  8. @Andrew, I meant to draw attention to the headline in your post which reads, "Repealing Obamacare Will Not Increase the Deficit." That was why I suggested an alternate headline. Sorry for the confusion.

  9. To shadofax,
    You linked to pages 10-11 of Harry Reid's report. It details the expected cost savings in future health care expenditures.

    It achieves those cost savings merely by declaring that Congress will spend less for various purposes, including this section:

    === ===
    Reducing Medicaid and Medicare payments to hospitals that serve a large number of low-income patients by about $43 billion. $19 billion from [reduced] Medicaid and $24 billion from [reduced] Medicare DSH payments.
    === ===

    I don't believe that a Democratic (or any) Congress will spend less, especially for services to the poor. The CBO had to score such statements as if they were likely to happen.

    This is typical of pages 10-11. They state that Congress will just spend less on things. There is no consideration of efficiency. Efficiency is delivering more services for less money. Pages 10-11 are merely a decree. Given Reid's intent to expand the delivery of medical services, why should I believe these statements, even if the CBO was commanded to evaluate the bill as if these statements are true.

    Consider that the "doc fix" is a correction to past legislation that doctor's fees would be reduced to keep reimbursements below inflation. In fact, that provision has been waived yearly.

    The reason that it was not abolished in the past is that it was part of scoring Medicare the last time around, part of savings that were projected but which did not materialize.

    === ===
    Page 10 [edited]: An Independent Payment Advisory Board will recommend changes to the Medicare program to limit the rate of growth in that program’s spending. Those recommendations would go into effect if the Chief Actuary projects that spending per beneficiary would grow more rapidly than inflation. The board is prohibited from modifying eligibility or benefits, so it would focus on:

    • Reducing subsidies for non-Medicare benefits offered by Medicare Advantage plans; and
    • Changes to payment rates and methodologies for services furnished in the fee-for-service sector (but not affecting hospitals, physicians, hospices, and competitively bid durable medical equipment).

    CBO expects that the board would be fairly effective at meeting the savings targets during the 2015–2019 period. So, CBO estimates that (given all of the reductions that would result from other provisions [1]) this arrangement would reduce Medicare spending by an additional $28 billion over that period
    === ===

    Here, an advisory board will magically limit the rate of growth in Medicare spending. It will do this by changing payments and services to providers, other than all of the major providers.

    I don't believe it. This is merely saying that something will happen without a shred of evidence from experience. As one wag said, if there are savings from eliminating waste, fraud, and abuse, from changing payment rates and methodologies, and from introducing efficiencies into medical care delivery, then why wait for PPACA? Just do it now and accept the applause.

    To me, the government is only claiming that future commissions will find a way. I don't consider that to be a foundation for scoring the PPACA. Especially, since prior estimates of Medicare and Medicaid costs were so bad. What is different this time?

    The PPACA is quite specific about raising taxes and extending benefits. It is quite vague about reducing spending. It just says it will spend less without cutting services. So, it is a big spending bill along with mechanisms for raising even more taxes to pay for it. That isn't how it has been described by Obama, Reid, and Pelosi.

    There is no lack of claims about what will be spent and not spent through PPACA. I should modify my question above. Do you know of an official, thoughtful, and detailed account of how the government will produce more efficient healthcare?

    I assume that if there were such a document, it would already be a matter of public debate.

  10. Andrew:

    First of all, not that the cited letter is the CBOs to Reid, not Reid's authorship. I agree with you that the PPACA will not revoutionize the way healthcare is delivered. Cost containment was clearly a secondary goal to universal coverage in the crafting of the law, and we all agree that it will not do the job in toto. it is a start, however.

    Having said that, you are pretty glib in dismissing the actual cuts. They won't happen, you blithely assert, ignoring that the cuts are largely in statute, and can only be avoided if congress were to, well, repeal the law. yes, it is possible that a future congress will repeal the law or reverse the cuts, but that's hardly a flaw in the law, is it? It's a flaw in Congress itself. And if that really is the case, then the US is heading towards an inevitable fiscal catastrophe, since current treands end in insolvency. But don't criticize this law for the fecklessness of congress.

    Your citation of the SGR patch is also misleading, as this is not typical of how actual medicare cuts have been handled. In fact, almost all of the cuts in medicare over the last fifteen years have been successfully implemented and were not blocked by congress. The SGR is unique because it is an unintended cut, and a huge one at that.

    The IPAB is designed as an end-run around congress, which has routinely passed appropriation laws forcing medicare to spend money on certain favored products or services (with lobbyists friendly to legislators in key positions). The "magic" in the IPAB is the "I" -- it is independent of Congressional meddling. It was described, unfavorably, by Boehner, as Congress' cessation of soveriegnty -- which is exactly the point. Experts differ greatly on how large the savings will be, but nobody doubts that it will achieve some very large savings.

  11. Per CBPP:

    Congress Has Allowed Most Previous Medicare Cuts to Take Effect, New Study Shows

    Point being that politically it's very difficult to make cuts in entitlements, but once made they do tend to stick.

  12. To shadowfax,

    Concerning the link to "Congress Has Allowed Most Previous Medicare Cuts to Take Effect". That information was new to me. I had wrongly assumed that prior limits on Medicare/Medicaid (say Medicare) spending must have failed, either being ignored or overridden.

    So, a puzzle. Almost all past savings in Medicare are in effect, yet past and projected increases in health care costs are a severe problem. You agee above: "If that is really the case [that the PPACA limits on Medicare spending are removed], then the US is heading towards an inevitable fiscal catastrophe, since current trends end in insolvency."

    Obama and Biden say: [summary/excerpt] Health care costs are ruining the nation. Under my plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year. If you don’t have health insurance, you will have a choice of new, affordable health insurance options.

    The problem is so big that part of the savings in PPACA come from reducing reimbursements for treating the poor, from the CBO's report to Reid which you linked above (p10-11): Reducing Medicaid and Medicare payments to hospitals that serve a large number of low-income patients by about $43 billion. $19 billion from [reduced] Medicaid and $24 billion from [reduced] Medicare DSH payments.

    From my reading, reimbursement for Medicaid services, services to children and the poor, is already cut to the bone. I do find it hard to believe that the Democratic party really intends to make further cuts stick.

    Yet, you note that universal coverage is primary, and cost containment is a secondary goal: "I agree with you that the PPACA will not revoutionize the way healthcare is delivered. Cost containment was clearly a secondary goal to universal coverage in the crafting of the law, and we all agree that it will not do the job in toto. It is a start, however."

    The IPAB (Independent Payment Advisory Board) is the part of PPACA which is supposed to lower costs in the future, without cutting benefits. But, you point out that this is scored conservatively: "the IPAB is only scored as saving a few billion dollars".
      I suggest that conservative score results from there being no established success for similar boards. If there is such a success (spend less and get more by doing something different), then that is the thoughtful paper I would like to read.

    The rest of PPACA seems to be a collection of mandated "cuts" from a projected future expense. This allows healthcare expenses to increase, and even increase per capita and above inflation, because it does not state what the absolute increase in expense will be after the "cuts" are made. If medical expenses are already too high, then maybe this converts a big catastrophe into a small catastrophe.

    The history of Medicare seems to be a series of "cuts" in reimbursements, yet costs have risen greatly. That seems to be the plan this time also.

    So, I see the PPACA as offering a definite $770 B increase in taxes, a definite $540 B increase in spending, a collection of mandated cuts in reimbursement for medical expenses (even on the poor), and a speculative claim that medical panels to-be-implemented will achieve efficiencies. I don't know how those panels will do that, and so would like to see the analysis that predicts they will work as claimed.

  13. Thank you for the discussion and links, and whatever discussion we might have here and in the future. I have learned some things and this has focused my questions. I do ask that you not sprinkle insults into your replies. You have characterized my participation as "pretty glib", "misleading", "blithely assert". I suggest you merely correct my errors without throwing in scorn.

    I am further interested in two of your assertions above.

    shadowfax: And again, I point out that it was due to GOP demagoguery that many of the more effective cost controls were eliminated from consideration.

    AMG: The Democrats were in control of the bill and passed it without Republican support. So, what were those more effective cost controls, and how did demagoguery eliminate them from the bill?

    shadowfax: Experts differ greatly on how large the savings will be, but nobody doubts that it will achieve some very large savings.

    AMG: Is it really true that "nobody" doubts the cost savings? If these are savings from projected increases, then what is the basis for the projections and the savings? I would love to see the official, thoughtful analysis of this. If you know of such, I would appreciate the link.

  14. Andrew,

    Fair enough -- you've stayed on point and I will strive to do the same.

    Re: Medicaid and DSH cuts: first of all, Medicaid reimbursements are actually being expanded, as reimbursement for primary care services under medicaid will be paid at medicare rates. The DSH payment cuts are supposed to be offset by the fact that the hospitals which get DSH payments now will not need them as there will be fewer uninsured patients and therefore less need to offset them with DSH payments. I know some county hospital CEOs are nervous about how this will work out for them and I don't know the answer either.

    Regarding the IPAB -- there is lots of literature on it, and I agree that it's fair to give it a conservative score. It's got a lot of potential though.

    Re: Dems, demagoguery, and cost cutting. The biggest thing that could have saved money would have been the public option. That is why liberals and policy wonks fought so hard for it. The medicare buy-in was another. Both were dropped in the hope of attracting GOP support (and retaining the support of conservative Dems). This all played out during the summer of Death Panels. My read is that the Dems are a cowardly lot and were afraid that pushing too liberal a package could cost them the election. So they got what they deserved for their cowardice: a watered-down bill AND a lost election. I've long said that elected Dems tend to lack the courage of their convictions, and this was just one more example of the same.


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