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Kevin Drum explains the budget deficit

Kevin Drum explains the budget deficit

Is the Deficit Commission Serious?

By Kevin Drum
Mother Jones
November 10, 2010

So this report matters (the “chairman’s mark” of the deficit commission report), even though it’s really nothing more than the opinion of Alan Simpson and Erskine Bowles. So here’s what I think of it, all contained in one handy chart from the Congressional Budget Office:

(If the chart is not transmitted by this email, it can be accessed at the link below.)

Here’s what the chart means:

*  Discretionary spending (the light blue bottom chunk) isn’t a long-term deficit problem. It takes up about 10% of GDP forever. What’s more, pretending that it can be capped is just game playing: anything one Congress can do, another can undo. So if you want to recommend a few discretionary cuts, that’s fine. Beyond that, though, the discretionary budget should be left to Congress since it can be cut or expanded easily via the ordinary political process. That’s why it’s called “discretionary.”

*  Social Security (the dark blue middle chunk) isn’t a long-term deficit problem. It goes up very slightly between now and 2030 and then flattens out forever. If Republicans were willing to get serious and knock off their puerile anti-tax jihad, it could be fixed easily with a combination of tiny tax increases and tiny benefit cuts phased in over 20 years that the public would barely notice. It deserves about a week of deliberation.

*  Medicare, and healthcare in general, is a huge problem. It is, in fact, our only real long-term spending problem.

To put this more succinctly: any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. Any proposal that doesn’t maintain approximately that ratio shouldn’t be considered serious. The Simpson-Bowles plan, conversely, goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That’s not serious.

There are other reasons the Simpson-Bowles plan isn’t serious. Capping revenue at 21% of GDP, for example. The plain fact is that over the next few decades Social Security will need a little more money and healthcare will need a lot more. That will be true even if we implement the greatest healthcare cost containment plan in the world. Pretending that we can nonetheless cap revenues at 2000 levels isn’t serious.

And their tax proposal? As part of a deficit reduction plan they want to cut taxes on the rich and make the federal tax system more regressive? That’s not serious either.

Bottom line: this document isn’t really aimed at deficit reduction. It’s aimed at keeping government small. There’s nothing wrong with that if you’re a conservative think tank and that’s what you’re dedicated to selling. But it should be called by its right name. This document is a paean to cutting the federal government, not cutting the federal deficit.

http://motherjones.com/kevin-drum/2010/11/deficit-commission-serious

Comment: 

By Don McCanne, MD

After reading Kevin Drum’s explanation of the federal deficit, it becomes even more obvious that all we have to do is improve Medicare, provide it for everyone, and then use its power as a monopsony serving the public good to bring the growth of health care costs to a manageable level. Compared to this, the other budget issues are a piece of cake. 

Repeal and Replace?

Not so fast. An insurance-company defector explains why the most controversial provision of the health-care law will survive.

By Wendell Potter
Newsweek, Nov. 5, 2010

Conservatives who voted for congressional candidates because they pledged to repeal and replace the health-care-reform law are in for a rude awakening. Once those newly elected members of Congress have a little talk with the insurance industry’s lobbyists and executives, they will back off from that pledge. They will go through the motions, of course. They’ll hold hearings and take to the floor of both Houses to rail against the new law, and they’ll probably even introduce a bill to repeal it with much fanfare — but it will all be for show. That’s because health insurers, one of Republican candidates’ biggest and most reliable benefactors — the industry contributed three times as much money to Republicans as to Democrats since January — can’t survive without it.

Despite all the attacks on “Obamacare,” the new law props up the employer-based system that insurers and large corporations benefit from so greatly. It also guarantees that private insurers will get billions of dollars in new revenue. And the insurers won’t have to share a penny of that windfall with a government-run public option the president once said was necessary “to keep insurers honest.”

I know what the insurers are thinking because, not long ago, I was on their side. I am sorry to admit it, but over nearly two decades I had a hand in planning the industry’s PR and public-policy strategies to either kill or shape any health-care reform proposal that might hinder profits. I was part of the strategic-communications team that planned and carried out the successful attack on the Clinton plan in the 1990s as well as the one that killed the patients’ bill of rights a few years later. I left my job handling communications for Cigna in 2008 because I didn’t have the stomach to be part of yet another spin campaign to cheat Americans out of the reform they needed.

For months before I left my job, I worked closely with my counterparts at the other big insurers to develop the list of must-haves our well-connected army of lobbyists would take to Capitol Hill when lawmakers began drafting reform legislation. Despite their public statements to the contrary, insurance companies really liked much of what was in both House and Senate versions of the bill — big chunks of which they actually wrote behind the scenes — especially the requirement that all Americans buy insurance if they’re not eligible for an existing public program like Medic-aid or Medicare.

During the reform debate, the industry’s deception-based PR strategy had two active fronts. One was a highly visible charm offensive designed to create an image of the industry as an advocate for reform and a good-faith partner with the president and lawmakers in achieving it. The second was a secret fearmongering campaign using shadowy “AstroTurf” groups and business and political allies as shills to disseminate misinformation and lies — like the one about the creation of “death panels” — with the sole intent of killing any reform that might hurt the bottom line.

Although I was ashamed of many of the things I did during my career, I didn’t plan to speak out about the industry’s devious practices until I saw Karen Ignagni, president of America’s Health Insurance Plans, tell President Obama at the end of his March 2009 White House Forum on Health Reform, “You have our commitment to play, to contribute, and to help pass health-care reform this year.” Then I knew the industry’s disingenuous charm offensive had begun. Soon after that I read that, Aetna chairman and CEO Ron Williams, the driving force behind the industry’s effort to get the individual mandate enacted, had met with the president half a dozen times. I knew Williams was trying to persuade the president to drop his insistence on the public option and to embrace the individual mandate. Sure enough, Williams got his wish.

It is ironic, of course, that the requirement to purchase insurance has become the centerpiece of Republicans’ condemnation of the new law and their court challenge of its constitutionality. Insurers have no reason to worry, however, because they fare very well when the Republicans are in charge. Their profits soared — as did the number of Americans who are uninsured and underinsured — during the Bush years and Republican control of Congress.

The real reason insurers want the GOP leading Congress again is not to repeal “Obamacare,” but to try to gut some of the provisions of the law that protect consumers from the abuses of the industry, such as refusing to cover kids with preexisting conditions, canceling policyholders’ coverage when they get sick, and setting annual and lifetime limits on how much they’ll pay for medical care. Insurers also hate the provision that requires them to spend at least 80 percent of premium revenues on medical care, as well as the one that calls for eliminating the billions of dollars that the government has been overpaying them for years to participate in private Medicare plans. (Be on the lookout for a death panel-like fearmongering campaign to scare people into thinking, erroneously, that Granny and Pawpaw will lose their government health care if Congress doesn’t restore those “cuts” to Medicare.)

Insurers are not waiting for all their new members of Congress to be sworn in to get what they want. They and their big-business allies are already pressuring the Obama administration to waive or delay the implementation of provisions they don’t like, all the while working behind the scenes not only to protect the individual mandate but to have the government enforce it with much greater gusto. The one thing the industry didn’t like about the mandate provision was that the penalties for not buying their overpriced products won’t inflict nearly enough financial pain.

Retiring Sen. Judd Gregg (R-N.H.), who once had been a part of the repeal-and-replace brigade, provoked the wrath of conservative pundits shortly before the midterm elections when he said, in a moment of unguarded candor, that repealing the law was not realistic. Instead, he said, the GOP should focus on “retooling” it. You can be certain that insurance-industry lobbyists will be helping their newly expanded congressional caucus determine what needs retooling. As my former Cigna colleague Bill Hoagland, the company’s top lobbyist, told the Associated Press a few days ago: “If you ended up repealing [the individual mandate], the whole thing blows up. It doesn’t work. The cost would explode.” In other words, feel free to repeal those pesky consumer protections, but keep your hands off our mandate.

Potter is a senior analyst at The Center for Public Integrity. This piece is based on his book “Deadly Spin,” published this week by Bloomsbury Press.

http://www.newsweek.com/search.html?q=wendell+potter

Gov.-elect Shumlin: ‘I am convinced that Vermont has an opportunity to pass a single-payer health care system’

Green Mountain Daily, Nov. 10, 2010
 
The following is an excerpt from an interview with Gov.-elect Peter Shumlin of Vermont conducted by a blogger at Green Mountain Daily (GMD).
 
GMD: You made some big commitments on health care, and I think you’ve got a strong reservoir of trust in the progressive community on that issue. But what should reformers expectations really be over the first term?
 
Gov.-elect Peter Shumlin: Well, we’re going to get Dr. [William] Hsiao’s work back shortly. I’m going to start assembling in the next few weeks a team of people – I abhor ribbon commissions because they just sit on shelves collecting dust. What I do like is a group of really informed people that can sit around and chart an ambitious course. I’ll be putting that group together. I am convinced that Vermont has an opportunity to pass a single-payer health care system that does three things. First, that contains costs so that we’re not spending a million dollars a day than we were before. Second, where health care follows the individual and is not a requirement of the employer. And third, where health care is a right, not a privilege. They’re the sort of principles that I go into this with.
 
Now, I got a lot of criticism during the campaign by Brian [Dubie, the GOP candidate] and frankly a lot of the Democrats over the primary saying, “He’s overpromising more than can be delivered.” And what I’ve said about this health care vision is this is not a promise, it’s a plan. My promise is that I will work as hard as I can over the next two years to make this happen as quickly as I can. I understand the obstacles. Some people see the federal waivers. My own view is that the federal waivers are the easy part. I think the hard part is designing a system that actually works, and bringing together the players and getting them to agree to change, and making it fast enough so that we don’t bankrupt the state, see more and more people lose their health insurance because they cant afford it, keeping the middle class from continually being [inaudible], and most importantly, keep our providers alive. You know, we’re in crisis. We’re losing our primary care providers in Vermont. We’re losing many of our health care providers. Our hospitals are on the brink because of this crazy reimbursement system. Because all the money we’re spending chasing money around, and because of a lack of technology and efficiency in the system. So – it’s a very ambitious goal, I get that, but I’m going to work as diligently as I can with as many people as we can and get it done.
 
I think that – let’s put it this way: part of the economic opportunity I’m talking about in terms of infrastructure is cracking this nut. If we can be the state where health insurance follows the individual, where it’s affordable, and where everybody’s covered. And where we’re sharing, using technology to reduce costs. Getting rid of the waste – the percentage for insurance companies and bureaucracy – we beat the other 49 states to jobs, because that is the single biggest challenge. Small business, middle class families – how do we afford the health care increases, 10 percent, 20 percent, 30 percent a year? It’s just not sustainable.
 
GMD: As far as the waivers go, you’ve got some of this wave around the country of Republican governors that got in. I was just hearing Rick Perry in Texas – arch-conservative – saying the same sort of thing, you know, they want waivers for Medicare so they can do their own thing. Obviously their own thing is going to be very different, but do you see some potential for maybe getting together on that?
 
Shumlin: I do. I’ve already talked to [Health and Human Services Secretary Kathleen] Sebelius about this. I had the pleasure of having a conversation with the president of the United States, told him I was going to be looking for three waivers. You know, we just – all I’m saying is I don’t think the waivers are the biggest challenge. The biggest challenge is designing a system, getting consensus on a system, and passing it.
 
full: http://greenmountaindaily.com/diary/7115/governorelect-shumlin-the-hopefully-first-of-many-gmd-interview

Kevin Drum explains the budget deficit

Is the Deficit Commission Serious?

By Kevin Drum
Mother Jones
November 10, 2010

So this report matters (the “chairman’s mark” of the deficit commission report), even though it’s really nothing more than the opinion of Alan Simpson and Erskine Bowles. So here’s what I think of it, all contained in one handy chart from the Congressional Budget Office:

(If the chart is not transmitted by this email, it can be accessed at the link below.)

Here’s what the chart means:

*  Discretionary spending (the light blue bottom chunk) isn’t a long-term deficit problem. It takes up about 10% of GDP forever. What’s more, pretending that it can be capped is just game playing: anything one Congress can do, another can undo. So if you want to recommend a few discretionary cuts, that’s fine. Beyond that, though, the discretionary budget should be left to Congress since it can be cut or expanded easily via the ordinary political process. That’s why it’s called “discretionary.”

*  Social Security (the dark blue middle chunk) isn’t a long-term deficit problem. It goes up very slightly between now and 2030 and then flattens out forever. If Republicans were willing to get serious and knock off their puerile anti-tax jihad, it could be fixed easily with a combination of tiny tax increases and tiny benefit cuts phased in over 20 years that the public would barely notice. It deserves about a week of deliberation.

*  Medicare, and healthcare in general, is a huge problem. It is, in fact, our only real long-term spending problem.

To put this more succinctly: any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. Any proposal that doesn’t maintain approximately that ratio shouldn’t be considered serious. The Simpson-Bowles plan, conversely, goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That’s not serious.

There are other reasons the Simpson-Bowles plan isn’t serious. Capping revenue at 21% of GDP, for example. The plain fact is that over the next few decades Social Security will need a little more money and healthcare will need a lot more. That will be true even if we implement the greatest healthcare cost containment plan in the world. Pretending that we can nonetheless cap revenues at 2000 levels isn’t serious.

And their tax proposal? As part of a deficit reduction plan they want to cut taxes on the rich and make the federal tax system more regressive? That’s not serious either.

Bottom line: this document isn’t really aimed at deficit reduction. It’s aimed at keeping government small. There’s nothing wrong with that if you’re a conservative think tank and that’s what you’re dedicated to selling. But it should be called by its right name. This document is a paean to cutting the federal government, not cutting the federal deficit.

http://motherjones.com/kevin-drum/2010/11/deficit-commission-serious

After reading Kevin Drum’s explanation of the federal deficit, it becomes even more obvious that all we have to do is improve Medicare, provide it for everyone, and then use its power as a monopsony serving the public good to bring the growth of health care costs to a manageable level. Compared to this, the other budget issues are a piece of cake.


More on the Deficit Commission’s co-chairs’ proposal

Critique of the co-chairs’ health care proposals for the National Commission on Fiscal Responsibility and Reform

By Don McCanne, M.D.

The projected increases in Medicare spending are of concern to all of us. Although we need to slow the rate of growth in spending, we should do so not only without impairing the program, but by actually enhancing the benefits. Let me explain.

The co-chairmen have advanced proposals that address federal budget deficits related to Medicare, but unfortunately they have done so to the detriment of the Medicare beneficiaries. I spoke to this briefly in my Quote of the Day yesterday (Nov. 10).

They propose an increase in Medicare cost sharing to promote greater consumer sensitivity to health care costs. Medicare is already a relatively Spartan program, paying roughly only half of health care costs for our seniors and those with long-term disabilities. Medicare beneficiaries face significant financial barriers to care, sometimes preventing them from receiving essential health care services. Some with greater health care needs even face bankruptcy because of the high out-of-pocket costs. Shifting more costs from the federal government to patients might reduce the federal budget, but it plays havoc with personal budgets. Cost sharing is merely a polite term for what it really is — cost shifting onto the backs of patients.

Because of the potential financial burden, many Medicare beneficiaries purchase Medigap plans. They provide one of the lousiest values in health insurance, having very high premiums for very modest benefits. The co-chairmen propose that the benefits be reduced further by requiring deductibles, again to create greater consumer sensitivity to costs. If they were really interested in saving money, they would recommend folding the Medigap benefits into the traditional Medicare program, thereby saving the profound administrative waste that characterizes these private Medigap plans. Although that improves patients’ budgets without changing the federal budget, policies should be designed to benefit the patients rather than appease the anti-government ideologues.

In many areas of the country physicians are concerned about their relatively low Medicare payment rates, and the lack of a “doc fix” is a very real threat for patients. Our primary care infrastructure is already crumbling, and imposition of the scheduled fee reductions will cause many more physicians to exit the Medicare program. The recommendation to prevent the fee reductions for physicians by imposing fee reductions on physicians is truly disingenuous. Physicians understand simple math when it comes to their paychecks. Patients also understand what it means when physicians’ practices are closed to new Medicare patients.

The co-chairmen propose strengthening the pending Independent Payment Advisory Board (IPAB). The board is being given the task of reducing payments in the traditional fee-for-service Medicare program, and has been provided with considerable leverage to impose those changes. Reducing fees in the Medicare program without changing fees paid by private insurers will surely motivate physicians to drop Medicare patients in favor of those privately insured. Strengthening IPAB will only compound this differential. We do need an IPAB that has a mission not to simply reduce payments, but rather to set payments based on value. We need to pay the right amount, not necessarily the least amount. But, to be effective, an IPAB would have to have influence over the entire health care delivery system. That would be possible only with a single payer system, but not with our current fragmented system of financing health care.

Another disingenuous recommendation is to reward physicians for meeting spending targets by reducing their rates further. Disgruntled physicians lack incentives for high quality performance. A “back-up-sequester” (when IPAB recommendations are not adopted) to increase premiums or reduce provider payments is punitive to both patients and physicians and could further impair patients’ access to care.

The proposed premium support system for Medicare (basically vouchers for private plans) is strictly another manifestation of the great risk shift – an assault on individuals and families (Hacker). It defeats the solidarity behind social insurance programs.

Although the deficit commission is fixated on the federal budget, what really matters in health care is that our total spending is brought under control – both private and public. If we are paying a reasonable amount for all health care combined, then it really doesn’t matter that most of it would appear in the federal budget. It’s still our money whether we pay it directly or pay it as taxpayers.

It would be much more efficient and equitable if our national health expenditures were funded through progressive tax policies. We could do that very easily if we simply improved Medicare and then provided it for everyone, as PNHP’s congressional fellow, Dr. Margaret Flowers indicated in her testimony before the commission months ago. At least we would have stabilized the health care component of our federal budget.

https://pnhp.org/blog/2010/11/11/more-on-the-deficit-commission’s-co-chairs’-proposal/

Yesterday’s Quote of the Day, listing the health care proposals of the Co-Chairmen:
https://pnhp.org/news/2010/november/deficit-commission-co-chairs-proposal

Deficit commission: Co-Chairs' proposal

Co-Chairs' Proposal (Draft Document)

National Commission on Fiscal Responsibility and Reform
November 10, 2010

Reducing Health Care Costs (page 31)

## Medium Term: Fully offset the cost of the “Doc Fix” by asking doctors and other health providers, lawyers, and individuals to take responsibility for slowing health care cost growth. Offsets include:
  * Pay doctors and other providers less, improve efficiency, and reward quality by speeding up payment reforms and increasing drug rebates
  * Pay lawyers less and reduce the cost of defensive medicine by adopting comprehensive tort reform
  * Expand cost-sharing in Medicare to promote informed consumer health  choices and spending
  * Expand successful cost containment demonstrations
  * Strengthen IPAB
  * Recommend additional health savings (illustrative examples to follow)
## Long Term: Contain growth in total federal health spending to GDP+1% after 2020 by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize

Paying for the “Doc Fix” (page 32)

## Pay doctors, other health providers, and drug companies less and improve efficiency and quality
  * Replace cuts required by SGR through 2015 with modest reductions while directing CMS to establish a new payment system, beginning in 2015, to reduce costs and improve quality.
  * Require rebates for brand-name drugs as a condition of participating in Medicare Part D.
## Increase cost-sharing in Medicare
  * Eliminate first-dollar coverage in Medigap plans.
  * Replace existing cost-sharing rules with universal deductible, single coinsurance rate, and catastrophic cap for Medicare Part A and Part B.
## Pay lawyers less and reduce the cost of defensive medicine
  * Enact comprehensive medical malpractice liability reform to cap non-economic and punitive damages and make other changes in tort law.

Savings Beyond the Doc Fix (page 34)

## Expand Successful Cost-Containment Demonstration Projects by 2015
## Identify an additional $200 billion savings in federal health spending
## Strengthen the Independent Payment Advisory Board (IPAB)
  * Include all providers (no carve-outs) and recommendations on benefit design and cost-sharing.
  * Improve savings targets to 1.5% starting in 2015.
  * Eliminate the trigger that could turn off IPAB in 2019.
  * Allow cost-savings recommendations even when spending does not exceed the target growth rate.
  * Allow proposals that apply reforms to health plans in the exchange.
  * Require affirmative Congressional approval of recommendations or alternative savings, with a “back-up sequester” increasing premiums and reducing provider payments if IPAB recommendations (or equivalent savings) are not adopted.

Long-Term Health Care Savings (page 36)

## Set global target for total federal health expenditures after 2020 (Medicare, Medicaid, CHIP, exchange subsidies, employer health exclusion), and review costs every 2 years. Keep growth to GDP+1%.
## If costs have grown faster than targets (on average of previous 5 years), require President to submit and Congress to consider reforms to lower spending, such as:
  * Increase premiums (or further increase cost-sharing)
  * Overhaul the fee-for-service system
  * Develop a premium support system for Medicare
  * Add a robust public option and/or all-payer system in the exchange
  * Further expand authority of IPAB

http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf

Comment: 

By Don McCanne, Md

Today, behind closed doors, the chairmen of President’s Obama’s deficit commission, Erskine Bowles and Alan Simpson, presented to the other members of the commission their draft proposal for reform. The selections above, from their report, apply to health care.

The reception by the committee members is expressed well by Lori Montgomery of The Washington Post:

“Commission members, who include a dozen sitting members of Congress, emerged from the morning session in a Capitol Hill hearing room praising the seriousness of the effort but voicing deep reservations about the details.”

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029.html

Obviously, some of these proposals are very deleterious. It is not as if the commission didn’t receive suggestions for far better policies to address costs while actually improving our health care system, though they have chosen to ignore them. Following is a quote from the testimony of Margaret Flowers, M.D. of Physicians for a National Health Program:

“The alternative scenario of a national improved Medicare for All will save lives and save money. National improved Medicare for All will place our nation on the path of becoming one of the best health systems in the world – something of which we can all be proud. This commission has the ability to recommend creating a financially sustainable universal health system. I urge the members of this commission to recommend addressing the deficit through adopting this most popular approach: national improved Medicare for All. Don’t cut Medicare. Protect it, improve it and expand it to cover everyone.”

http://www.fiscalcommission.gov/meetings/public-forum/6/Margaret_Flowers_6_30_2010.pdf

Video version (in 6 of 7 at 27:30):
http://www.fiscalcommission.gov/meetings/public-forum/

Deficit commission: Co-Chairs’ proposal

Co-Chairs’ Proposal (Draft Document)

National Commission on Fiscal Responsibility and Reform
November 10, 2010

Reducing Health Care Costs (page 31)

## Medium Term: Fully offset the cost of the “Doc Fix” by asking doctors and other health providers, lawyers, and individuals to take responsibility for slowing health care cost growth. Offsets include:
  * Pay doctors and other providers less, improve efficiency, and reward quality by speeding up payment reforms and increasing drug rebates
  * Pay lawyers less and reduce the cost of defensive medicine by adopting comprehensive tort reform
  * Expand cost-sharing in Medicare to promote informed consumer health  choices and spending
  * Expand successful cost containment demonstrations
  * Strengthen IPAB
  * Recommend additional health savings (illustrative examples to follow)
## Long Term: Contain growth in total federal health spending to GDP+1% after 2020 by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize

Paying for the “Doc Fix” (page 32)

## Pay doctors, other health providers, and drug companies less and improve efficiency and quality
  * Replace cuts required by SGR through 2015 with modest reductions while directing CMS to establish a new payment system, beginning in 2015, to reduce costs and improve quality.
  * Require rebates for brand-name drugs as a condition of participating in Medicare Part D.
## Increase cost-sharing in Medicare
  * Eliminate first-dollar coverage in Medigap plans.
  * Replace existing cost-sharing rules with universal deductible, single coinsurance rate, and catastrophic cap for Medicare Part A and Part B.
## Pay lawyers less and reduce the cost of defensive medicine
  * Enact comprehensive medical malpractice liability reform to cap non-economic and punitive damages and make other changes in tort law.

Savings Beyond the Doc Fix (page 34)

## Expand Successful Cost-Containment Demonstration Projects by 2015
## Identify an additional $200 billion savings in federal health spending
## Strengthen the Independent Payment Advisory Board (IPAB)
  * Include all providers (no carve-outs) and recommendations on benefit design and cost-sharing.
  * Improve savings targets to 1.5% starting in 2015.
  * Eliminate the trigger that could turn off IPAB in 2019.
  * Allow cost-savings recommendations even when spending does not exceed the target growth rate.
  * Allow proposals that apply reforms to health plans in the exchange.
  * Require affirmative Congressional approval of recommendations or alternative savings, with a “back-up sequester” increasing premiums and reducing provider payments if IPAB recommendations (or equivalent savings) are not adopted.

Long-Term Health Care Savings (page 36)

## Set global target for total federal health expenditures after 2020 (Medicare, Medicaid, CHIP, exchange subsidies, employer health exclusion), and review costs every 2 years. Keep growth to GDP+1%.
## If costs have grown faster than targets (on average of previous 5 years), require President to submit and Congress to consider reforms to lower spending, such as:
  * Increase premiums (or further increase cost-sharing)
  * Overhaul the fee-for-service system
  * Develop a premium support system for Medicare
  * Add a robust public option and/or all-payer system in the exchange
  * Further expand authority of IPAB

http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf

Comment: 

By Don McCanne, Md

Today, behind closed doors, the chairmen of President’s Obama’s deficit commission, Erskine Bowles and Alan Simpson, presented to the other members of the commission their draft proposal for reform. The selections above, from their report, apply to health care.

The reception by the committee members is expressed well by Lori Montgomery of The Washington Post:

“Commission members, who include a dozen sitting members of Congress, emerged from the morning session in a Capitol Hill hearing room praising the seriousness of the effort but voicing deep reservations about the details.”

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/10/AR2010111004029.html

Obviously, some of these proposals are very deleterious. It is not as if the commission didn’t receive suggestions for far better policies to address costs while actually improving our health care system, though they have chosen to ignore them. Following is a quote from the testimony of Margaret Flowers, M.D. of Physicians for a National Health Program:

“The alternative scenario of a national improved Medicare for All will save lives and save money. National improved Medicare for All will place our nation on the path of becoming one of the best health systems in the world – something of which we can all be proud. This commission has the ability to recommend creating a financially sustainable universal health system. I urge the members of this commission to recommend addressing the deficit through adopting this most popular approach: national improved Medicare for All. Don’t cut Medicare. Protect it, improve it and expand it to cover everyone.”

http://www.fiscalcommission.gov/meetings/public-forum/6/Margaret_Flowers_6_30_2010.pdf

Video version (in 6 of 7 at 27:30):
http://www.fiscalcommission.gov/meetings/public-forum/

Single Payer System Takes Center Stage in Vermont

Healthcare Technology News
Tuesday, November 9, 2010

Vermont’s new governor-elect Peter Shumlin makes the case for a single payer system first and foremost as an economic issue based on the trajectory of  cost increases for the state, employers and individuals. Shumlin campaigned on a platform that calls for implementation of a single payer system, with benefits that follow the individual and are not a requirement of the employer. The system would reimburse based on outcomes rather than fee for service using technology for medical records and payment.  It would also eliminate private insurers and their administrative costs.

Earlier this year, Harvard Economics Professor William Hsiao, an expert on health care systems, was  commissioned by the Vermont legislature to develop implementation plans for healthcare system options including a single payer system. In a New York Times interview, Hsiao contends that “you can have universal coverage and good quality health care while still managing to control costs.  But you have to have a single-payer system to do it.”

Vermont would require a waiver from the federal government to implement a single payer program.  Shumlin is already lobbying President Obama about this waiver.  According to Shumlin, “the waivers is the easy part. The hard part is designing a single payer health care system that works and that delivers quality health care, gets insurers off our providers’ backs, has a reimbursement system that makes sense. … I believe if we design that system, we can sell it.“

There is solid evidence to back up Shumlin’s belief.  Exit polls tallied 59% of Vermont voters either backing national health care reform as-is (16%) or backing expansion of reform (43%).  And with the Vermont executive and legislative branches firmly controlled by one political party, there is the very real opportunity for a viable single payer system to be enacted.

According to Shumlin, “in Vermont, the cost of health care is estimated to increase by $1 billion from 2010 to 2012. For the average Vermont family of four that’s a $7,000 increase on top of the $32,000 that we now spend for health care coverage each year. Our rate of increase exceeds the national average. It is not sustainable. Health care costs are crippling our economy, hampering business growth, driving up property taxes, and bankrupting too many individuals. These costs must be brought under control. The only way to do this is for the state of Vermont to lead the nation in comprehensive health care reform.  47,000 Vermonters have no insurance. When these Vermonters become sick, they are faced with a choice—seek the care they need and risk bankruptcy, or avoid care and face debilitating health or even death. When they do choose to seek care, it is the insured that pay for it. This is an unacceptable choice in a civilized society. It also imposes ethical dilemmas on health care professionals trying to treat the uninsured. Unfortunately, this problem isn’t confined to the uninsured. Tens of thousands of Vermonters are underinsured. All too often Vermonters don’t get the care they need because of unaffordable deductibles, co-pays, and coinsurance.”

Privatizing Medicaid is wrong way to go

By ROBERT PUTSCH
Independent Record (Helena, Mont.), November 5, 2010

The IR’s Oct. 14 headline caught me off guard: “Gov mulls privately run Medicaid.” Is this the same governor who in August 2009, welcomed President Obama saying: “Did you know that, just 300 miles north of here … they offered universal health care 62 years ago?”

Gov. Schweitzer certainly understands that the Canadians didn’t accomplish universal care by privatizing health care programs that are publicly funded. Thanks to excellent coverage by reporter Mike Dennison it appears that the state is considering a five-county Medicaid demonstration project and it includes a proposal from Centene Corp.

So what’s going on? To begin with, Medicaid, at $315.2 billion per year in 2005, covering 60.4 million people, has become the nation’s largest public health insurance program. This caught the attention of health insurance companies. United Health Group and Wellpoint and smaller companies such as Centene all want a cut of the pie.

Centene, in fact, is listed by Goldman Sachs as one of the country’s fastest growing Medicaid HMOs. John Geymen, in his book “Do Not Resuscitate,” says “two of these companies (WellCare and Centene) have grown 300 to 400 percent since their IPOs all within the last six years.” As if to emphasize Geyman’s point, Centene joined the Fortune 500 list this summer.

And these details leave me wondering. How can a company that specializes in managed Medicaid plans and CHIP become a darling of Wall Street?

After all, Medicaid has often been targeted in budget cuts around the country and is widely regarded as being underfunded. Beyond that, all of the money going into Medicaid is tax financed. We’re not arguing here about what percentage of the money is tax based — Medicaid is 100 percent funded by state and federal taxes.

By that measure, Centene is a publicly funded “private” corporation. Geyman once again hits the nail on the head: “Privatization of public programs has clearly been a bonanza for private insurers.”

Listed on the New York Stock exchange as CNC, Centene’s CEO is Michael Neidorff, who earns (according to Reuters) $6.1 million a year and has $9.5 million in stock options. Wall Street likes the company’s ability to generate profits. On July 27, Centene’s CEO laid out the following company policy: “Protecting our earnings stream is crucial and we will continue to be bottom-line focused.”

Hopefully, thinking about how these outfits make tons of money and attract the attention of Wall Street makes you as uncomfortable as it does me. It begs another question: How do companies squeeze profits out of an underfunded public program,?

Massachusetts’ experience is instructive. In 2009 Massachusetts transferred 30,100 green-card-holding immigrants from its state-subsidized insurance program to a Centene subsidiary, CeltiCare. CeltiCare was paid $1,500 per enrollee for a plan that covered less than the one it replaced; $1,500 is well below Kaiser’s projections for adequate care. Eight months after the plan became active, a brief study in the Aug. 5 New England Journal of Medicine accused Centene of “rationing by inconvenience.”

Medicaid managed care plans profit by cutting costs, by exclusionary contract language, and by denying care. In New Jersey, private Medicaid plans enrolled large numbers of low-income families and then denied up to 30 percent of their claims for hospital care. Both Montana and Massachusetts undertook earlier attempts to provide private Medicaid funding in mental health with disastrous results.

But there’s another key item I haven’t mentioned. It’s called the medical loss ratio. Centene’s is variously reported as 81-82 percent. That means that they spend either 81 or 82 cents on every dollar on actual care. The company gets to keep the rest. So if Montana continues down this path, the state will see 18 to 19 cents of every tax dollar spent on Medicaid feed Centene’s bottom line.

Finally, Centene began its involvement in Montana quite a while back. They undertook renovations at the old American Legion baseball park in Great Falls and it’s now called Centene Stadium. They then announced the development of a data processing center in Great Falls. That deal was worked out and had the attention of both state and local development authorities. Makes one wonder whether the current privatization proposal is about health care for families living on the margin or about employment and business. Think about it. What’s the deal here?

The Schweitzer administration and Legislature should focus on building a robust and functional state-managed Medicaid program. At the very least, a state-run program doesn’t have to add a profit motive to the costs of serving children and families in Montana. Beyond that, I liked the rest of Gov. Schweitzer’s comments to the crowd greeting President Obama at the Gallatin Field Airport hangar. He reminded them that the Canadians had recently selected the “father” of Canada’s single-payer health care system, former Saskatchewan Premier Tommy Douglas, as the greatest Canadian.

Remember, Medicaid covers four of 10 births in the U.S. and provides care for one in every three children. Montana can ill afford to expose at-risk families to denials and the profit-making focus of yet another health insurance company.

Robert Putsch, a retired physician and a clinical professor emeritus of medicine at the University of Washington School of Medicine and member of Physicians for a National Health Program, a national organization dedicated to the extablishment of a single-payer sytem, lives year round in Canyon Creek.

Deficit commission: Co-Chairs’ proposal

Co-Chairs’ Proposal (Draft Document)

National Commission on Fiscal Responsibility and Reform
November 10, 2010

Reducing Health Care Costs (page 31)

## Medium Term: Fully offset the cost of the “Doc Fix” by asking doctors and other health providers, lawyers, and individuals to take responsibility for slowing health care cost growth. Offsets include:
* Pay doctors and other providers less, improve efficiency, and reward quality by speeding up payment reforms and increasing drug rebates
* Pay lawyers less and reduce the cost of defensive medicine by adopting comprehensive tort reform
* Expand cost-sharing in Medicare to promote informed consumer health  choices and spending
* Expand successful cost containment demonstrations
* Strengthen IPAB
* Recommend additional health savings (illustrative examples to follow)
## Long Term: Contain growth in total federal health spending to GDP+1% after 2020 by establishing a process to regularly evaluate cost growth, and take additional steps as needed if projected savings do not materialize

Paying for the “Doc Fix” (page 32)

## Pay doctors, other health providers, and drug companies less and improve efficiency and quality
* Replace cuts required by SGR through 2015 with modest reductions while directing CMS to establish a new payment system, beginning in 2015, to reduce costs and improve quality.
* Require rebates for brand-name drugs as a condition of participating in Medicare Part D.
## Increase cost-sharing in Medicare
* Eliminate first-dollar coverage in Medigap plans.
* Replace existing cost-sharing rules with universal deductible, single coinsurance rate, and catastrophic cap for Medicare Part A and Part B.
## Pay lawyers less and reduce the cost of defensive medicine
* Enact comprehensive medical malpractice liability reform to cap non-economic and punitive damages and make other changes in tort law.

Savings Beyond the Doc Fix (page 34)

## Expand Successful Cost-Containment Demonstration Projects by 2015
## Identify an additional $200 billion savings in federal health spending
## Strengthen the Independent Payment Advisory Board (IPAB)
* Include all providers (no carve-outs) and recommendations on benefit design and cost-sharing.
* Improve savings targets to 1.5% starting in 2015.
* Eliminate the trigger that could turn off IPAB in 2019.
* Allow cost-savings recommendations even when spending does not exceed the target growth rate.
* Allow proposals that apply reforms to health plans in the exchange.
* Require affirmative Congressional approval of recommendations or alternative savings, with a “back-up sequester” increasing premiums and reducing provider payments if IPAB recommendations (or equivalent savings) are not adopted.

Long-Term Health Care Savings (page 36)

## Set global target for total federal health expenditures after 2020 (Medicare, Medicaid, CHIP, exchange subsidies, employer health exclusion), and review costs every 2 years. Keep growth to GDP+1%.
## If costs have grown faster than targets (on average of previous 5 years), require President to submit and Congress to consider reforms to lower spending, such as:
* Increase premiums (or further increase cost-sharing)
* Overhaul the fee-for-service system
* Develop a premium support system for Medicare
* Add a robust public option and/or all-payer system in the exchange
* Further expand authority of IPAB

https://www.nytimes.com…

Today, behind closed doors, the chairmen of President’s Obama’s deficit commission, Erskine Bowles and Alan Simpson, presented to the other members of the commission their draft proposal for reform. The selections above, from their report, apply to health care.

The reception by the committee members is expressed well by Lori Montgomery of The Washington Post:

“Commission members, who include a dozen sitting members of Congress, emerged from the morning session in a Capitol Hill hearing room praising the seriousness of the effort but voicing deep reservations about the details.”

http://www.washingtonpost.com…

Obviously, some of these proposals are very deleterious. It is not as if the commission didn’t receive suggestions for far better policies to address costs while actually improving our health care system, though they have chosen to ignore them. Following is a quote from the testimony of Margaret Flowers, M.D. of Physicians for a National Health Program:

“The alternative scenario of a national improved Medicare for All will save lives and save money. National improved Medicare for All will place our nation on the path of becoming one of the best health systems in the world – something of which we can all be proud. This commission has the ability to recommend creating a financially sustainable universal health system. I urge the members of this commission to recommend addressing the deficit through adopting this most popular approach: national improved Medicare for All. Don’t cut Medicare. Protect it, improve it and expand it to cover everyone.”

http://www.fiscalcommission.gov…

Video version (in 6 of 7 at 27:30):
http://www.fiscalcommission.gov…