As we look at the ideas to reduce federal health spending, we see the same phenomenon. First, we see a total failure to look beyond direct federal spending to take into account the important contribution rising private sector health spending growth and the deteriorating underlying health of the U.S. population make to growth of federal health spending. (High unemployment also plays a role, but let’s not even go there.) Second, we see a very constricted range of “acceptable strategies” to reduce federal health spending.

On the Republican side, Congressmen Boehner and Cantor have proposed about $350 billion in health care cuts with over one-third coming in the form of cost-shifting to states and Medicare and Medicaid beneficiaries. In addition to direct cuts to state Medicaid programs, proposed increases in Medicare cost-sharing would also raise costs to states, since Medicaid picks up where Medicare leaves off for low-income seniors and people with disabilities.

What is the Democratic response? Most Congressional Democrats have voiced their opposition to radical proposals to restructure Medicare and Medicaid, but resistance to cost shifting onto states (and indirectly onto Medicaid beneficiaries) seems more muted.

A better way is possible

Meanwhile, alternative health policies that could reduce the deficit by a similar amount without harming beneficiaries have been pushed off the table or, at best, onto the fringes of the debate. We offer here a brief list of progressive health care deficit reduction measures – not so much because these ideas are politically viable at the moment, but to clarify that the damaging and dangerous policies that policymakers are now pursuing in Washington stem from the choices of political leaders.

Better cost containment agenda:

• – Require a drug rebate for low-income Medicare beneficiaries: (somewhat on the table in the talks). When Medicare Part D was created, pharmaceutical companies received a windfall – the elimination of the requirement to pay rebates on drugs prescribed for Medicare beneficiaries who had previously had their drugs covered by Medicaid. Requiring the drug companies to pay the Medicaid rebate for low income Medicare and Medicaid dual eligibles would yield an estimated $112 billion according to CBO.
• – Quality care pricing in Medicare and Medicaid: Although the ACA takes some small steps in this direction, more could be done to reduce low-quality health care in Medicare and Medicaid, such as potentially avoidable hospital readmissions and complications, and to promote efficiency in the system. After reviewing the literature, Community Catalyst has estimated over $100 billion in savings are available over the next 10 years from payment reforms that would target wasteful or harmful spending.
• – Public option: The idea of having a public insurer compete with private insurers in the Health Insurance Exchanges enjoyed public support throughout the ACA debate. It also surfaced in the Bowles-Simpson debt reduction talks. (Though unlike other ideas less objectionable to special interests it has not gained traction in the political debate.) The CBO estimated ten-year savings of nearly $90 billion.
• – Tax on sugar-sweetened beverages: The nation is suffering from an epidemic of childhood obesity, leading to increased rates of Type II diabetes in children (the kind that used to be called “adult onset” diabetes). A penny-per-ounce tax on sugar sweetened beverages would yield $79 billion over five years according to a recent analysis. To be conservative, cut that amount in half over a second five years and you still get deficit reduction of $120 billion over 10 years, while helping to improve the underlying health of the population and reducing future health care costs.

And there you have easily over $350 billion in available federal health care savings that can be achieved by weeding out low-value spending and improving public health without shifting costs onto Medicare and Medicaid beneficiaries or state Medicaid programs. Not only that, but there is no doubt that this agenda would be much more attractive to the American people than the one that is currently being pursued. Yet with few exceptions, these ideas languish on the political margins while federal cost-shifting onto states and harmful and unpopular cuts to Medicare and Medicaid beneficiaries are given serious consideration. Fortunately, people are becoming increasingly vocal in their support for maintaining public health insurance programs.

We can only hope that political leaders will start listening.

– Michael Miller, Policy Director

You may ask yourself, well, how did I get here?
Back in April, along with a spirited defense of the role for government in the economy, the President laid out a comprehensive approach to debt reduction. The deal he outlined included cuts in military spending, and tax increases. It also included a fix for the Medicare physician payment formula to end the annual ritual of finding funding for a temporary rate patch. Although one can question whether it is either fair or logical to use cuts in Medicaid to partially pay for an increase in Medicare physician payments, as the administration proposed, at least there was some overall balance to the approach. The concern is that as the negotiations continue, the same scope of Medicare and Medicaid cuts would remain on the table without the other elements of the deal.

Equally concerning is the composition of the proposed cuts. Although definitive information about the negotiations is hard to come by, the health care proposals identified in the media are mostly a combination of missed opportunities and bad ideas.

Let’s take a look at each category:

Missed Opportunities

Graduate Medical Education
One proposal on the table is to reduce federal funding for graduate medical education. Instead of focusing on reducing GME funding, a better approach would be to make better use of existing funding by redirecting funding to increase the supply of primary care physicians as outlined here.

Medicare Bad Debt
Another proposal is to eliminate funding for Medicare bad debt. This is another missed opportunity. A reduction in bad debt should contain an explicit exclusion that free care given pursuant to a financial assistance policy would still be reimbursed, giving hospitals an incentive to actually qualify people for financial assistance. This would not only help Medicare beneficiaries, but also low-income underinsured people who often have a hard time obtaining financial assistance.

Bad ideas

The main bad ideas on the table are variations on the theme of shifting costs onto Medicare and Medicaid beneficiaries, including blended rate (combining regular federal Medicaid match, CHIP match and enhanced match for new eligibles under the ACA into a single rate); eliminating or curtailing states’ use of provider taxes; and increases in Medicare cost sharing, all of which will shift costs onto state Medicaid programs and result in cuts in rates or benefits.

A better way
In a plan presented to the Senate Democratic caucus, Budget Chair Kent Conrad outlined a better approach that relies more on progressive taxes and less on health care cuts.

Nor does Conrad’s proposal exhaust the opportunities. In a future post we will look at some of the policy options that could generate federal health care savings that improve quality, efficiency and the underlying health of the public without hurting Medicare and Medicaid beneficiaries.

– Michael Miller, Policy Director

But my favorite is the amazing tap dancing of former Governor Mitt Romney as he tried yet again to have it both ways on health care reform in Massachusetts. In his USA Today op-ed and his speech in Michigan, Mr. Romney basically offered up a strange amalgamation of a defense of the Massachusetts law coupled with a rehash of old ideas for national reform that have been analyzed in the past and found to be ineffective and inadequate to address the problems he correctly identifies (the high number of uninsured, high cost and uneven quality).

As for the specifics of the “new” Romney plan:
He offers no evidence that the state flexibility he touts will address the problems he identifies. If you look at what states have done (and not done) with their Medicaid programs, you have to conclude that, absent some incentives or requirements to do so, states will not solve these problems on their own. President Obama has already come out in favor of state flexibility as long as states can meet certain minimum benchmarks for the quality of health plans and for reaching the uninsured. Mr. Romney appears to be embracing the idea of state flexibility without any accountability for actually achieving results.

He relies on innuendo and unsupported allegations — e.g. the ACA will harm US economy; the big federal bogey man will get your health care — but he doesn’t actually make an argument or provide evidence to back up his allegations.

Mr. Romney claims he will address the problem of the uninsured with no new taxes, but he also proposes several new federal tax expenditures (which will not be enough to make a real dent in problem of uninsured) with no offset in savings or revenue (unless he is proposing to take it out of the hide of the states with the Medicaid block grant).

He embraces Medicaid block grants that have been shown to shift costs to states and leave them without the resources to maintain current coverage levels, let alone expand coverage.

Romney offers only tepid insurance reforms. For example, insurers couldn’t deny coverage based on pre-existing condition, but he doesn’t say whether they could charge you more based on health status.

He also embraces the sale of insurance across state lines which would produce a race to the bottom that undermines coverage for those who need it most. It would also enormously complicate the job of state regulators who want to provide basic protections, such as requiring insurers to meet reserve requirements, let alone enforce patient rights and quality standards.

Mr. Romney repeats the standard Republican talking point about liability reform. Impartial analysts have concluded that malpractice reform offers a modest opportunity for cost containment but also limits people’s ability to get redress for injuries. Since most wrongfully injured patients are never compensated in any way, any fair malpractice reform proposal would have to address this problem as well.

And of course there are the usual paeans to making health function more like a “normal market.” Never mind that there are so many market failures in health care and they are so fundamental, (Do you really want the same legal and ethical relationship with your doctor that you have with the guy who sells you shoes? No offense meant to shoe salesmen.) that the attempt to make health care more of a market a.) is bound to fail and b.) will have all kinds of negative consequences along the way. Thoughtful people have concluded that in order to make competition work in health care you actually need a very active role for government (e.g. Health Insurance Exchanges, subsidies, universal coverage, etc.).

No matter. It appears that Mr. Romney has concluded that this is what potential donors and Republican primary voters want to hear. He seems to be working overtime NOT to distinguish himself on health care and to repudiate any claim he might justifiably make to leadership on the issue. But judging by the reactions of a number of conservative media outlets and think tanks, it’s not clear that the effort will be successful. If things don’t work out, there is no need to worry. Mr. Romney can always take his tap-dancing act to Dancing with the Stars.

– Michael Miller, Policy Director

From a health care point of view, cap proposals that establish an arbitrary ceiling on federal health spending as a specific percentage of GDP are just as bad as specific proposals for Medicaid block grants or Medicare vouchers. Block grants and vouchers become the inevitable mechanism to enforce a cap, shifting costs onto states, providers and beneficiaries. A cap is also a bad idea because it undermines the “countercyclical” effect of federal health spending. Public health spending rises during an economic slowdown as more people qualify for Medicaid (and in the future for ACA tax credits). This natural increase in public health care spending during tough times stabilizes the health care system and the economy. A cap would interfere and make the health and economic consequences of recession much worse.

Battle for hearts and minds—untangling the polls
As the debate unfolds over the future of federal health programs, there are questions about where the public stands. For example, a recent Kaiser poll seems to indicate that the public is very malleable on the issue of Medicare changes. But what results really show is that it is possible to mislead the public with incomplete information. A NPR analysis of the Kaiser polling found the devil is in the details, or how polling questions are framed. Pollsters gave supporters of a voucher program an anti-voucher talking point and were able to move most of them to opposition. Those who opposed vouchers also moved to pro-voucher in response to a pro-voucher point, though not as much. But here’s the rub – the anti-voucher point did not go far enough. It did not point out that the amount of savings from health care cuts was essentially equal to cost of tax cuts for wealthy Americans, and they didn’t offer alternative debt reduction plans for people to choose from. IF people understand the plan, they overwhelmingly oppose it. The question is not whether the public supports Medicare cuts (they don’t). It’s how effective the disinformation campaign will be in fooling the public and how strong the defense of health programs will be.

With that defense in mind, it’s encouraging to see organizations such as AARP getting into the fray. The reaction at town hall meetings from the recent Congressional recess is also encouraging. And public pushback seems to be having an effect. Even Tea Party darling Rep. Michele Bachmann (R-Minnesota) has waffled on her position, and Republicans seem to be losing their appetite for a showdown over Medicare.

– Michael Miller, Policy Director

Want to do something more useful than speculating or gambling? Go out and educate people on the benefits of the ACA. The court won’t make its decision in a vacuum and what people think, matters.

You may be recused
When the SCOTUS finally does get the case, how many justices will actually hear it? Legislators on both sides of the aisle are already battling over this. Orrin Hatch is demanding Elena Kagan recuse herself because when she was Soliciter General, she had taken part in discussions of the ACA within the administration. Democrats are countering with a demand that Clarence Thomas recuse himself because of his wife’s political activities in opposition to the ACA.

Meanwhile, some Democrats in the Senate are not waiting for the Court ruling on the IRR, they are going out and seeking alternatives. This is a misguided effort. First, from a policy perspective, the alternatives will work less well. Perhaps, more importantly, the search for an alternative presumes that a consensus can be built within Congress for constructive modifications when in fact no such consensus is possible. The goal of the current Republican leadership is to bury the ACA, not to modify it.

There are slasher films and then there are slasher films
Remember that movie last year about the guy who was trapped while hiking and had to amputate his own arm in order to stay alive? That seems like a good metaphor for the Obama budget — it’s nasty and painful. But it’s better than the alternative if the proposals from House Republicans for the remainder of FY 2011 are any guide — $1.3 billion cut to community health centers and elimination of all funding for the national health service corps, which provides funding for doctors to work in underserved communities — the political equivalent of the Texas Chainsaw Massacre.

The U.S. economy has yet to really emerge from the worst economic crisis since the Great Depression. Although there are some signs of improvement, there are also many signs of continuing weakness, including in the housing market. With state and local job cuts already a drain on the economy, and more public employee cuts on the horizon in the next state fiscal year, it is premature to be contracting federal spending. While some commentators are making this point, it seems to have little traction on Capitol Hill where the main debate is between the President and his critics on the right. As a result, the budget debate appears to be shaping up as a rerun of the debate on the expiring Bush tax giveaways, and we already know how that movie ended.

Does the public support cuts?
In pursuing spending cuts, aren’t politicians just responding to the demands of their constituents? That’s a hard question. As with questions about health reform, it depends on how you ask. In general, the public seems to prefer the abstract idea of cuts over taxes, but is much less willing to embrace specific spending reductions.

Meanwhile, advocates for programs across the federal budget are rallying around their specific area of concern. This is understandable, but the moment seems to require a broader approach. Arguments that accept the basic premise that spending on human needs must be reduced but posit that somebody else should be cut increase the chance of a food fight over a shrinking pie. For an alternative approach, check out the good work being done by the folks at the Coalition for Human Needs There’s still time to sign on to their statement on budget priorities.

What does it all mean for health care activists?
The approach being pursued by Congressional Republicans is clearly a health care disaster. President Obama’s budget is more of a mixed bag. Although there are some good proposals to reduce health care spending — such as eliminating the ability of drug companies to pay generic drug firms to delay market entry (“pay-for-delay”) — there are also some painful reductions. Most troubling is a proposal to reduce the ability of states to use provider taxes to help fund their Medicaid budgets. While the proposed reduction in allowable taxes, from 6 percent in FY2014 to 3.5 percent in FY2017 and beyond, does not start phasing in until 2015, there are two likely effects. First, it will likely have a chilling effect on states that might be considering these taxes to help balance their budgets in the short run, making cuts in benefits more likely. Second, it will force states to find alternative revenue sources at roughly the same time they are expanding eligibility under the ACA, adding substantive and political challenges to implementation. In general, our view is that the federal government should be doing more, not less to help finance the Medicaid program.

Still, for the most part, the President’s budget spares health care programs from serious harm. But we shouldn’t rest easy. The debate in Congress is sure to be difficult and health care will not emerge unscathed. As difficult as the current budget moment may seem, it is likely that even greater challenges lie ahead when the focus of debate moves from FY2012 to long term debt reduction, which will put health care squarely in the spotlight.

– Michael Miller, Policy Director

Essentially the ruling has no immediate practical significance other than providing fresh ammunition for the attack dogs who were quick to seize on it. It doesn’t really change the calculus with regard to implementation. Federal regulators will certainly move ahead and the situation is not much different in the states. Since all or most of the ACA that pertains to states is likely to survive the legal challenges, the consequences of inaction are too significant for state government to sit back and do nothing while the court cases play out. For example, state administrations politically opposed to the ACA who want to use this ruling as an excuse for inaction risk turning over the operation of the Exchange (and the keys to Medicaid eligibility) in their state to the federal government.

The main concern about the ruling is that it opens up new ground on the far right, moving the Virginia ruling — which struck the IRR while upholding the rest of the law — into the center. This could create cover for the Supreme Court to follow suit in dumping the IRR while upholding the rest of the law.

If it comes, a Supreme Court ruling along the lines of the Virginia decision would create a major challenge for ACA backers. If the law, minus the IRR, remains intact, there could be significant adverse selection in private insurance pools. Technically, there are a number of alternatives that could be put in place to allow ACA implementation to move forward without major disruption.

The challenge is political. Bipartisan cooperation would be needed to enact an alternative. Republican opponents of the ACA could demand other major changes in return for an agreement to enact an alternative mechanism to prevent adverse selection.

During the debate on expiring tax cuts, Congressional Republicans showed themselves willing and able to avail themselves of this type of “hostage taking” opportunity to preserve tax breaks for the wealthy. They seem likely to attempt a similar strategy both with regard to completing the work on the FY’11 budget and the upcoming vote to raise the federal debt ceiling (see below). During the tax debate, neither the Obama administration nor Democrats in Congress were willing to play hardball. It remains to be seen whether the same dynamic plays out with respect to health care.

Stay tuned for more detail on the Vinson ruling.

The Next Dragon in the Road
The much-hyped House vote on ACA repeal is already fading into the rearview mirror. While Senators Reid and McConnell jockey over scheduling a similarly symbolic Senate vote, far more significant threats loom ahead that advocates must be prepared to meet. One critical fight that is rapidly approaching is a likely vote on whether to amend or repeal the Medicaid Maintenance of Effort (MoE) requirement contained in the ACA.

The ACA prohibits states from reducing Medicaid eligibility or putting in place new administrative enrollment barriers for most adults prior to 2014 and for kids until 2019. Recently, Republican Governors sent a letter to President Obama and Congressional leaders calling for repeal of the MoE. Even more recently, the National Governors Association (which includes all of the nation’s governors — Democrats as well as Republicans) sent another letter that, while less explicit in calling for repeal, also took a stance in opposition to the MoE requirement.

Medicaid is the foundation on which the ACA rests. The repeal attempt on the MoE is the opening move in what will be a sustained effort to undermine both the ACA coverage expansion and the entitlement nature of Medicaid itself, which is why we can be sure that Congressional opponents of the ACA will push it.

MoE repeal would not only lead to an increase in the number of uninsured, it would also create new barriers to full expansion in 2014. States that rolled back coverage would have to reinstate that coverage at their regular Medicaid match rate, making the 2014 expansion more difficult. Politically, moderate Senate Democrats, especially those up for reelection in 2012, may be reluctant to hold the line on eligibility given the poor fiscal condition of states and the looming expiration of enhanced federal Medicaid matching dollars. MoE is an especially hard vote for ACA supporters because, unlike total repeal, MoE repeal, will be scored by CBO as a budget saver, making it attractive to Senators eager to burnish their credentials as deficit cutters or for use as a “pay for” for another priority that has a price tag attached.

They just can’t help themselves
Although posing as defenders of Medicare helped Republican candidates rack up positive vote margins with older voters, some members of the House GOP caucus seem eager to cough up those gains. Republican House leaders are considering a measure to convert the Medicare program into a voucher system as part of the House budget proposal, which could take shape within a month. The proposal being considered would convert Medicare into a voucher by 2021 and would also raise the eligibility age for Medicare to 69 (a change that would add substantially to employer health costs). The same idea is likely to be advanced during the debate over an increase in the debt ceiling expected to occur this spring.

Eyes of the Beholder
Did CMS Actuary Richard Foster validate the supporters or opponents of the ACA (or some of both)? Both Democrats and Republicans claim that Foster’s testimony before the House Budget Committee bolstered their views of the ACA. Democrats say that Foster agreed that the ACA would reduce the budget deficit. Republicans point to his statements relating to overall health costs and whether people could stay on their current plans as support for their criticism of the ACA. Let’s take a closer look at these two latter statements.

First, Foster said the claim “if you like what you have, you can keep it” is not true in all cases. Given the way he qualified his statement, on this point, he seems obviously correct. Although Foster may have had changes to Medicare Advantage in mind, conceding that the ACA will force junk insurance off the market isn’t anything that ACA supporters should apologize for. Sooner or later (and generally speaking the sooner, the better) plans that take subscribers money without offering them either reasonable value or adequate financial protection in the event of a serious illness will be forced off the market. People who have them now and like them only like them because they are cheap, and will only like them as long as they don’t get really sick. Just because it’s cheaper to have cars without working brakes or airbags does not mean they should be allowed on the streets.

The more serious contention is that the ACA will not contain health care costs. The statement rests on the Office of the Actuary’s (OACT) projection of total health spending under the ACA and whether the Medicare cost containment provisions will actually be implemented.

The OACT is quite pessimistic about the cost containment potential of the ACA relative to other analysts like the CBO or Council of Economic Advisors. This is a general tendency of the office, not unique to the ACA. For example, the OACT overestimated the cost of Medicare Part D by 25 percent. Nonetheless, their analysis concludes that the ACA will expand coverage to over 30 million uninsured people with virtually no net increase in health spending. Since uninsured people get only about half the care of the insured, this large coverage expansion with a negligible increase in cost is actually an endorsement, rather than a rejection of the ACA’s cost containment effect.

Most importantly, Foster is making a political rather than analytic judgment that the Medicare cost containment provisions won’t be sustained. The endless replay of the drama around how to prevent the cuts in physician fees mandated by the Medicare Sustainable Growth Rate would seem to bolster his view, but, as Paul Van de Water of CBPP points out, the SGR is the exception rather than the rule when it comes to Medicare cost containment efforts. Notwithstanding the routine fee increases approved by Congress, savings from reductions in Medicare physician fees still exceed the levels projected at the time of SGR passage.

Don’t hold your breath
While the repeal and harass parts of the repeal, replace and harass strategy seem well underway, replace seems to be lagging and the likelihood of a coherent replace strategy emerging is much lower. The problem is that most of the ideas previously advanced by House Republicans don’t actually work—having at most a modest effect on health spending and even less on coverage, while failing to adequately protect those with preexisting condition exclusions. Even McCain advisor Douglas Holtz-Eakin, a vociferous critic of the ACA says, “If it’s all they do, it’s not a serious effort.”

Nonetheless the old Boehner bill constitutes too much government intervention for some in the incoming class of freshman Republicans. As a result, coming up with an alternative to the ACA is likely to prove much harder than trying to unravel it by picking at the less popular provisions. In addition, an alternative acceptable to the House majority may not be very popular with the American people who like most of the provisions of the ACA.

In their own little corner
The health care debate in the rest of the country may be focused on repeal, replace, defund and harass or on the fiscal challenges facing state budgets, but a different story is unfolding in Vermont. Newly elected Governor Shumlin campaigned on single payer, and he is taking the issue seriously. Shumlin contracted with William Hsiao, who, among other things, helped design the national health system in Taiwan, and Jonathan Gruber, who modeled coverage expansion costs in Massachusetts and for Congress during the ACA debate, to help design a single payer plan for Vermont. Their report, released a week ago, showed that a single payer system would significantly lower health care costs and create jobs while covering more people with coverage at least as good as offered by the ACA. (They also modeled the ACA and found that it too would create jobs and lower health care costs relative to the status quo, but not as much.)

Even with a supportive governor and a Democratic legislature, there are still many legal, operational and political challenges ahead. How the plan is received by the provider community, whether there would be a role for the state’s Blue Cross plan (which now has a 75 percent market share), and the distribution and reaction of winners and losers among employers in the proposed shift from premiums to payroll taxes, are all likely to play a large role in the ultimate fate of the effort. To date, the national news media have paid relatively little attention to the Vermont effort, but if the state succeeds in establishing a single payer plan, VT could become the mouse that roared in health policy terms.

– Michael Miller, Policy Director

The question is, what comes next? One likely candidate is an attempt to roll back the regulation requiring insurers to spend at least 80 percent of premium dollars on medical care (known as the Medical Loss Ratio or MLR). ACA opponents believe that they can make the case that the MLR regulation represents over intrusion of government into the business of insurance and that they will actually inhibit insurers ability to contain costs. However, most people are likely somewhat skeptical of both the ability and intentions of insurers as agents of cost containment and like the requirement that premium dollars get spent on medical care and the requirement that insurers pay rebates if their non-medical expenses are too high. Like total repeal, this should be an issue that plays to the advantage of supporters. Other issues in the pipeline relating to the Personal Responsibility Requirement and to Medicaid could prove to be more difficult challenges. (More on the threats to ACA implementation in a coming post.)

– Michael Miller, Policy Director

For different reasons and in different contexts, these public insurance programs already have been getting some rough treatment in public debate.

For Medicare, the recent context has included continuing debate over cost containment provisions in the Affordable Care Act—a debate that includes allegations of death panels, rationing, and the forcing of seniors onto “government-controlled” health care. (Note: It doesn’t have to make sense; it’s just a sound bite.)

For Medicaid, the challenge has rested mainly at the state level. Cash-strapped states have struggled to keep up with increased demand for Medicaid amidst falling revenue streams and other realities arising from the recession. Many states have filed suits to block the ACA-mandated expansion of Medicaid eligibility. Some have gone so far as to threaten withdrawal from the Medicaid program.

However, as a new political alignment prepares to take the reins in Washington, new federal level threats are aimed against Medicare and Medicaid, which form the foundation of our nation’s health care safety net, particularly for older adults, people with disabilities and children. The deliberations of the official Deficit Reduction Commission (DRC) appointed by President Obama, along with related policy proposals, such as the one released by the Bipartisan Policy Center (an organization financed by Peter G. Peterson – a long-term proponent of reduced federal spending on entitlement programs), bring these threats into focus.

Putting the Deficit Debate into Context
As Henry Aaron of the Brookings Institution observed in the New York Times, the various official and unofficial “commission” reports aim at three distinct problems: the short-term increase in the national debt, a projected shortfall in Social Security funds, and a projected long-term rise in the national debt. Let’s look at the short- and long-term issues in turn.

It’s the economy, stupid (and the wars and the Bush tax cuts)
Most economists agree that the current short-term increase in public debt is attributable almost entirely to the wars in Afghanistan and Iraq, the Bush tax cuts (mainly benefiting the wealthy) and the recession. Also, lingering effects of the recession, not health spending or the debt, pose the most immediate and serious threat to our health security and general well-being. Persistent high unemployment rates reduce the proportion of people who have employer-sponsored health insurance, and also reduce the revenue to fund Medicare, Medicaid and Social Security while driving Medicaid enrollment up. With enhanced federal support for Medicaid slated to expire in June even while states face continued significant revenue shortfalls, pressures on Medicaid will be greater than ever.

Meanwhile, the actions and words of President Obama’s financial advisors make it clear that they do not regard the possibility of a “double dip” recession as being out of the question, especially without additional fiscal stimulus. By spurring job growth, additional stimulus would support the economic recovery and restore growth, creating the conditions necessary to bring down the short-term debt. Reducing unnecessary military spending and restoring more progressivity to the tax code also would help. However, the type of stimulus that would include additional federal funds for state Medicaid programs appears to be off the table.

Medicare and Medicaid in the crosshairs
Finally, and most significantly for health care advocates, the various commission reports all addressed the issue of long-term projected increases in Medicare and Medicaid spending. The CBO has projected that the growth of federal debt long-term is attributable almost entirely to the growth of health care spending, particularly Medicare and Medicaid. Based on this, various debt-buster report recommendations to reduce health care spending in Medicare and Medicaid vary from the benign (increasing funds for fiscal oversight, reducing fraud and payment errors, and collecting the Medicaid drug rebate for all dual-eligibles) to the alarming (increasing Medicare cost-sharing, setting a global cap on federal health spending equal to GDP growth plus one percent, turning Medicare into a voucher program, and eliminating the federal commitment to matching state Medicaid spending on no less than a dollar for dollar basis).

Beware of GIGO (Garbage In Garbage Out)
Before entertaining any drastic action to cut Medicare and Medicaid, policymakers should subject the assumptions underlying the Deficit Reduction Commission and similar reports to careful scrutiny. First, although you would never know it from any of these reports, there is actually very little evidence to support any particular debt-to-GNP ratio as a target that we must adhere to or risk financial disaster. (See this and this for discussions that call into question the basic premises of the deficit commission. An opposing view is here.)

Policymakers also should closely examine underlying assumptions in the CBO forecast. Projections of explosive debt growth are very sensitive, both to assumptions and to policy change. (See, for example, the difference between the 2009 and 2010 CBO forecasts.) James Galbraith and others have pointed out that the CBO baseline assumes an unlikely combination of circumstances that includes low inflation (except in health care) and, notwithstanding that low inflation rate, significantly higher interest rates. CBO also assumes that there are no long-term cost savings effects from the ACA. While it may be prudent not to assume a continuing cost-containment effect from the ACA, it also would be prudent to give the law a chance to work before performing radical surgery on the core of our health care safety net.

Finally, neither the assumed need for debt reduction nor the use of arbitrary caps to reduce the percentage of our economy devoted to Medicare and Medicaid are helpful lenses through which to consider the question of health care cost containment. On the one hand, reduction of the debt is taken as a primary good, with benefits assumed but not demonstrated. On the other hand, discussion of the impact of proposed cuts on health programs serving older adults and others served by Medicare and Medicaid is nowhere in evidence. It is impossible to judge the reasonableness of proffered recommendations without looking at their costs, as well as any alleged benefits.

A few facts are important to keep in mind:

– Medicare already offers coverage benefits that are less generous than those typically available through employer-sponsored insurance.
– Older adults already devote a substantial share of their income to health care –well above what younger groups spend.
– Medicaid beneficiaries are both the poorest and sickest members of society. A retrenchment in Medicaid is therefore likely to create substantial hardship both for the low-income frail seniors and younger adults and children with chronic illnesses and disabilities on whom most Medicaid dollars are spent.
– The same proposals that envision reducing the value of Medicare also envision reducing Social Security benefits, creating a double whammy for all who do not participate fully in the labor force because of old age, disability or other categorical dependency.

The cost of public programs providing health coverage and services is tied to the overall growth in health care costs. Focusing only on public spending in this equation obscures this link and leads toward draconian solutions that harm vulnerable populations rather than smarter, more system-wide approaches. Arbitrary cuts in public spending for health care would be a cure worse than the disease. What we need is not an arbitrary cap on health spending, but long-term integrated approaches to reducing the rate of growth in health care costs that also improve quality and value. The Affordable Care Act plants the seeds of such a program. More could be done, but that will require less demagoguery and ideological rigidity than was on display during the debate on passage.

Is the threat real?
For now, the debt reduction juggernaut may be temporarily stalled. Even Congress might blush before recommending major cuts to popular programs immediately after voting to increase the deficit by $900 billion, as they are now considering doing. But it is not dead. When the debate turns again to debt reduction, it is critically important for advocates of quality affordable health care for all to block a stampede caused by debt-phobia that would undermine health security for millions of Americans.

– Michael Miller, Policy Director

Preview of Coming Attractions (coming to a Congressional multiplex near you)
The incoming House Republicans have made it clear that they will try to block implementation. We can expect:

– Repeated overall repeal attempts
– Efforts to impede federal regulators via oversight hearings, legislation to block regulations and restricting funding (though probably stopping short of a game of chicken over passing a budget)
– Repeal efforts aimed at selected provisions. These last efforts will be designed to try to force moderate Democratic Senators up for reelection in 2012 either to vote against the ACA or to take votes that can be used for attacks in the 2012 election. (Remember the attack ads claiming various Democrats supported Viagra for sex offenders?)

Repeal — a real threat or a political stunt?
The first question confronting advocates is how to respond to repeal efforts — especially those focused on the individual responsibility requirement. Although they have no chance of passage in the short run, ignoring them would likely prove politically damaging. The goal of putting these forward is twofold: to try to keep the national conversation about the ACA focused on its least popular elements and to make Democratic Senators take tough votes. Even a vote in the Senate that attracts some Democrats, and especially enough to constitute a majority while falling short of 60 votes, will hurt the public perception of the ACA. The ultimate goal of opponents is to get some repeal or rollback measures on President Obama’s desk. By forcing a veto, Republicans hope to paint a picture of an obstinate Obama standing against the popular will. Advocates of reform can’t roll over in the short run if they want to win in the long run — even with House votes that cannot be won.

What about in the longer run? Many analysts do not believe that the individual responsibility requirement is in serious jeopardy because, they argue, repeal is not really in the interest of health care interest groups, particularly insurers.

Of course, it is impossible to be certain, but given their vociferous objections to the requirement, it is hard to see Republicans turning around and saying “just kidding” if they run the table in 2012. Although there may be some cynics in the party who see attacks on the individual responsibility requirement purely in terms of political opportunism, there are certainly many true believers in repeal. In addition, the requirement to purchase coverage becomes unworkable if much of the funding for the subsidies is wiped out (e.g. by restoring funding for Medicare Advantage overpayments or eliminating insurance and other taxes). Trying to implement the mandate without adequate subsidies would likely prove costly at the ballot box.

Also, looking to the first Massachusetts attempt at universal health care in the late 1980s, when business and health care industry groups abandoned their support for reform after the election of a Republican governor, you can’t assume the interest groups that supported the passage of the ACA will stay on course for coverage expansion in a different political environment if they think their bread is buttered elsewhere. You can be sure that the insurers and other interest groups have alternative plans and business models in place to deal with that eventuality.

Past performance is not a guarantee of future returns
So, is the 2010 election a harbinger of doom for health reform? Not necessarily. First off, as we noted last time, the extent to which health reform drove the outcome is being vastly overstated by the incoming House majority. Approximately half of the country wants to see the ACA either implemented as is, or expanded. Constituencies that tend to support the ACA were underrepresented in the 2010 election relative to their participation in 2008 but may return to the voting booth in 2012.

Also, most of the provisions of the law continue to command majority support, making repeal a dubious political proposition. Defenders of the law will have an easier time mobilizing supporters going forward because it is an organizing truism that it is easier to organize against something being taken away than it is to organize for getting the benefit in the first place.

Furthermore, despite their complaining (and piling on to lawsuits) we are likely to see states with conservative administrations moving forward with implementation. Even state administrations that oppose the ACA may be reluctant to gamble on repeal. Failure to move forward on implementation would mean turning crucial state functions like Exchange operation (and access to state Medicaid coverage) over to the federal government. This will create momentum for implementation.

Finally, some of the big whopper lies that opponents have told will be shown to be untrue in the coming year (e.g. that the ACA requires you to pay taxes on the value of your employer-sponsored health benefits). As time goes on, implementation gains steam and more people are helped by the interim provisions, repeal will become less plausible and the claims of opponents will become less credible.

Nonetheless, the ultimate fate of the ACA rests on the results of the 2012 election and on the eventual decision of the Supreme Court. If 2012 results in a Republican sweep, it is highly uncertain whether Democrats in the Senate will have the will to filibuster repeal efforts. Meanwhile, the Supreme Court remains the wild card in the implementation debate. If court prognosticating is your passion, check out the discussion here: http://aca-litigation.wikispaces.com/

Coming up next time: Spotlight on Medicare and Medicaid

– Michael Miller, Policy Director

…and what the ACA has to do with it
Although Republican leaders are already busy claiming that their electoral victory equals a voter mandate to repeal the ACA, the facts tell a different story.

Only 19 percent of voters said that health care was their main concern—and the majority of those voters voted for Democrats.  Furthermore, voters are split nearly between those who want to repeal the ACA, and those who want it to remain in place or go even farther. Taking this in, it’s hard to claim the election outcome was a call to repeal ACA.

It’s the Economy, Stupid

If health care wasn’t the driver, what was? Simply and clearly, the economy. Sixty-two percent of voters reported in exit polls that the economy was their number one issue and the majority of these voters (52 percent) cast their ballots for Republicans.

Despite the fact that the recession is officially over and the stock market has recovered the value it lost then, votes probably reflected the persistently bleak jobs picture.  The unemployment statistics since President Obama took office in January 2009 show that not only did the jobs numbers not get better; they got worse.

The “U6” rate calculated by the Bureau of Labor Statistics includes not only active job seekers (the number most commonly cited in unemployment data) but also counts discouraged workers and those who have a marginal attachment to the workforce and are looking for more work hours. The U6 now stands at 17 percent: that’s three percentage points higher than when President Obama took office and only one-tenth of a point off its high-water mark in 2010.

So the numbers suggest jobs was the biggest election factor, not views on health reform.

It’s also important to note that while the wave of GOP victories was widespread, it was far from evenly distributed.  Nearly 90 percent of House Democrats up for reelection this year who represented districts President Obama carried in 2008 were reelected.  The corresponding percentage for those in districts carried by Senator McCain was only 24 percent.  In other words, most of the Republican gains in the House came in districts that tended to vote Republican.  In a weak economy, Democratic House members in Republican-leaning districts were extremely vulnerable, regardless of their stand on health care.

Nonetheless, it would be a mistake to say that popular views of the ACA played no role in the outcome.  Without attributing causality, it’s noteworthy that Democrats in Obama-carried districts who voted against the ACA did worse than their counterparts who voted yes, while the hearty few who followed their conscience and voted yes on ACA while representing a McCain-carried district were almost all defeated.

Popular views of the ACA may also have played a role in the turnout and voting preferences of older adults.  Starting with the big lie about death panels in August 2009, there has been a deliberate, relentless and largely successful misinformation campaign aimed at older adults to turn them against the ACA.  Older voters are the age segment least supportive of the ACA.  They represented a larger share of the electorate this year than in 2010, and the majority voted for Republican candidates.  It’s not much of a stretch to suggest that their concerns about the ACA—however unfounded—helped bring them to the polls and affected their ballot choices.

And Democrats did not use the ACA to help motivate their core voters, even as they lost ground among older Americans.  Democratic messaging on the ACA focused heavily on the elimination of pre-existing condition exclusions—an issue that resonates particularly well with swing voters (who nonetheless trended Republican)—and pretty much ignored the importance of expanding coverage to more than 30 million Americans; an issue that plays better with core Democratic voters and particularly with younger voters, and racial and ethnic minorities, whose participation in the 2010 election fell sharply from 2008.

One notable (and perhaps too-late) exception? President Obama’s appearance on the Daily Show with Jon Stewart the week before the election, where he highlighted the coverage expansion as a key part of the ACA and made it part of his overall appeal to core Democratic voters.

The ACA, Medicare Advantage and the fall of Troy
It’s more than a little ironic that senior voters turned away from the party most closely associated with the creation of Medicare (and Social Security) in favor of the party whose leadership has been very public about their intention to radically reshape, if not dismantle, the program.  Medicare beneficiaries made themselves willing, if unintentional, accomplices in undermining the program, and the Trojan Horse that made it all possible was the Medicare Advantage program.

The designers of Medicare Part D built in a formula that overpaid Medicare Advantage plans, thereby accomplishing two things at once.

First, the extra payments to the managed care plans enabled the plans to offer benefits that were richer than the statutory Medicare program.  The goal was to encourage beneficiaries to abandon traditional Medicare so that it would, in Newt Gingrich’s infamous phrase, “wither on the vine,” and make it easier to move from a guaranteed set of benefits to a voucher program.

Second, since the program increased Medicare costs overall, Medicare Part D would help precipitate a financing crisis that could be used as further ammunition for those who call for its restructuring.

The fortuitous (and surely unintended) twist on this strategy is the success ACA opponents have had in casting the elimination of those overpayments as a Medicare cut, cynically turning seniors against both the ACA and the party that has traditionally defended Medicare, and putting themselves in prime position to dismantle it–a long-held GOP goal.

So now what?
With the election behind us, the next Insider will discuss what the new political landscape means for ACA implementation, and point to some silver linings among the clouds.

–Michael Miller, policy director