Tuesday, October 20, 2009

Advocates of health care reform are relying on budget manipulations to stick with President Obama’s pledge to overhaul the system without adding to the deficit, critics on and off Capitol Hill say.

Both independent budget analysts and Republicans say a Senate vote expected this week on a 10-year, nearly $250 billion Medicare reimbursement bill is the perfect example. They say it was sliced out of the reform plans because it would send the cost of Mr. Obama’s top legislative priority over $1 trillion.

Further, they argue that the health care overhaul bill has been front-loaded with revenue and backloaded with spending to make it look less expensive that it actually is. The reforms price tag will play a major role in the looming debates in Congress and across America.

“It’s a gimmick that is designed to allow the president and the Democrat majority to say our health care reform bill is deficit-neutral,” said Sen. John Thune, South Dakota Republican. “And well, sure, if you take $250 billion and back it out, it’s easy to say it’s deficit-neutral.”

The Medicare bill, offered by Sen. Debbie Stabenow, Michigan Democrat, would repair what physicians say is a flawed formula that underpays them for treating Medicare patients. Nearly every year, the math calls for them to face a double-digit cut unless Congress overturns it.

“The very act of separately passing the 10-year physician-payment patch, without paying for it, before passing health care reform undermines [the Democrats’] credibility and the confidence that they will make the hard choices necessary to make sure that reform is fiscally responsible,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.

But Senate Majority Leader Harry Reid, Nevada Democrat, says the move is simply to address an annual problem that must be fixed to ensure doctors can treat senior citizens.

“Physicians, you know, they go into medicine to take care of people, and when they are faced with a situation where if they see a Medicare patient, they can’t even pay their overhead, that doesn’t speak well for our Medicare system,” Mr. Reid said.

Both the American Medical Association and the AARP are lobbying hard in support of the measure.

“Those who are concerned about waiving budget requirements should recognize that the past practice of ‘temporary band-aids’ on the [rates] has only served to increase both the size of future cuts and the cost of subsequent interventions. That is neither responsible budget policy nor in keeping with our obligations to provide access, choice and quality care,” the groups said in a letter to Congress.

While there is near-universal agreement on Capitol Hill to fix the formula somehow, Republicans and some moderate Democrats warn that it’s irresponsible to cut the fix out of health care reform and not pay for it.

“The physicians issue has to be addressed but it has to be addressed in a way that doesn’t increase the deficit by $245 billion,” Sen. Evan Bayh, Indiana Democrat, said last week. “That’s just not responsible. … If we’re going to honor the president’s promise to make this fiscally responsible, that’s an issue that ought to be addressed.”

In his televised address to Congress last month, Mr. Obama drew a clear-cut line in the sand between budget deficits and health care reform. “I will not sign a plan that adds one dime to our deficits - either now or in the future. Period,” he said.

On the payment cut, physicians have lobbied hard since 2001 to fix the flawed system, calling it one of their top legislative issues. The Sustainable Growth Rate was established in 1997 in an attempt to keep payments from spiraling out of control, but each year Congress overturns the cuts.

“There’s been a strong desire to get a permanent fix,” said Julius W. Hobson Jr., a senior policy adviser at Bryan Cave LLP and lobbyist for the American Academy of Family Physicians.

But even they say it’s going to be hard to talk Republicans and even some Democrats into backing a bill without a payment mechanism. Many of the suggested ways to pay for it already have been claimed by the reform bill.

“I’m not sure where you get the Republican votes for something like that,” Mr. Hobson said.

Fiscal policy hawks say that the Congress should stick with its rule to “pay as you go.”

“If policymakers believe that the current [Medicare] formula is unrealistic, they should replace it with a more appropriate policy and pay for the change in keeping with their pledge to reform health care in a deficit-neutral way,” said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan group that advocates for a balanced federal budget.

Republicans in the House and Senate are expected to offer amendments to pay for the Medicare fix bill and try to attach medical malpractice reform.

Republicans argue that Democrats have played with their math before. They say that the Senate Finance Committee’s bill enacts revenue raisers quickly but doesn’t enact spending measures as soon, to make it look less expensive.

Douglas J. Holtz-Eakin, a former director of the Congressional Budget Office who was the chief economic adviser to the 2008 presidential campaign of Sen. John McCain, Arizona Republican, criticized the plan passed by the Senate Finance Committee and its chairman, Sen. Max Baucus, Montana Democrat, for “front-loading taxes and backloading benefits.”

The plan begins imposing taxes in 2010 on the pharmaceutical industry ($2.3 billion), the medical-device industry ($4 billion) and the health insurance industry ($6.7 billion). Beginning in 2013, the plan imposes a 40 percent excise tax on the cost of so-called “Cadillac” health insurance plans above a certain threshold ($21,000 for family policies).

An expansion of Medicaid and the sliding-scale subsidies paid to offset the cost of health insurance for low- and middle-income households would not begin until 2014.

In 2010, the Baucus plan begins to cut $117 billion in payments over 10 years to insurance companies for the Medicare Advantage programs they operate. Those programs, which offer increased benefits to 10 million beneficiaries, compete with the traditional Medicare program operated by the federal government.

Mr. Holtz-Eakin said the 10-year deficit cut was achieved by assuming that revenue from tax increases and spending savings from Medicare cuts would both rise by 10 percent a year.

“No Congress has ever cut Medicare on a sustained basis,” Mr. Holtz-Eakin said.

The nonpartisan Congressional Budget Office (CBO) has estimated that the bill would cost $829 billion over 10 years and reduce the deficit by $81 billion.

Sen. Charles E. Grassley of Iowa, the top Republican on the Finance Committee, said that examining the bill after 2013 tells a different story than starting in 2010.

“If you take the years 2013 through 2023, you’ll find it’s a very expensive bill,” he said when the CBO report was released earlier this month.

The CBO said that the federal deficit would continue to decline after 2019, but based it on a rough estimate and on the assumption that policies in the Finance Committee bill remain in place.

“These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation,” the CBO report said.

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