Rush Limbaugh has recently described the Independent Payment Advisory Board (IPAB) as a “death panel.” Another critic argues that IPAB’s “ultimate function will be to serve as a lever with which to pry the entire health care industry from private hands,” while another sees IPAB culminating in “the slippery slope to a Canadian-style health system.” Who would have thought a 15-member board, appointed by the President, would have such power?
The truth about IPAB depends on whether you believe what is written on paper or instead take into account the messy politics of entitlements as they have played out since the inception of Medicare and Medicaid. On paper, IPAB is restricted to making recommendations to Congress regarding how to help Medicare provide better care at lower cost. Since Medicare alone accounts for nearly one-quarter of personal health care spending, this is not a trivial degree of authority. But as the White House Blog correctly observes: “IPAB is specifically prohibited by law from recommending any policies that ration care, raise taxes, increase premiums or cost-sharing, restrict benefits or modify who is eligible for Medicare.” Indeed, IPAB’s paper powers are so weak that CBO predicts it will not be required to produce any cost savings between now and 2021.
What IPAB is most likely to do to control costs and do what Congress has neglected for decades: cut provider payments. This, in turn, will lead to reductions in access to care. Indeed today, seniors find it harder to find providers willing to take Medicare than 15 years ago and the IPAB has yet to even be appointed, much less issued its recommendations to Congress.
A decade ago, Congress failed to adopt a 30 percent reduction in physician fees codified in a statutory payment formula more. Due to politics, it kept kicking the can down the road (they refused to follow their own law). Yet this is exactly what IPAB was designed to achieve: to use experts to force Congress to do what it could not do politically.
So what would happen if IPAB succeeded where Congress could not? First, even the Medicare Payment Advisory Commission (MedPAC) — the panel of experts that currently advises Congress with voluntary recommendations –concedes that “fee cuts of that magnitude would be detrimental to beneficiary access to care.” But we don’t need to speculate on this score. Just this week, the Massachusetts Medical Society released its latest survey showing that less than half of family medicine doctors now accept new patients (compared to 70 percent in 2007 just before “Romneycare” was adopted). More worrisome is the vast difference between acceptance of Medicare and various flavors of Romneycare. Whereas 87 percent of family practitioners in Massachusetts currently accept Medicare, only 62 percent accept Medicaid, 56 percent accept Commonwealth Care (the heavily subsidized plan offered through the Connector to low-and middle-income individuals without insured and only 44 percent accept Commonwealth Choice(the unsubsidized plan provided through the Connector to uninsured adults above 300 percent of poverty).
President Obama himself acknowledged the similarity between his plan and Massachusetts’ new healthcare law. Yet access to care for those obtaining coverage from a Connector that is nearly identical to a program in Obamacare is not only far worse than Medicare, but even worse than Medicaid.
Once IPAB is done with its cost-cutting why should anyone believe that access to Medicare will be any better than Massachusetts citizens have to Romneycare? Given that high-level White House officials have explicitly expressed interest in IPAB being extended to all health care while another key federal healthcare official has expressed a great fondness for NICE (the British version of IPAB which does have the power of a “death panel”) what does that bode for the rest of us?
Conover is a research scholar at the Center for Health Policy and Inequalities Research at Duke University.
The Medicare proposal in U.S. Congressman Paul Ryan’s budget plan, Path to Prosperity, is superior to the status quo, or anything proposed by President Obama. However, it is somewhat vaguer – and might differ significantly – from the high standard for reform that Ryan set himself last year, in Roadmap for America’s Future.
Some of Ryan’s biggest fans did not initially appreciate the difference. The Wall Street Journal editorialized (incorrectly) that the Path to Prosperity “means that at age 65 you would be able to keep your same insurer, with the feds paying for that insurance instead of your employer.”
But that was a feature of last year’s Roadmap, not this month’s proposed budget. The Wall Street Journal corrected the record the next day, clarifying that “the subsidies will flow through Medicare, only to regulated insurers and government-approved plans. It does not go as far as Ryan’s previous ‘roadmap’ which offered direct cash vouchers for individuals who preferred to buy insurance themselves.”
The previous Roadmap contained a very precise Medicare “payment” (in Ryan’s words) of $11,000, to be adjusted for future inflation by a factor combining changes in the Consumer Price Index and changes in medical prices, for future Medicare beneficiaries who are now under 55 years of age. Path to Prosperity eliminates the payment in favor of the somewhat more vague “premium support.” Nor does it even report how it would calculate this premium support, beyond asserting that “wealthier beneficiaries would receive a lower subsidy” (p. 46).
Under the previous Roadmap, you could have taken the payment and used it to “to pay for one of the Medicare certified plans, or any other plan, such as those offered by former employers or available from the private market” (p. 51). In other words, you would have had the freedom to buy a Medicare Advantage plan, or to pay your employer for a retiree health plan, or buy an individual plan regulated by your state’s Insurance Commissioner.
Under the current proposal, we’d be forced to choose a plan from a federal “tightly regulated exchange.” This change is disconcerting for two reasons. First, “exchange” is Obamacare language. It makes little sense for Ryan and his colleagues to pledge to cut off funding for Obamacare’s state-based exchanges (which will provide the means whereby working Americans will lose our employer-based health benefits), while proposing to set up a new federal bureaucracy with the same name for Medicare beneficiaries. Second, people rightly associate an exchange with a limited choice of plans selected by a politically appointed board, offering benefits determined by bureaucrats’ whims.
Of course, the Wall Street Journal also notes that Ryan “moderated his ambitions” because “reforms of this order are so unusual,” and that Ryan’s Medicare would look a lot like Medicare Advantage. Ryan should have hired the Wall Street Journal‘s editorial board to write his proposal, because using the term Medicare Advantage instead of “exchange” puts the reform in an entirely more positive light.
Medicare Advantage is a popular alternative to traditional Medicare, whereby seniors can choose Medicare through a private plan, which does not have to pay providers according to the government’s Soviet-style fixed-price schedule. Obamacare will drive about a half of participating seniors out of the program, as I discussed in a study of the costs and benefits of Medicare Advantage.
Instead of jettisoning this popular program in favor of an Obamacare-style exchange, Republicans who wish to bring this valuable reform to fruition should combine the best features of Medicare Advantage with the best features of Medigap, another popular option used by Medicare seniors to supplement traditional Medicare. Such a reform would allow Medicare beneficiaries to use their Medicare “payments” (or whatever Ryan & Co. want to call them) to buy long-term, individual health insurance, which protects seniors from unanticipated premium hikes by guaranteed renewability, as more fully described in the study cited above.
Ryan and his Republican colleagues have made a very serious proposal to reform Medicare by allowing seniors more choices while protecting taxpayers. Anticipating political risks, they camouflaged their proposal in language that makes the benefits unnecessarily difficult to perceive. As they move it forward, I trust that they will advance it in a way that makes those benefits more clear to the American public.
John R. Graham is the director of health care studies at the Pacific Research Institute.
There is no question that Medicare needs to be modernized since its expenditures are out of control, and that is why a reform proposal by U.S. Congressman Paul Ryan (R-WI) is welcome news. Proponents persuasively argue that its implementation by Congress would ease the burden on taxpayers while introducing private market competition to dramatically control costs nationwide.
Now that the first anniversary of Obamacare has passed, it should be clear to almost all that the federal government bureaucracy is basically in charge of healthcare policy. This expensive legislation, with its transition period of several years, is already leading to steep declines of healthcare choice and quality. With regard to Medicare, the government sets prices for thousands of services, then pays any physician or medical facility based on a visit. This absurd fee schedule applies to the best and the worst medical facility, and bills for the patient visit continue to be sent to the overburdened taxpayer. The Ryan proposal seeks to end this growing and unsustainable problem.
Under the Ryan premium support model, seniors would be able to pick from an array of private insurance options of the kind that younger workers in the private sector utilize. These plans would be subsidized by a defined contribution, roughly equal to what the government now spends per person. This $15,000 subsidy would grow over time, but seniors who want more expensive plans would be able to pay extra.
The Wall Street Journal rightly notes that ‘premium support would create a market reward for the services that consumers value. Because seniors would be chipping in at the margin, only above the fixed-dollar subsidy, most would favor lower premiums.’ My organization– the conservative alternative to the AARP– likes the fact that insurers would compete to supply them, and providers in turn would have a reason to improve healthcare delivery and services.
President Barack Obama offers no reform and no vision regarding healthcare and Medicare policy – except for government rationing of healthcare services and more debt. Especially alarming is what the Payment Advisory Board, created by the Obamacare law, will do. Unless the law is repealed, starting in 2014 this board is charged with holding Medicare spending to certain limits. That means 15 unelected political hacks will start dictating how seniors will receive less and less service via flat pricing. Outrageous.
In this context, public pressure should be brought to bear on our representatives and senators to support congressional passage of a commonsense Ryan-type plan. Remember this: Ryan seeks to let seniors choose which private Medicare-financed insurance policies to buy, while Obama wants Americans to come under the rigid dictatorship of 15 appointed “health experts.” Which approach do you like?
Kent is the CEO of the American Seniors Association.
The U.S. Conference of Catholic Bishops (USCCB) is calling on Catholics nationwide “to prevent healthcare reform from being derailed by the abortion lobby,” the conference said over the weekend.
The unprecedented campaign encompasses 19,000 parishes across the United States, and asks the faithful to fight for restrictions on abortion funding in the health care bills by contacting their congressmen.
“The bishops want health care reform, but they recoil at any expansion of abortion,” explained Helen Osman, USCCB Secretary for Communications.
The bishops have already told Congress in a letter, “If acceptable language in these areas cannot be found, we will have to oppose the health care bill vigorously.”
The time line for influencing members of Congress appears to be short, with a vote on the bill expected in the next days.
The Catholic bishops are also pushing for affordability, access to health care for legal immigrants and the protection of consciences.
“Genuine health care reform is much needed and should protect the life and dignity of all people from the moment of conception until natural death. Mandated coverage for abortion should be excluded and longstanding policies against abortion funding and supporting conscience rights should be included. No one should be required to pay for or participate in abortion,” they said, reiterating that no current bill meets these criteria.
This effort by the U.S. Catholic Bishops comes just at the time that Nebraska late-term abortionist LeRoy Carhart was present at House Speaker Nancy Pelosi’s press conference in support of her new health care reform bill, a pro-life group reports.
Wendy Wright, President of Concerned Women for America (CWA), spotted Carhart holding a sign at the Thursday morning press conference in support of Speaker Pelosi’s proposal.
He is currently under investigation by the Nebraska Attorney General for unsafe medical practices. He allegedly allowed non-licensed persons to give injections, start IVs, and administer controlled substances.
A CWA picture of Carhart shows him at the press conference holding a sign for the Religious Coalition for Reproductive Choice (RCRC).
RCRC says on its website that it is “deeply troubling” that coverage for abortions remains “unsettled.” It endorses the “status quo” of funding abortion with federal dollars only in cases of rape, incest, and to save the life of a woman.
However, at present the health care reform bill lacks a Hyde Amendment or other explicit prohibitions on abortion funding. The Associated Press has reported that the proposed House health care legislation would create “a new stream of federal funding” not covered by current abortion funding restrictions.
Wendy Wright charged that Speaker Pelosi’s bill has gained the support of “the nation’s most notorious partial-birth abortionist.”
“Pelosi’s bill can now be rightly called an abortionist’s dream,” she added. “Under her bill, government money will pay for abortions, even the kind that Carhart commits — late-term abortions against viable babies that put women’s health at risk.”
Carhart’s legal challenge to a federal ban on partial-birth abortions was rejected by the U.S. Supreme Court by a 5-4 vote in 2007.
Newtcare, here we come.
Former House Speaker Newt Gingrich hates President Obama’s new health care law and he’s got his own plan to replace it, one that relies heavily on several controversial cost savings approaches.
But the Georgia Republican also made a pitch for saving some key programs from the budget ax, arguing against proposed reductions at the National Institutes of Health.Gingrich, a possible presidential hopeful, predicts Barack Obama’s Affordable Care Act will be repealed by April 2013 “at the latest,” suggesting that the GOP can take back both the Senate and White House next year.
“When Obamacare is repealed we can’t go back to a world that led us there, which was the same world that led us to Hillarycare which is why we have to have a replacement,” he said in a slap at Hillary Clinton – who once teamed with him on a plan to computerize medical records.
Gingrich’s prescription for cost savings: tort reform and cutting Medicare and Medicaid fraud. He said there was an estimated $70 billion to $120 billion in fraud a year.
“And the cost of defensive medicine today is $800 billion a year…. If we fixed these two things we would have more than enough money to cover the uninsured,” Gingrich said during a GOP-sponsored panel discussion on Thursday.
Gingrich differentiated himself a bit from cut-first-ask-questions-later Tea Party Republicans, saying he helped balance federal budgets in the 1990s through a combination of smart reductions and targeted funding increases to critical research agencies that help improve care and contain costs long-term, the Institute of Medicine and the National Institutes of Health.
Gingrich said he was “deeply opposed” to the proposed billion-dollar cuts to the NIH and while the medical center needed bureaucratic reforms, investing in research now would save incredible amounts of money in the future – especially relating to diseases like Alzheimer’s and Parkinson’s.
Gingrich also said he fully supported block grants for states saying the “centralized bureaucracy” of Medicaid could never fully understand the needs of each state.
“There’s zero doubt in my mind that the Lyndon Johnson experiment in a nationally managed bureaucracy for the poor is a total failure. We will never figure out a national solution,” he said. “But if you decentralized it to the 50 states … some of them are going to come up with some really good inventions.”
On Medicare he said people, especially those who were well off, should be allowed to apply for a private insurance plan.
“I see no reason to trap a Bill Gates and Warren Buffett in a government-run centralized system that tells them precisely what they can pay their doctor or hospital,” he said.
Gingrich was the speaker at a Congressional Health Caucus “Thought Leaders” series sponsored by Texas Republican Michael Burgess.
Gingrich said that since 1999 he’s been focused on two subjects: national security and health care. Health care, he said was “ten times more complicated.”
He started the Center for Health Transformation, a think-tank to produce what he calls “center-right, market-orientated” approaches to health care reform.
As the new health care law counts its first birthday, it’s time to measure the more than $500 billion in new taxes – or about $4,600 per household over the next decade. Americans are known worldwide for their distaste for taxes. Indeed, it was a tax on tea that triggered the Revolutionary War. In light of this, Democrats had to resort to every trick in their playbook to sneak through these taxes (and pay for the new law) without arousing taxpayers.
Trick Number 1: “Don’t tax you, don’t tax me, tax that fellow behind the tree.” This saying was coined by Senator Russell Long, who acquired his tax expertise over nearly four decades in the U.S. Senate. He recognized that one politically feasible way of raising taxes was to make it appear they would be paid by someone else. Not surprisingly, more than $170 billion of new taxes under the Affordable Care Act take the form of taxes on businesses–businesses that ultimately will turn around and pass them onto consumers or workers. These include taxes on health insurers ($92.7 billion), pharmaceutical manufacturers ($27 billion), medical device manufacturers ($20 billion), employers who offer prescription drug coverage to retirees ($4.5 billion) and tanning parlors ($2.7 billion) as well as the elimination of tax credits for bio-fuels ($23.6 billion). Congress is counting on consumers to blame companies for higher prices rather than connect them back to a healthcare law adopted in 2010.
Trick Number 2: The inflation tax. Part of the strategy for taxing that fellow behind the tree was to raise $210.2 billion through higher taxes on “the rich,” i.e., individuals with annual incomes above $200,000 and families whose income exceeded $250,000. However, Congress cleverly avoided adopting any sort of inflation adjustment for these income thresholds. Anyone who knows the history of the Alternative Minimum Tax is aware that it was originally enacted to target 155 very wealthy households that paid no taxes. However, the lack of an inflation adjuster has resulted in about 4 million households now being subjected to the AMT. The same will happen with several of the taxes under Obamacare. As a consequence, the Congressional Budget Office estimates bracket creep alone will more than double the amount of new health law taxes collected in 2035 compared to 2020.
Trick Number 3: Boiling the frog. Everyone knows a frog placed in a pot of boiling water will jump out. But a frog placed in cold water that is gradually heated will boil to death. These taxes ultimately will collect $500 billion, but they were carefully phased in over time. It should surprise no one to learn that the taxes that began in 2010 generated only a modest amount, averaging $3.1 billion a year. After the 2012 election is over, revenue-raising begins in earnest. The levies starting in 2013 average $25 billion a year, those in 2014 average $12.5 billion and those that starting in 2018 average $3.2 billion. By spreading these over nearly 20 different levies starting at different points in time, Congress is banking on its taxpayer frogs to remain complacently in the pot.
Trick Number 4: Untruth in labeling. Some $65 billion of revenues being raised come in the form of surtaxes on individuals and employers who do not comply with the mandates to buy or provide health insurance. While vociferously defended as “penalties” during the health care debate, the Administration has spent the past year repeatedly insisting in court cases challenging the law’s constitutionality that these actually are taxes. Which lie should Americans believe?
King George’s tax on tea was a pittance compared to the massive stealth taxes duplicitously levied by the new health law. The health law was passed in spite of persistent and unmistakable public opposition. For nearly half a year, Americans have favored repeal by double-digit margins. In light of the law’s massive taxation without representation, is it any wonder Americans are up in arms?
Conover is a research scholar in the Center for Health Policy and Inequalities Research at Duke University.
Obamacare is now one year old. It’s unlikely to make it to its third anniversary, and may fail before its second. The promise to repeal and replace Obamacare was fundamental to Republican electoral success last November, and a GOP Presidential candidate will have to make a firm commitment to sign a repeal bill soon after he or she takes office in January 2013.
But then comes the hard part. One challenge Republicans have never successfully grappled with is how to give Americans more choice of health benefits outside the current system. Currently an employee must accept health benefits offered by his or her spouse’s employer to earn those benefits tax-free. The government’s grant of monopoly privilege to our employers is clearly absurd.
What is needed is a reform to the tax code such that the tax benefit for having a health plan goes to the household instead. What has never been agreed upon is whether this tax benefit should be a tax deduction or a tax credit. Both have challenges.
If the value of the health benefits is deducted from taxable income, all parties should be indifferent to the change. Employers pay exactly the same amount of remuneration. Employees enjoy the same net compensation as they did before, and the government takes the same tax revenue. This is the first benefit of a tax deduction: minimal disruption to the status quo. Unfortunately, it also preserves some of the problems of the status quo.
First, because of the progressive income tax regime, higher-income earners will value the deduction more than lower-income workers. This will lead to higher-income households over-consuming health goods and services at a higher rate than lower-income households. Second, any individual will face a lower marginal price for each purchase of an eligible health good or service, further motivating overconsumption. Third, people who earn less than a certain threshold of income will not be able to enjoy the deduction, which implies that they will continue to be dependent on Medicaid and other taxpayer-funded programs.
If we introduce a tax credit instead, the household which buys a qualifying health plan gets a fixed dollar tax credit. If the credit is small, higher earners will suffer a tax hike. We can solve this by increasing the credit, but this will result in “too much” credit. Also, a large credit is likely to cause a higher number of lower earners to buy health insurance, leading to higher government spending than anticipated.
Indeed, many people who don’t pay taxes will get refundable tax credits. This is less of a problem, however, if the tax credits also replace Medicaid and other tax-payer funded programs. Unfortunately, politicians who propose universal tax credits (such as Senator John McCain in his 2008 presidential campaign) have never been able to persuade fiscal hawks that such a reform will not lead to more government spending.
One “fix” to the problem of expensive tax credits is to means test them. While popular among some conservatives, means testing is often described as imposing punitively high marginal income tax rates on people at certain income levels. This reduces, or even eliminates their incentive to earn higher incomes.
Tax credits have a key advantage, especially if the individual can “bank” the any unspent tax credit for future use. They do not reduce marginal prices of health goods and services, so individuals have less of an incentive to over-consume than under the status quo or a tax deduction.
Individual ownership of health insurance is necessary for coverage that is portable from job to job and state to state. After the defeat of Obamacare, Republican leaders will have to be comfortable with discussing all the consequences of such reform. The question is, which type will lead the way.
Graham is director of Health Care Studies at the Pacific Research Institute. This column is excerpted from his briefing paper on tax credits versus tax deductions and can be found at http://tinyurl.com/6hmcbgo.