The New Health Dialogue

People by now have had a few days to digest the National Commission on Fiscal Responsibility and Reform's co-chairmen’s deficit-reduction draft. As you know, the initial news accounts focused on Social Security and taxation in general. (For some reason, that proposal to stop paying states and territories for abandoned mines just didn’t grab those headlines.) We thought it would be useful to take another look a few days out at the health aspects.  

What all of the recommendations will look like by the time it gets to Congress (if it gets to Congress) is anyone's guess. But the irony, the great great irony, is that all the people who resisted health reform because somehow they thought that the current system was sustainable, are going to have a pretty unpleasant shock. We either bring health care spending under control the pretty way, or a reasonable facsimile of a pretty way (trying to create an efficient, equitable, evidence-based system) or we do it ugly. (Slash and burn.) The economic reality of our country now is that pure pretty probably isn't an option. There's going to be some pain. We just don't want to see the slashing and burning falling hardest on those who can least afford to be slashed and burned.

Let's start by looking at what the recommendations mean for health reform. As has been pointed out, there is plenty in the Bowles-Simpson draft for both the left and right to complain about -- we certainly see elements that aren’t our cup of tea coffee. Opinions have been all over the map as to whether -- when the details are known --  this is an endorsement or repudiation of the Affordable Care Act.

On one hand, there’s an implicit endorsement of the exchanges, a call for review and regulation of insurers, and for strengthening not weakening the Independent Payment Advisory Board. And -- this admittedly surprised us (and kudos to Janet Adamy of Wall Street Journal for giving this attention) the report urged reconsideration of a “robust public plan” option and/or an all payer system within the exchange to bring down costs a few years into health reform if the “curve” is not bending enough. There also seems to be a general embrace of the concept that we need to (and it is possible to) change payment incentives and ways of providing health care so that we reward quality, not volume.

On the other hand… all those caps on federal health care spending. Which may mean that there isn’t enough money to help cover all the people who are supposed to be covered by subsidized plans in the exchange and through Medicaid and the Children’s Health Insurance Plan. And the design of the cuts are problematic, not taking into account the growing numbers of Boomers aging into Medicare. (The Center for Budget Priorities and Policies does a good job of explaining the difference between the chairmen’s proposed cap and the traditional approach of measuring growth in spending per person. Actually that report explains a lot of things well, but this was particularly clear.)

A lot of those cuts would fall on those who could least afford it. As  Drew Altman, president and CEO of the Kaiser Family Foundation reminded us:

…many seniors and disabled people on Medicare have low incomes and already pay a significant share of those incomes for their health care today.  It will be difficult if not impossible to ask the majority of beneficiaries to pay more or make do with less…. Warren Buffet is not the typical Medicare beneficiary.  Instead the prototype is an older woman with multiple chronic illnesses living on an income of less than $25,000 who spends more than 15 percent of her income on health care.  It is the people on these programs and the realities of their lives that have been left out of the discussion.

Institutionally we at the New America Foundation health policy program haven’t focused in depth on the so-called “Doc Fix.” (Wishing it would get fixed and go away, my personal two cents as a former Capitol Hill reporter who had to deal with it ad infinitum, probably isn't a particularly insightful policy approach.) But we need to mention it here not just because it’s pending in Congress yet again, but because the deficit report identifies it as one of the big five problems in search of solution.  Fixing the fix used to be an annual crisis in Congress but now the Sustainable Growth Rate (aka Medicare payments to doctors) comes up every few months as lawmakers go from one fiscal patch to another.

The co-chairmen recommend addressing the payment problem not with deficit spending but “through  savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.” In other words, docs will need to give a little and get a little -- and over time as we shift away at least in part from fee for service medicine to new delivery models, the SGR may not be quite such a BFD. (Not the technical term used by Bowles and Simpson.)  The report sets 2015 as the target for a new payment system to “reduce costs and improve quality.” But it's a lot of money and it's a serious problem that gets harder every year as more and more money needs to be found to fix it.

Other  recommendations worth noting that haven’t gotten all that much attention yet (and of course we don’t know details so we might think differently about some of these elements when we know more):

• Overhauling aspects of health care for the armed services and military retirees.
• Eliminating first dollar coverage in Medigap plans (a bit of "skin in the game"). (With Medicare covering more preventive services starting Jan 2011 under health reform, I worry a little less about this than I would have, but still concern about how much extra burden this is on poorer seniors.)
• Pay lawyers less and reduce the cost of defensive medicine through limits on non-economic and punitive damages in medical malpractice cases.  (We at New America have supported experimenting with alternative approaches to malpractice that enhance patient safety. Arbitrary caps don't change how doctors practice, or make patients safer. We have elaborated  here and in a bunch of posts you'll find here.)
• Turning the federal share of Medicaid long-term care payments into a block grant. (Some similar ideas came up the Gingrich era, and I remember wondering if the states, with all the talk about flexibility, really knew what they were wishing for. More flexibility at the state level up to a point can be helpful, if it promotes caring for people in the community, not in long-term care facilities. But ultimately where's the safety net? Who is going to take care of the most vulnerable? Remember the people who qualify for Medicaid long-term care are poor in the first place.)
• Strengthen IPAB in a number of ways including allowing proposals to apply reforms to plans in the health insurance exchanges. (Our program has basically been pretty pro-IPAB and would like to see its powers and expertise deployed creatively to promote a more efficient, but high quality system.)
• Step up anti-fraud and improper payment efforts in Medicare, Medicaid and other federal programs.
• Increasing drug rebates to federal programs. (Not exactly sure what shape this would take but could it possibly contribute to a solution, or a partial solution to some of the really really expensive new cancer drugs? Instead of worrying about which ones Medicare can afford, bring down the cost?)
• Eliminating (or limiting) the tax breaks for employer sponsored health care. Getting rid of the exclusion was considered and rejected during the health reform  -- even some progressive economists and analysts were split, because on one hand those big health plans are something unions have fought hard for, but by its very nature the tax is regressive tax (wealthier people get more benefit from the break). Ultimately, a watered down excise tax on insurers (which still has some excised) was included in the health care law, effective in 2018 on plans with plans for individuals that exceed $10,200, or $27,500 for families. One variant discussed in the draft report was for people who have a plan better than the typical federal worker plan, you pay tax on the excess. (This was more or less the soundbite I was waiting for during the health reform debate - something like, we'll only tax you if  your plan is better than those no-good federal bureaucrats!)

Of course, as others looking at the big picture (not just health) have noted, if we can't avoid pain (and we can't) how can we distribute it. How much spending cut, how much tax increases. How much slash? And who will get burned.