by Bruce Webb

The latest Republican talking point, promoted among others by Chuck Grassley this morning, is that proposed cuts to Medicare make its financial situation more precarious. Why cut $500 billion if Medicare is already in trouble? This is totally backwards and shows a total unawareness of how Medicare is financed. So lets review:

Medicare has four 'Parts' A (Hospital), B (Physicians), C (Medicare Advantage) and D (Drugs).

Part A is financed primarily by a tax on payroll supplemented by co-pays for extended stays. Tax receipts not needed for immediate payout are deposited in the HI (Hospital Insurance) Trust Fund which like its counterparts in Social Security functions as a reserve fund, serving to buffer out fluctuations in tax income.

Parts B & D are financed by a combination of premiums and direct transfers from the General Fund, while Part C being a combination of A, B, and D draws from all three sources and is run by insurance companies.

The Health Care bills under consideration leave current revenues into Medicare alone and so CAN'T worsen the overall financial health of the system. Instead they propose to change the payment mix going out and slash the extra premium going to Part C and so make the overall financial position BETTER. These changes actually move the date the HI Trust Fund is projected to go to depletion OUT IN TIME.

Now it is fair to argue that cuts in Medicare potentially deprive people on Medicare benefits they have come accustomed to, but the argument that they financially weaken Medicare is to get it 180 degrees reversed. Republicans have been bleating about an 'entitlements crisis' whose costs are out of control. Well the answer to that is to cut costs. The only difference is that Democrats propose to use the savings to extend coverage to the uninsured while Republicans were hoping to use them to preserve tax cuts.

So don't buy the "We are trying to save Medicare" argument from the Republicans, they don't like it, never have, and don't care in principle about cutting money going to gramma. Instead all of this, all of it is about wanting Obama and the Democrats to fail so that Republicans can make gains in the 2010 mid-terms. Pay no attention to the crocodile tears.

Robert Waldmann

AHIP The health insurance lobby just declared war on the Baucus plan. This is new, since they previously supported health care reform. It is not, however, surprising. AHIP made its condition clear, they would support health care reform provided that all were insured. Basically the individual mandate was the price for their support.

Displaying his usual inverted political genius, Baucus decided to water down the individual mandate so that some people are allowed to go without insurance. He was trying to compromise with Republicans, well in this case, with a Republican -- Olympia Snowe. Thus he violated the terms of a very clear very public agreement with AHIP. It's not as if I didn't warn on September 2 that this is a terrible idea.


Now Baucus has lost AHIP and Snowe remains officially undecided. He dumped AHIP Prsident Karen Ignani in a bid for the Ignavi (I make that plural to refer to the Divine Comedy but pretend it is to include Nelson or Lieberman or someone).

Update: Maybe I was wrong. Maybe Baucus is an even more brilliant 11 dimensional chess player than Obama (a 12 dimensional chess player) and he knew that provoking AHIP was a brilliant strategy. The line from an anonymous "finance committee aide" is that AHIP's attack is good for Baucus. The idea seems to be that Senators are angry with AHIP and don't want to appear to take instructions from AHIP (doesn't mean they don't want to take the instructions, it just means that they don't want it to be obvious as in changing their position the day before the big vote after a very public command).

Of course I assume that "a finance committee aide" would not make a totally bogus claim in support of the view that Sen Baucus is a genius and certainly wouldn't demand anonymity if the claim were totally bogus. Nahhh that's just not the way Washington works.

I'd guess that the bought and paid for insurance industry senators (definitely including Sen Baucus) aren't even capable of being good fiduciaries of insurance company shareholders -- that there obsession with compromising, watering down and settling for half a loaf (and above all pissing of the left wing of the party) lead them to water down the individual mandate which is much more critical to insurance company profits than is the avoidance of a public option.

update 2: Kevin Drum has the same theory as I do, but he writes much more goodly.

update 3: Yves Smith ways in
More comments after the jump.

Interestingly the AHIP broadside is not a press release. It is an A1 article by Ceci Conolly in The Washington Post. I thought the Washington Post was a subsidiary of the test prep industry not the health insurance industry (live and learn).

Dougj notes that The Washington Post publisher invited health industry players to pay for access to Ceci Conolly and writes "There’s a pretty strong prima facie case for pay-to-play here."

Also AHIP didn't just say the Baucus bill is a bad bill which will cause insurance premia to increase. They commissioned a study from PricewaterhouseCoopers to conduct an analysis (it must be an analysis there are lot's of numbers in it) and a frightening possible price tag. PricewaterhouseCoopers clearly explains, in the text of their analysis, that they made extreme and implausible assumptions to make the calculated number as large as possible. AHIP and PwC assume that they know how journamalism works. Journalists don't look at the assumptions or any non headline number so credibility can be bought (although I didn't know that PwC had any left to sell). John Cohn read the fine print so you don't have to.

I'm not sure if the old approach will work now that serious journalists have to worry about geeks who actually read the analysis that interest groups buy. OK I'm pretty sure it will still work.

update: looks the approach of anonymous sources praising their bosses still works.

by Bruce Webb

CBO letter to Baucus

Estimated Budgetary Impact of the Amended Chairman’s Mark According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period (see Table 1). The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period.1 In subsequent years, the collective effect of those provisions would probably be continued reductions in federal budget deficits. Those estimates are all subject to substantial uncertainty.

For some reason the Table came out smaller than usual, in any event click to enlarge.

I haven't read through this and will make only two preliminary notes. One the bill leaves $81 billion in wiggle room to allow changes and still not break Obama's (rather foolish in my mind) demand that it be deficit neutral. Two is that on the cost side it is way under Obama's $900 billion leaving plenty of room for additions as long as corresponding funding is found for any thing proposed in excess of the $81 billion. Now if the Senate Finance Committee can just get this thing voted on and approved we could get this show on the road.

All right, I give up. I've reviewed for the Washington Post Book World, I consider some of their work interesting, and can almost forgive them for publishing Ruth Marcus, Charles Krauthammer, Anne Applebaum, and Richard Cohen as if they were sane.

But when your Ombudsman claims that your readers "typically demand coverage that is unfailingly neutral," and cites as an example of "crossing the line" one of your reporters making a statement of fact:

"We can incur all sorts of federal deficits for wars and what not," Raju Narisetti wrote on his Twitter feed. "But we have to promise not to increase it by $1 for healthcare reform? Sad."

There is no purpose for your organization to even claim it publishes news.

Via the must-read Susan of Texas, Ezra Klein finally comes to some of his senses:

couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.

It turned out that concerns about innovation weren't really about innovation at all. They were just about attacking universal health care ideas of a certain sort. Which is why I stopped taking them seriously. As it is, I'm less worried about squeezing out medical innovation than I am about rising medical costs squeezing out innovation in every other sector of society.

The final point is a key one; if you're talking trade-offs and DSGE Models, you better not be looking at an area in isolation. (Or, as I noted earlier, if you're looking at an area in isolation, you need to be able to explain what "equilibrium" means in context: quadrupling the amount diverted from the alleged business does not count.

Health Affairs tells the truth and shames...well...

Unlike for-profit firms, a public plan has no incentive to cut corners and prevent providers from giving their patients quality evidence-based care, because its ultimate goal is public health, not private profit. Nor does it have any interest in sideswiping regulations and shortchanging consumers. Free market proponents argue that private health insurers should be lightly regulated to give Americans the best value. We have seen the results of that sort of regulatory neglect in many industries in the past eight years; the harm to all Americans, businesses and the overall economy could not be more profound.

Read the Whole Thing, since you probably won't find it being cited at The Atlantic.

UPDATE: Bonus quote, since it gets to the core of the matter:

[Health insurance is an] oligopoly [market] with high entry barriers in which prices and profits have escalated rapidly.

Traditional economic theory holds that there are no economic profits in a true market.* That the Health Insurance industry has realised higher profits while spending a lower portion of each dollar received on claims over the past twenty years is, economics tells us, an indication of market failure. Strangely, the mass of economists don't seem to be saying this. Which is a market failure of another type.

*There is, of course, a fair Return on Investment embedded in the equation, but that is assumed to be the stable risk-adjusted return, not increasing in an equilibrium state.

by Bruce Webb (Update. A tech problem currently prevents me from responding to comments, though not from updating the post. Keep those questions coming and maybe I can address them in a later post.)

With the release of the Baucus Chairman's Mark it became apparent that there are some profound misconceptions floating around the existing legislation represented by HR3200 and the HELP Bill in relation to the scope of the Exchanges and the Public Option. So profound that some people are claiming the Baucus Markup, no matter egregious its faults is at least on this front an advance. Well not on my reading.

One misconception out there is that the Public Option is only available to those without insurance. The other which got highlighted Wednesday by Ezra Klein was that the Exchanges themelves, within which the Public Option resides are only open to individuals and employers with less than 20 employees. Either if true would eliminate the ability of the PO to develop in the direction of Universal Coverage.

Starting with Ezra. He put up the following on Wednesday The Baucus Plan and the Exchanges he starts off with:

Color me impressed. I've argued before that the Health Insurance Exchanges are the most important piece of health-care reform, and they're being unacceptably weakened and constrained. The House bill, for instance, specifically allows businesses with only 20 or fewer people to join.

Baucus goes quite a bit further. He begins by mandating that businesses with up to 50 employees be allowed to buy into the exchanges. If states want, they can expand that to businesses with 100 employees.

After a couple of sentences about risk adjustment he closes with this:

So far, so good. This, however, is where the Baucus plan takes that crucial next step: "In 2017, states must develop and submit to the Secretary a phase-in schedule (not to exceed five years), including applicable rating rules, for incorporating firms with 50 or more (or 100 or more for those states that already included firms with 51-100 employees) into the state exchanges."

In other words, by 2022, the Health Insurance Exchanges will be open to all businesses of all sizes. That's a huge deal. And the first place where I've seen the Baucus bill go substantially further than the other bills

Well I can only draw three possible conclusions from this. One Ezra just biffed in his reading of Sec 202 of the bill. Or I did. Or that it was inexplicably changed in all three House Committee markups.

I'll let you all be the judge. Relevant text under the fold.


The following is a direct cut and paste from my comment to Ezra, with some formatting that the WaPo site strips out.

"The House bill, for instance, specifically allows businesses with only 20 or fewer people to join."

It does? Where? I am working from the Ed&Labor version, which I believe represents the Tri-Committee Bill PRIOR to markup. So maybe something got taken out. I don't see why that would be, but on a plain reading the above assertion is simply a misreading.

The relevant section is: SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS. starting on pg. 73. 'Employers' are categorized in 202 (e)(1-3) starting on pg. 79 into 'Smallest' or 10 employees or fewer, 'Smaller' or 20 employees or fewer, and "Larger'. The rules for these latter are spelled out in 202 (e) (3) as follows:

(3) LARGER EMPLOYERS.—
(A) IN GENERAL.—Beginning with Y3, the Commissioner may permit employers not described in paragraph (1) or (2) to be Exchange eligible employers.
(B) PHASE-IN.—In applying subparagraph (A), the Commissioner may phase-in the application of such subparagraph based on the number of full-time employees of an employer and such other considerations as the Commissioner deems appropriate.

This last bit seems to mean that mega-employers can't dump all their workers on Exchange Plans all at once.

The confusion may come from Sec 202 (c) starting on pg. 74
(c) TRANSITION.—Individuals and employers shall only be eligible to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule:
(1) FIRSTYEAR.—In Y1 (as defined in section 100(c))— {i.e. 2013}
(A) individuals described in subsection (d)(1), including individuals described in paragraphs (3) and (4) of subsection (d); and
(B) smallest employers described in subsection (e)(1).
(2) SECOND YEAR.—In Y2— {2014}
(A) individuals and employers described in paragraph (1); and
(B) smaller employers described in subsection (e)(2).
(3) THIRD AND SUBSEQUENT YEARS.—In Y3 {2015} and subsequent years—
(A) individuals and employers described in paragraph (2); and
(B) larger employers as permitted by the Commissioner under subsection (e)(3).

Unless 202 (c)(3) and 202 (e)(3) were deleted during markup in all three Committees it would appear that all employers will become Exchange Eligible starting on Jan 1, 2015 subject only to phasing requirements for the largest companies. A process that surely would be accomplished well before the 2022 in the Baucus markup.

What did I miss?

A plain reading (or as plain as you can get reading legislative language) is that the Exchanges will be open to employers of all sizes starting on Jan 1, 2015 or seven years EARLIER than the date touted by Ezra as a "huge deal".

The related assertion that only people who are uninsured are eligible for the Public Option is similarly misguided. There are fairly strict limits on who can opt out of an employer paid plan, and for good reason (a discussion for another time) but there are no barriers for someone currently in the individual market cancelling their private plan or letting it expire and signing up in the PO. In fairness there is a tiny bit of ambiguity in the language.

SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOYERS.

(a) ACCESS TO COVERAGE.—In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or other acceptable coverage.

'acceptable coverage' mostly means another government run and paid for plan such as Medicare, Medicaid, VA, Tri-Care. And almost everyone in 'another qualified health benefits plan' would be in one offered by an employer. I don't read this to mean that individuals dissatisfied with current private insurance cannot shift to another insurer in the exchange which includes the Public Option. But in general I am going with "all individuals are eligible to obtain coverage".

Getting this right is crucially important. If the Exchanges and the Public Option were in fact crippled in the way Ezra and others on the Left think they are there is no wonder that they think the whole thing is a sham and a simple give-away to the insurers rather than the Public Option being a very real alternative and potential replacement to private insurance for individuals and most medium to small employers.

So to repeat my question to Ezra. What did I miss?

by Bruce Webb (h/t kharris)

A Summary of the Specifications for Health Insurance Coverage Provided by the Staff of the Senate Finance Committee. 'Preliminary' doesn't begin to describe this, it is not even based on the full text of the Chairman's mark as released this morning, which is probably just as well since that really didn't have numbers attached anyway. So with no further ado:





Even with an individual mandate which comes with a substantial fine for non-compliance 6% of the legal non-elderly population end up still uninsured and a total of 25 million uninsured total, most of whom would be legal. And people above 300% of poverty getting no help at all.

Change we can count on? Sheesh.

Navigable PDF of the Chairman's Mark courtesy of NYT here.

Andrew Samwick:

Government bureaucrats don't reduce costs. Market competition reduces costs. The challenge for health care reform is to get the market competition into the places where we want it -- providers and insurers competing to deliver better services at lower prices -- and out of the places where we don't want it -- insurers competing to insure only the lowest risks and providers gaming the government reimbursement systems to earn the highest profits.

Susan of Texas:

Government might possibly keep [one] safe and therefore the billions wasted are money well-spent. [One] graciously permits the government to police [one's] bar-hopping, repair the roads [one] drives on, clean [one's] water and deliver it to [one's] door, remove [one's] bodily waste, treat it, and release it far from [one's] view.

The government hauls away [one's] garbage, keeps [one's] lights on, pumps natural gas into [one's] water heater, for far less money than it would cost if [one] had to do it on [one's] own. It keeps food manufacturers from poisoning [one], and inspects the restaurants [one] visits, the buildings [one] lives and works in, the cars that whizz by [one] on the freeway. It created the internet [one] works on, and much of the medication and vaccines [from which one] has benefited. It educated most of the people who fix [one's] dishwasher, [one's] car, [one's] hair, [one's] dog. All of that is perfectly okay. But health care for people drowning in rising premiums?...[T]here the benefits must stop, there the line must be drawn.[emphasis mine]

by Bruce Webb

For the last two months much of the talk around Health Care Reform has been about the Gang of Six of the Senate Finance Commitee to the point that some people think the Gang and the Committee are one and the same. But this is not true at all, this week Chairman Baucus will release the Chairman's Mark, shaped as it is by contributions from other members of the Gang, and will be faced with getting it through the full Finance Committee, itself largely shut out from the process to date. So for at least the moment the math changes, instead of crafting a bill that could potentially get 60 votes in the full Senate, Baucus is now face with pushing a bill out of the Committee with majority support, which in this case means 12 of 23 votes. The following names are in Committee seniority order with members of the Sub-Committee on Health Care marked with an 'H' and members of the Gang of Six marked with a 'G'

Democrats
MAX BAUCUS, MT (G)
JOHN D. ROCKEFELLER IV, WV (H-Sub-Committee Chair)
KENT CONRAD, ND (G)
JEFF BINGAMAN, NM (G) (H)
JOHN F. KERRY, MA (H)
BLANCHE L. LINCOLN, AR (H)
RON WYDEN, OR (H)
CHARLES E. SCHUMER, NY (H)
DEBBIE STABENOW, MI (H)
MARIA CANTWELL, WA (H)
BILL NELSON, FL (H)
ROBERT MENENDEZ, NJ (H)
THOMAS CARPER, DE (H)

Republicans
CHUCK GRASSLEY, IA (G)
ORRIN G. HATCH, UT (H-Ranking Member)
OLYMPIA J. SNOWE, ME (G) (H)
JON KYL, AZ (H)
JIM BUNNING, KY (H)
MIKE CRAPO, ID (H)
PAT ROBERTS, KS
JOHN ENSIGN, NV (H)
MIKE ENZI, WY (G) (H)
JOHN CORNYN, TX (H)

First thing to note is that Health is a big Sub-Committee that includes all but four members of the full Committee which might explain why Baucus chose to take it to a smaller group. But inspection of the list shows a curious thing, the Gang of Six managed to include three out of the four members who are NOT on the Finance Health Sub-Committee and so would include those people not committed enough to Health Care to even request a seat.

Second thing is that while Sub-Committee Ranking Member Hatch was originally included in what was then a Gang of Seven, he dropped out early, and Sub-Committee Chair Jay Rockefeller, the person you would expect a priori to have the biggest interest in this topic, was frozen out altogether. Nor did the Gang respect seniority, as noted it jumped over the number two Democrat on the full Committee roster in Rockefeller but also dipped deep on the Republican bench to pick up Enzi.

Third is the arithmetic. In order to get marked up legislation out of Committee Chairman Baucus needs twelve of twenty-three votes. We know from news reports that he has no support from nine Republicans, although he continues negotiation with the Gang of Six both Grassley and Enzi are on record that they will not vote for the final version. Which means that even if he retains the support of remaining Republican Gang member Snowe he needs the support of ten of the remaining Democrats to get to the magic number of twelve to achieve a majority. Without Snowe he can only afford to lose a single Democrat. Which at this point means the side-lined Chair of the Finance Subcommittee who the New Republic reports came out firmly against the Baucus Plan on Tuesday afternoon Breaking: Rockefeller Says "No Way" on Baucus Framework

I have sat besides Max Baucus for 22 years on the Finance Committee. ... I'm probably one of his best friend among Democrats. But I cannot agree with him on this bill. ... There is no way in present form I will vote for it. Therefore, I will not vote for it unless it changes during the amendment process by vast amounts.

Conventional wisdom was that the bill that would supply the framework for the bill on the Senate floor was going to be that of the Finance Committee and that moreover that bill would be fundamentally the work product of Baucus's Gang of Six. But while Baucus asserts that the work of the Gang will continue, the fate of the bill over the next week will be determined by who can get twelve votes.

In a battle between full Committee Chair Baucus and Health Sub-Committee Chair Rockefeller who holds the strongest hand? We'll see. But Rockefeller only needs to hold Kerry and Wyden to keep Baucus from an outright win, and one would think at a minimum he can hold Schumer and Stabenow, each of whom's states look to be big winners from near universal health care.

My inbox tells me the Baucus Plan was just released so I expect to be back with some links and discussion. In the meanwhile: any early thoughts?

(Update one) SWEET. The NYT has the PDF of the Chairman's mark in a navigable form on their site.
http://documents.nytimes.com/baucus-proposal-to-overhaul-health-care#p=1

Via a former editor's Twitter feed, the Simon Fraser Institute decides to segment the costs of Canadian health care. For the good of the people, of course:

It is critically important, however, that Canadians understand the true cost of Medicare. Armed with a more meaningful estimate, Canadians will be able to better assess whether or not they are receiving value for their health care dollars.

And what do they calculate as the direct Canadian cost for everything—not just insurance, but insurance, treatment, drugs, etc.—on average?

- $9,572 for the average 2 adult family

- $9,855 for the average 2 adult and 1 child family

- $10,191 for the average 2 adult and 2 child family

The lowest quote I can find for insurance alone is $950/month, or $11,400/year. And that's before any visits, or shots, or treatments.

Tell me again why we can't afford a government option? And why the Simon Fraser Institute is getting to shill fear in the Windsor Star?

There were reasons for moving back to the States, but health care certainly isn't one of them.

Or at least why the best case for BarryO and Co. is that I'm just not going to bother to vote for the next several years:

Apparently, the American swing voter tends to think, "If I’m going to get screwed over, I want it to be by someone who is aggressive as possible about it."

That's pretty much the summary of it.

Hint to Rahm Emmanuel: when you run a candidate with "I'm going to fix Health Insurance by adding a Public Option" at the center of his platform and then make it worse, do not be surprised when the voters decide that your candidate and His Party are not worth the trouble of voting.

UPDATE: Dr. Black disagrees. This is the sad part of being trained to believe Rational Expectations theory. As with other forms of Early Indoctrination, leaving the Alliance doesn't mean you leave the no-longer-explored assumptions.

by Bruce Webb

(Update Sept 9. This post generated some heated objections from one or more people who thought it libelous. I don't agree but have been urged to make the following point:

My posts on AB represent my own opinions and judgements and do not necessarily represent those of any other front page posters or the siteowner. There is no pre-publication review process at AB currently, if a post seems to cross a line the responsibility is with the front page poster, in this case me)

The Gang of Six is on life-support. Baucus released something unilaterally yesterday which suggests he is asking for buy-in to the plan or not in advance of a meeting Tuesday between Reid, Pelosi and Obama and the Wednesday night speech to a joint session of Congress. But before we pull the plug on the Gang I want to take a little time to show how artificial it all was, because you can be certain people will be up in arms about how the 'bipartisan process' was bull-rushed by Obama.

Our first hint of 'bipartisanship' came when Baucus announced he could not work off the basis of the HELP Bill but would start from scratch in Finance. Now the other four Committees mostly worked on the bill as a whole but Baucus thought it better to have a working group that originally totaled seven. Now there were three ways of devising this group that would respect Senate seniority rules and the party split. In a 60-40 Senate the closest split of seven is 4 to 3.

Update: This piece is an op-ed and not to be construed as 'reporting' as suggested by a reader...it is one interpretation of events during a very controversial time...rdan


Baucus could have just appointed the top seven of the whole Committee, this would have left a Gang looking like this:
D: Baucus, Rockefeller, Conrad, Bingaman to R: Grassley, Hatch, Snowe

Or he could have just appointed the top seven of the Sub-Committee on Health Care which would have produced this:
D: Rockefeller, Bingaman, Kerry, Lincoln R: Hatch, Snowe, Ensign

Since it doesn't make much sense to craft a group that excludes both your Committee Chair and Ranking Member, it would have been natural for Baucus to create a blended group of leadership plus the top five on the Health Sub-Committee:
D: Baucus, Rockefeller, Bingaman, Kerry R: Grassley, Hatch Snowe

Any of these lineups would seem to meet the criteria for bipartisanship. In each case you have two conservative R's and one moderate, all with reputations for deal-making. One model one the D side breaks down as three centrists and one liberal, one models two and three you have two liberals and two centrists. There should have been no trouble finding a bill acceptable to five or six of them, that is you might lose Ensign at one end or Kerry or Rockefeller at the other, but what came out would represent a consensus reflective of the whole Senate.

But Baucus did not choose any route that reflected a 60 - 40 split or respected seniority at all, instead he went originally with this Gang of Seven:
D: Baucus, Conrad, Bingaman R:Grassley, Hatch, Snowe, Enzi

Now not only do we have a 3 to 4 split in favor of the minority, the ideological breakdown is three conservatives to four moderates. There is only one logical explanation for Baucus's move. He simply decided to side-line the Chairman of the Finance Committee Sub-Committee on Health, i.e. Rockefeller and liberals generally.

There was nothing bi-partisan or pertaining to regular order in creation of the Gang of Seven, now reduced to a Gang of Six. It was a naked power grab that has now apparently gone bad. No one should regret the passing of the Gang that Couldn't Legislate Straight, they were never really legitimate to start with.

by Bruce Webb

HOLD THE PRESSES.

I am deleting this post. It is not clear that the document posted on the Finance Committee website actually reflects Baucus's new proposal. Why they chose to put an older document up this morning is a mystery. Until I get it figured out this will have to be a Emily Letilla moment: "Never mind!"

by Bruce Webb

The current line of attack on Health Care reform from Republicans is that it proposes to Rob Gramma to Pay Pedro. I am not going to address the care for illegals canard today but do want to probe just what HR3200 does for Medicare on net. Starting from the following two charts from the Kaiser Family Foundation.


Summary of Key Medicare Provisions in HR3200
The first chart reports the number proposed to be saved by changes in Medicare and displays the only number you are likely to see cited by opponents: $538.5 billion in cuts. But the second chart shows something interesting, these cuts are offset by an additional $320.4 billion in spending. Meaning that the net cut to Medicare overall is $218.1 billion over ten years. Which matches closely with the one shown in CBO's $219 bn score shown here:

http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf

Still $218 billion over ten years is still something. But lets look at the breakdown. Of the $538.5 billion in cuts $172 billion of it is the result of removing the 15% extra payment per enrollee granted to the private insurance companies offering Medicare Advantage. This extra payment, which made a mockery of the idea that private companies could provide a better product for the same price, was originally designed to subvert traditional Medicare and is no real loss. If we subtract that $172 billion from $218 billion we get a net spending cut to traditional Medicare of $46 billion over ten years representing only a small fraction of the cost to extend coverage to 97% of legal non-elderly Americas.

So why are Republicans pushing this point so hard? Are they really concerned about the specific tradeoffs represented by the above two charts (because wihin Medicare there are winners and losers)? I think not, instead all their crocodile tears about Gramma are disguising real tears at the prospect of the outcome shown in the third row of the CBO table: the $583 billion in extra taxes on the top 1.5% over the next ten years.

Rule no 1 in evaluating Republican proposals and counter-proposals: it's about the taxes first and foremost. They don't like paying for services for the working class. Period.

by Bruce Webb

DC and the blogosphere are all over the resurrection of the Public Option Trigger, the idea that with the right legislation the insurance companies would just straighten up and fly right. Most of the Left is pretty cynical about the idea and rightly so given the insurance companies several decade pattern on driving down what they call their 'medical cost ratio', i.e. the amount of your premium dollar actually spent on paying providers for medical care. Where that ratio used to be 95% now it is down to 80%, meaning that insurance companies are taking four times the share of your premium dollar than in the past. The question is whether you could craft legislation that would control overall premium costs in a way that would not pull the trigger? Well I think you can and in fact it has already been done. If you excised the public option what would be left in the bill to control costs? To start with Secs 111-116.

Subtitle B—Standards Guaranteeing Access to Affordable Coverage

SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS.
A qualified health benefits plan may not impose any pre-existing condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any health status-related factors (as defined in section 2791(d)(9) of the Public Health Service Act) in relation to the individual or dependent.
SEC. 112. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS.
(snip-the title of Sec 112 tells the story. Plus no recision except for fraud, as defined by the govt and not the insurance co.)
SEC. 113. INSURANCE RATING RULES.
(a) IN GENERAL.—The premium rate charged for an insured qualified health benefits plan may not vary except as follows:
(1) LIMITED AGE VARIATION PERMITTED.—By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.
(2) BY AREA.—By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).
(3) BY FAMILY ENROLLMENT.—By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as
specified under State law and consistent with rules of the Commissioner.
(snip-rest of section calls for a study)
SEC. 114. NONDISCRIMINATION IN BENEFITS; PARITY IN MENTAL HEALTH AND SUBSTANCE ABUSE DISORDER BENEFITS. (self-explanatory)
SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS.
SEC. 116. ENSURING VALUE AND LOWER PREMIUMS.
(a) IN GENERAL.—A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.
(b) BUILDING ON INTERIM RULES.—In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services.

This if enforced as a pretty strong combination, insurance companies have to take all comers without regard to physical or mental condition, charge each individual or family in the area the same rate, with a small exception of a 2-1 ratio between young and old. Additionally they can't rescind the policy for any reason except non-payment or fraud as defined by statute, nor can they refuse to renew it. And most importantly they have to stay within a set medical-loss ratio.

Now clearly the weak point here is that medical loss ratio. Companies will have an interest in making the case that it just HAS to be set lower in each future year, and you can hear the stories now from both directions, companies crying poor while critics point out not so poor that they can't afford First Class air travel. So what would a Trigger look like in this mix? Well it seems that it would have to be tied to a certain irreducible medical loss ratio. So we could imagine that the typical acceptable medical loss ratio was set at 95% for Year 1 with a Trigger set at 85%. Each year the companies could try to argue that they need to get a lower ratio and maybe make their case. But each step down gets them closer to Triggering the Public Option and so forces them to strive for efficiencies on the business side not related to denying care outright.

The model works. On paper anyway. The devil is in getting the initial Medical Loss Ratio right and not letting the trigger point get too low. I would still push for a Public Option which allows direct inspection of and competition between Medical Loss Ratios between public and private plans rather than some process of renegotiating them each contract renewal period. But it is not crazy to entertain the idea of a Trigger mechanism.

by Bruce Webb

Both sides of the Health Care debate are looking and or calculating at the effects on future elections, will including a public option play in Peoria? This I think is to misunderstand the timelines because for most people the initial passage of reform really doesn't change anything for the next two election cycles either for better or for worse. Now it may change some future expectations about what will or will not be possible after the real Day 1 of Year 1 (as defined in the bill) but not much before. Let's review the putative timeline.

Let's assume the Health Care bill passes this year with a Public Option and an effective date of Jan 1, 2010. What happens?

Jan 2010. Obama nominates a Health Choices Commissioner who chances are is going to be a technocrat whose name nobody outside health care wonkery will even recognize. The name goes to the Senate and is sent to Committee. (Snooze)

Jan to Mar 2010. Obama tasked with appointing members of the Health Benefits Advisory Committee with representatives of all stakeholders. (More napping by public)

Mar to Dec 2010. HBA Comm meets to hammer out the details of the Essential Benefits Package. Since the broader outlines are firmly set in the bill the only chances for something dramatic will revolve around provisions about abortion. For everyone not obsessed by Pro-Life issues not much to seize on.

Jan 2011. HBA Comm delivers recommendation to now confirmed Health Choices Commissioner. Public opens eyes and realizes that the 2010 mid-terms came and went.

June 2011. Deadline for the Commissioner to get guidelines through comment and publication requirements. Ho-hum.

July 2011 to Dec 2012. Contract negotiation between insurance companies and the Commissioner, near the end of this period private companies and the public option are marketing their plans but not actually having them in effect.

Jan 2013. Insurance Exchange opens it doors and individuals and employers start exercising options. Hey wait, we already had the Presidential election!

But through this whole process nothing really changes for anyone. If you have good insurance you will have it, if you have crappy insurance you will have that, if you don't have insurance you will still be out of luck though maybe counting the days and saving the pennies so you can buy into an Exchange elgible plan. What I don't see is any galvanizing event for voters. In this scenario the details of the plan will be old-hat by Nov 2010 and nobody will have been forced into anything. And this is pretty much still true by Nov. 2012, any dire change due to the plan will still be theoretical. So why should Congressmen be scared about constituent reaction? Do they really believe people will continue to be stirred up by a done deal? Right now people are being agitated or getting agitated by something quite unknown to them. Once it is in the form of legislation signed by the President and in the hands of appointed bureaucrats I see all the steam leaking out of the boiler. It's not like the Death Panels convene the day after Obama signs the bill.

LBJ and Senator Green of RI c.NYT
by Bruce Webb

Now that Grassley and Enzi have shown where the wind was actually blowing on the 'bi-partisan' 'compromise' supposedly being worked out by the Senate Finance Committee's Gang of Six it is time to hit the reset button and in the process clear up some confusion.

Generally the Press has been reporting on the Gang of Six as if it simply represented Regular Order, that when a bill gets referred to Committee it just gets assigned to a sub-group with absolute control and that nothing can proceed until that group agrees. Well that simply is not true at all. Equally some people at dKos have been asking why Senate Finance is split between parties when all other Committees reflect the overall rough balance between the parties. Well Senate Finance is not evenly split, nor all the relevant Sub-Committees.

Senate Finance has 23 members, 13 Democrats and 10 Republicans. Senate Finance Committee Members It is further broken down into Sub-Committees of which the largest is the Sub-Committee on Health. which has 11 Democrats and 8 Republicans, meaning that you have almost total overlap. But three names that are missing are Baucus and Conrad on the Dem side and Grassley on the Rep side. Finance Sub-Committees Meaning that fully half of the Gang of Six are not even on the relevant Sub-Committee. Moreover the Chair of that Sub-Committee was excluded from the negotiations while the Ranking Member was originally included in what could have been called a Gang of Seven, one that had 3 Republicans from the Health Care Sub-Committee: Hatch, Snowe, and Enzi plus one not in Grassley for a total of 4 as against 1 Democrat from the Health Care Sub-Committee in Bingaman and two not in Baucus and Conrad for a total of 3.

The whole thing was a total perversion of Normal Order, which would either have had the full Committee mark up the bill or refer it to the Sub-Committee, instead Baucus simply insisted on doing an end-run in what was just a blatant power-grab. Moreover the first act of the Gang of Seven was to scrap the Kennedy-Dodd HELP Bill, which had drawn Nay votes from two members from the Gang already in the persons of Hatch and Enzi.

The Gang of Six has been treated as if they were a legitimate and normal part of how major legislation is done and that the Senate has no other choice than to just let the process run. This is just not true at all, the Gang has just as much cover and legitimacy as the Committee Chairman allows it to, and his authority is in turn is limited to how much scope Senate Leadership is willing to defer to it. Baucus claimed that the only way to get a deal that could pass the whole Senate was to rewrite the entire bill from the ground up with the help of Republican Senators who fought the Kennedy-Dodd bill to the end. They further have the gall to claim that Ted Kennedy would have wanted it this way. They stooped to putting words in his mouth before his body was even buried.

Time to give up the pretense here. Grassley in his letter and Enzi in his public statements made it clear that they saw their roles as blocking Health Care Reform. If Baucus doesn't see that then he is being consciously blind. And given the way he simply by-passed the Health Care Sub-Committee to start with it is fair to conclude that he was willfully blind from the beginning. Under the Rules of the Senate a bill that has stalled in Committee can be in effect extracted from that Committee by any Senator invoking Rule 14 (link and explanation below the fold). The only thing that prevents that is some sense of courtesy and deference towards the Committee Chair, a deference that he has clearly abused throughout the process.

It is past time for Harry Reid to give Baucus the Johnson Treatment as depicted above. If he has it in him.



The Legislative Process on the Senate Floor; an Introduction

Committee Referral and Rule 14
The Senate’s standing committees play an essential part in the legislative process, as they select the small percentage of the bills introduced each Congress which, in their judgment, deserve the attention of the Senate as a whole, and as they recommend amendments to these bills based on their expert knowledge and experience. Most bills are routinely referred to the committee with appropriate jurisdiction as soon as they are introduced. However, if a Senator plans to introduce a bill and believes that the committee to which it would be referred will be unsympathetic, Rule XIV, paragraph 4, permits the Senator to bypass the standing committee system altogether and have the bill placed directly on the Calendar of Business, with exactly the same formal status the bill would have if it had been the subject of extensive hearings and exhaustive mark-up meetings in committee.
By the same token, if a committee fails to act on a bill that was referred to it, while this may mean the bill will die for lack of action, the proposal it embodies may not. The Senator sponsoring the bill may introduce a new bill with exactly the same provisions as the first, and have the second bill placed directly on the Calendar. In either event, the committee that has been circumvented may oppose bringing the bill from the Calendar to the floor by unanimous consent or by motion, but now the fate of the bill can be decided by the Senate as a whole, not only by one of its committees. Senators generally view this use of Rule XIV as a last resort, both because it undermines the committee system as a whole and because they do not wish to encourage a practice that can be used against their own committees. In recent practice, the Majority Leader sometimes also uses this method to put a measure directly on the Calendar—often to expedite consideration of a complicated or high-profile bill that has been drafted outside of the committee process.

By divorced one like Bush

It seems to go without saying, that if there is reform, there will be some type of assistance for those who need it. Some numbers are bandied about as to the cutoff points. The Mass Connector has it's formula up that you can play with by punching in your own numbers and picking a Mass zip code.

However, I have noted in my very early posts here at AB, that we seem to have slowly understated over time the amount of money actually required to be middle class in the US. I looked at this further here. It's not just the amount of money, it is the standard of living that has been down graded as we argue over implementing social policy. The clearest standard is that it takes two earners to accomplish what one earner use to. Now, with 47 million and rising, bankruptcy due to medical bills hitting 73% of all filings, having health care seems to no longer be a marker of having achieved middle class and thus the American Dream.

Such thinking could be a problem if we truly want to solve our issue of access to health care services. Mass knew that those at 350% to 450% of poverty would have difficulty buying insurance in their system. They may not view it as such, but this is an admission that our numbers regarding what income level is middle class (other than simple mean and median) are bogus. We are lying to ourselves and when we lie to ourselves, we prevent ourselves from actually resolving the issue in question. We're faking ourselves out! In doing so, we are further moving away from what was the accepted standard of living as representative of the American Dream. In fact, it has occurred to me that the political approach of redefining what will be considered a successful campaign and thus problem solved regarding any social oriented piece of legislation by reducing the expectations or size of the problem to be resolved has only lead our standard of living and thus the American Dream being defined down. It's one step removed from just plain ignoring the problem as if it does not exist. Though ignoring a problem is at least not patronizing to those with the problem as is defining it down and declaring it solved.

This brings me to the defined poverty level. A couple weeks ago I received an email as part of an ongoing health care debate that claimed to prove via a referenced article that there are not 47 million uninsured because 48% of those are earning 250% of poverty which is about $65K and thus choose not to purchase health insurance. I suspected there was something wrong and thus went looking.

Well, it turns out that 250% of poverty at $65K per year is for a family of 5! A gross income of $65K for a family of 5 leaves nothing for purchasing health insurance. It is also an income level that in Mass would have subsidies to help pay for health insurance.

I then thought: I wonder what the poverty level was in the old days. You can find the data I used here.
You can find the converting here. Then click on "Relative Values - US" in the left hand column.

The following chart looks at 5 decades (though I could not find exactly 1960 and 1970) and then compare them using CPI, Unskilled Labor, GDP per Capita and Share of GDP.
Certainly based on the CPI conversion, the numbers coming forward to today seem to be as they should. But then, poverty levels are based on CPI. However, looking at Unskilled labor, that family of 5 is getting under paid compared to the old days of 1962. The family has been on a over all downward trend. In the 70's it was a real roller coaster being down by '73, up by '75, heading down by '76, bottoming in 1978. Even their poverty level based on GDP/cap and share of GDP bottomed. Funky times indeed. From the 1978 bottom this family had a steady gain but, it peaked in 1996. This is the same year the income share to the 99% fell below personal consumption.

What I find most interesting is just how dramatic the change at 250% of poverty level for a family of 5 is based on the GDP share and per capita. My interpretation is that a person at this level of income has continually become poorer even though the income that is considered 250% of poverty level has remained constant comparatively over the decades based on CPI. I guess this bodes well for those who have finagled the CPI? Most interesting, is 2007. It is the only year where this family's income was valued more than the share of GDP and GDP per capita values. Frankly, I don't know what to say about it. It is no wonder people don't know if they are coming or going regarding their financial condition. Though a tendency toward the "going" feeling certainly can be understood. Even the anger expressed at the town halls can be more readily appreciated in that the mind can only handle so many cycles of ups and downs before it finally starts to crack.

It is this clash between the CPI and the GDP converters that is the fake out. If we continue to have such a dichotomy, then our efforts to assure "affordable health care" will be never ending because we are simply not being honest about how much it costs to be middle class and have the American Dream. Nor should we expect the apparent lunacy to subside as longs one's mind has to deal with the clash between what it is living verse what it is being told it is are living.

Ken Houghton notes the obvious corollary to Bruce Webb's post on the 1st: if you don't "read the bill," the obstructionists will lie about it. UPDATE: And now corrects his misreading (see Bruce's update below, following on Mitt Shook's comment).

Milt Shook demonstrates in detail that, even if you do, people such as Alan Caruba of ChronWatch will lie about it anyway. That this post is even necessary is saddening. And that he has to point out fundamentals such as

[Annual Limitation] is on how much a patient will have to pay, not a limit on the health care the patient receives. Watch how many times these tools bring up the "rationing" canard. It's almost as often as they mention ACORN. (I kid you not. Just wait.)

or my favorite: that maintaining a market depends on people being able to make informed choices:

[Alan Caruba at ChronWatch] Page 72: All private healthcare plans must conform to government rules to participate in a Healthcare Exchange.

[CarubaShook] This is a phenomenally stupid complaint from a right wing ideological perspective, and it lays bare the moral bankruptcy in their arguments against universal health care. These are the same people who are always touting competition and choice as the most important aspects of capitalism. The point of the insurance exchange is to give people an obvious and transparent choice of health insurance options. A private insurance company can participate and offer their wares alongside the public option, if they so choose. If they don't want to participate, they're free to conduct business as usual, and they won't have to conform to any government rules. Well, except for the ones they must already conform with....They've always had to conform to government rules to participate in Medicare, and I don't see any of them dropping out of business for that. [italics mine; snark omitted]

Go Read the Whole Thing. And think about all the good things Alan Caruba could have been doing if he hadn't had to waste time dealing with deliberate misreading and outright lies.

(Update by BW: the second link actually goes to a web-site called Please Cut the Crap run by a blogger named Milt Shook. Milt in comments points out that it is he deconstructing Caruba and not the other way around. The lines in italics are Milt, the plain text is from Caruba. ChronWatch=Caruba, 'Caruba'=Shook for the full Caruba: http://www.chronwatch-america.com/articles/5297/1/Page-After-Page-of-Reasons-to-Hate-ObamaCare/Page1.html)