Thursday, March 25, 2010

Requiem for a Health Care Reform Dream

On Sunday night, over bipartisan opposition, the Democrats in the House of Representatives passed HR 3962 - the same flawed Heath Care Reform Act that passed the Senate on Christmas Eve. This should have surprised no one. There are 257 Democrats in the House of Representatives. With Nancy Pelosi cracking the whip, and President Obama taking representatives for joy rides in Air Force One, it was inevitable that 216 Democrats would eventually be found to vote for it. Now, whether it should have passed is another matter. I can think of at least one trillion reasons why this bill should never have become law. So let me start with an easier task - specifically what does not bother me about the passage of this bill - the parliamentary procedures and rules used by Democrats to pass it.

I am not particularly bothered about the reconciliation process being used to bypass filibuster challenges and pass the bill modifications with a simple majority in the Senate. Nor am I surprised by the heavy handed parliamentary moves used by the Democratic majority leadership to limit Republican participation. Although it was ultimately not used, I would not have even been overly exercised if "deemed as passed" was used to pass the bill, although I think it would have been a damaging political mistake for the Democratic majority.

Don't get me wrong, I consider these parliamentary machinations to range from unseemly to downright sleazy, but they are not outside of the normal legislative process. A casual review of the process by which the Republican leadership rammed through the Prescription Drug Benefit in 2003 undermines their credibility when expressing shock and dismay at the Democratic leadership making similar moves now. The only thing comparable to Republican hypocrisy on these questions is the Democratic hypocrisy using and defending them, as they were vociferous decrying these same techniques when they in the minority. The only people who have a legitimate complaint, are those voters who supported Obama and the Democrats based on the promise of bringing change, transparency, bipartisanship, and the end of special interest / corporate lobbyist influence to Washington D.C. All of that proved to be a lie. While there was a difference in the "talk" coming from candidate Obama, there is zero difference in the "walk" comparing President Obama and One Party Rule Democrats vs. President Bush and One Party Rule Republicans. Based on the deafening silence from Obama supporters on these broken promises, apparently no one actually believed Obama anyway.

Last August, Justin Gardner of Donklephant and I cooperated in crafting a joint post in support of S 391 -the "Wyden-Bennett" Healthy Americans Act.
"If we were starting with a blank slate, we would support vastly different and incompatible health care systems. But we are not starting there. We have different objections to the existing system, but agree that the current system is in need of reform. We also agree that the reform most Americans want includes three critical criteria:
  1. Universal coverage for all Americans
  2. Insurance against financial ruin if struck with an illness.
  3. The reform program be fiscally responsible, manageable and have understandable costs."
That bill was long since buried in favor of the hairball passed by the Senate in December, passed by the House last Sunday and signed by the President on Tuesday. Democrat Ron Wyden voted for this version of HCR. Republican Bob Bennett voted against it. Justin supported this latest version of ObamaCare. I did not.

While Wyden-Bennett is dead and buried, it never had a proper funeral. In memory of this last best chance for a bi-partisan health-care reform bill that, unlike the bill that passed, actually reformed the health-care system, I though we should take one last look back. In particular a look back at the criteria by which we judged Wyden-Bennett, and apply that identical criteria to Obama's Health Care Reform Hairball (OHCRH) that is now the law of the land. This is what I said then:
“Wyden-Bennett has my support because it meets the critical criteria for reform, does it without increasing the deficit or requiring net new taxes. Wyden-Bennett has my support because it directly and honestly attacks the central problem of employer based health care insurance as the primary delivery vehicle for non-public health care in America. Wyden-Bennett has my support because it is not (yet) saddled with questionable deals for big pharma, big insurance, and payoffs for big union contributors... The trade-off for this mandated coverage is that we get a fiscally sound health care system that covers everyone, that puts no one at risk of financial ruin from getting sick, and does it without raising the deficit or requiring net new taxes. I am willing to take that trade-off. This is why I describe myself as libertarian-leaning as opposed to libertarian or Libertarian. Once in a while, I feel compelled to lean another way.”
To compare and contrast our quixotic dream of real reform with Wyden-Bennett vs the hairball that is now the law of the land, we'll grade OHCRH on a pass/fail basis against that same criteria:

On our first critical reform criteria - "universal coverage for all Americans" OHCRH falls short. Wyden-Bennett would have covered 99% of Americans upon implementation. In our joint post we found HR 3200 to be inferior, as it only covered 97% of Americans, and not until 2019. OHCRH is significantly worse, as it is not projected to cover more than 93% - 95% of Americans, and not until 2018. This law is worse than either Wyden-Bennett or the original House bill (HR 3200). So for the first critical criteria of real reform, OHCRH fails.

This criteria distills into essentially three elements 1) Guaranteed insurance availability for people with pre-existing conditions, 2) Protection against losing insurance because of illness or arbitrary Insurance Company revocation or rescission and 3) Mandated coverage.When implementation of these benefits begin in 2014, this law fully addresses all of these elements. The "Individual Mandate" question is a factor in both coverage and managing costs, and merits additional discussion.

As I stated in the analysis of Wyden-Bennett, there is no way to rationalize support for an individual mandate from a libertarian perspective. I simply decided that there is indeed a need for health care reform, that Americans want reform that offers universal coverage and financial protection against catastrophic illness, and there was no way to get there from here in a fiscally responsible way without invoking an individual mandate. So I abandoned my libertarian leaning principles on this issue and leaned another way, expressing grudging support for the mandate. Now, whether or not the individual mandate is constitutional is another matter altogether, and will be settled in the courts.

On these particular elements of reform, the OHCRH succeeds more than it fails, once the provisions kick in, if the administration and Democratic leadership even understands what they have crammed through the process. Which - one day after becoming law- it became apparent that they did not.

President Obama has repeatedly made the claim "Starting this year, insurance companies will be banned forever from denying coverage to children with pre-existing conditions." Yeah... no. That is not in the law. The way the law is written is that children get that protection in 2014, along with everyone else. So "Plan B" from the administration is to say the Department of Health and Human Services is empowered by the law to create that protection with regulations. I don't know which is worse - the fact that the administration itself does not understand what is written in the bill - or - their representation that wholesale major coverage constraints can be created or destroyed by regulatory fiat from unelected bureaucrats in the Department of Health and Human Services.

An additional post-passage surprise is Senator Ron Wyden's claim that the states need not sue over the individual mandate, since they can completely opt out of the act altogether. If true, I am not sure that anyone, including the administration, understands the ramifications of that provision.

This criteria had three elements. 1) Reasonable and understandable costs, 2) Tax neutral and 3) Deficit neutral. All three criteria were met by Wyden-Bennett. At best OHCRH meets one of the three (Deficit neutrality) - and then only if you squint and don't look too closely.

The Congressional Budget Office determined that OHCRH will add about $1 trillion of new spending by the Federal government and will reduce the deficit by $138 billion in the next ten years and by $1.3 trillion dollars in the ten years after that. Taking the CBO analysis at face value would give OHCRH a passing grade with flying colors. The CBO is a non-partisan office and we have frequently cited their analysis on this blog, including their analysis of Wyden-Bennett. As such, it would be disingenuous to not accept their findings on the law as it was communicated by Congress. They are not always right, but they are unbiased, and represent the best estimate we are likely to get within the constraints that they generate their estimates. And there is the rub.

The CBO is required to generate their estimates based on the law as written, and not make assumptions about likely, but unsubmitted congressional actions. So if Congress is willing to game the CBO by - for example - excluding costs from a bill that will be added later in a separate bill the results will be wrong. It becomes a variation of the programming catch phrase "Garbage In Garbage Out". If Congress feeds a lie into the the CBO process, we get a lie back out. There are multiple lies and deliberate cost obfuscations that are in the law specifically to game the CBO estimate as documented here and here. Consider two of the more egregious whoppers.
  • The first whopper is the "doc fix". This is an increase in medicare reimbursement rates for doctors that was promised to the AMA in order to secure their support. It was originally in the bill, now it is not, but is likely to be passed by Congress next year. It adds $200 B to the cost and immediately turns the deficit reduction into a deficit increase.
  • The second whopper is the unfunded mandate imposed on the states. It increases the number of people that qualify for Medicaid, but the law does not pay for those additional entitlements, leaving it to the states. Since the the law, as written, does not cover those costs out of federal funds, the CBO analysis does not include them in their deficit calculation. This is one of the catalysts for 14 states (so far) suing to stop the law.
Representative Paul Ryan requested an additional CBO analysis using more realistic assumptions about likely future Congressional actions, and got a very different result. Since we have dueling CBO deficit estimates that will not be resolved until we see how Congress behaves on outstanding issues, I have graded the deficit status of this bill as INCOMPLETE.

On taxes, this law is an unmitigated disaster. New and increased taxes, fees, penalties, and fines are levied across the board. President Obama broke his promise to not raise taxes on the middle class with this law. I won't belabor this point. It is incontrovertible. You can find a comprehensive list of the new taxes here. The ramifications are already being felt by companies large and small.

Predicting the political and economic consequences of this law is not quite as popular as filling out March Madness brackets, but getting close. DWSUWF will make one easy prediction: One consequence of these additional tax burdens on our fragile economy is a continuing high unemployment rate for the foreseeable future (7.5%+ for at least as long as Obama is President and this law - as written - is in effect). We'll save the political prognostications for a future post.

This is a bad piece of legislation that will have negative consequences for our economy and country and should never have become law. On that one point many liberals, conservatives and libertarians agree. Perhaps President Obama has finally created the post partisan political environment he promised during the campaign. Many Republicans, Democrats, Liberals and Conservatives are now united - in opposition to the Obama Health Care Reform Hairball - also known as BFD.

Divided and Balanced.™
Now that is fair.


Tully said...

The only people who have a legitimate complaint, are those voters who supported Obama and the Democrats based on the promise of bringing change, transparency, bipartisanship, and the end of special interest / corporate lobbyist influence to Washington D.C.

Well, no, absolutely EVERYONE who does not support sleazy parliamentary maneuvers has a moral right to complain, and all of us have a constitutional right to complain. Even the 2003 Medicare Drug Benefit vote had bipartisan support and majority approval in polling. Doesn't mean that some of those complaining aren't being hypocritical, of course. Those who got suckered into actually voting for Obama on those grounds have only themselves to blame. It's not as if some of us didn't spend a couple of EARS pointing out that Obama had a real habit of talking one way and walking another. ("Face it, Flounder, you fucked up. You trusted us!")

Deficit and costs are "incomplete" only in the sense that they have not actually occured yet, but the path is clear. In the real world it's FAIL. Even with the Medicare cuts, the overall scoring results in real-world deficits due to the double-counting of same, which CBO has pointed out. By pushing those moneys to the MCR "trust funds" they go off-buddget for scoring purposes. The added debt counts as "assets" in the "trust funds," but those bonds can only be paid out of general revenue. The same scam we have now, just bigger. Owing yourself money does not make your IOU's to yourself "assets." Except in gov't accounting, of course.

Passing the "doc fix" alone will turn the scoring negative in perpetuity -- and if they don't pass it, MCR patients are not going to be able to find providers. One client of mine, a major medical practice, is already preparing to implement layoffs and will quit accepting new MCR patients the second the cuts start.

And that's just the first decade, with six years of benefits stacked against ten years of revenues. With the CBO assumption of 7% growth in perpetuity and not a chance in hell of GDP growth that high, we'll run out of Other People's Money sooner rather than later.

Tully said...

YEARS not EARS. (How do we spend ears? Not legal tender...)

Meant to add, the doc fix alone is less than half of the phantom revenue involved here. I'm still digging through details, but a realistic net for the first 6/10 gamed decade is a lot closer to an additional $600B if things go well. But they won't -- there's too much idiocy built in.

mw said...

I pretty much agree with everything in your comment. Even the part about spending EARS. I think I almost did lose a couple of ears arguing with Obamites in '08. Trust me - spending ears are lot worse than losing an "arm and a leg".

I know was being overly generous with the benefit of the doubt on the BFD HCR deficit question. When working on a draft that I intend to cross-post at the Donk, I tend to pull punches. There are some sensitive souls over there.

Tully said...

Arguing with True Believers is like wrestling with pigs...but you know the rest of the saying.

"Sensitive souls" = "reality challenged ideological folk who simply can't grasp the cold equations and therefore confuse fantasy for reality"? ;-)

My biggest problem with wingers and ideologues is non-resolvable, and it's the unshakeable belief that a beloved fantasy vision transcendentally trumps a cold hard ugly reality. In short, a fundamentalist faith in magical thinking.

The left, of course, has no monopoly on that. Not even remotely. For example, try pointing out to pro-lifers the worldwide empirical evidence of decades that laws demonstrably lower the overall actual abortion rate little if any, but do produce a bumper crop of maimed, injured, and dead women.

Everyone wants the upside of their fantasy policy, or at least insist they must be implemented on sheer moral authority despite the obvious impossibilities and shortcomings, but wingers totally deny the predictable downsides and refuse to accept ANY responsibility for same, though they are part and parcel of the policies.

I'm of the school that says you OWN what you advocate, warts and all.