To make his threat credible, the president must start with three fundamental values he has identified. Americans cannot be denied or lose insurance because of pre-existing conditions, affordable insurance will be made available to a majority of the 45 million uninsured, and the federal deficit must not increase.
He'll also have to acknowledge that congressional claims that its legislation would reduce the federal deficit rely upon two major gimmicks. Actually the bills that passed the House and the Senate would each increase the deficit by a whopping $300 billion.
The legislative gimmick concerns physicians who, for a decade, have been saddled with a flawed Medicare payment system, the sustainable growth rate formula, or SGR. Since 2003, the SGR has required annual congressional patches. Thus, physicians' well-known requisite for supporting reform has been a 10-year deal with guaranteed annual increases costing $210 billion. Little surprise therefore that this piece was excised from both reform bills and left to separate legislation later. Well, later arrives Feb. 28, when the most recent temporary SGR fix expires.
Just last month, the Congressional Budget Office also uncovered some accounting sleight of hand. It agreed that “savings” from proposed cuts to most Medicare health providers would slow depletion of Medicare's Part A hospital insurance trust fund. However, other provisions of the bills would raise costs for Medicare Parts B and D, which are funded mainly by general revenue. Because these costs would not be offset by dedicated new taxes, the federal government would be forced to borrow an additional $226 billion to keep Medicare afloat until 2019.
The president's bill will therefore need to be streamlined to cover possibly 20 million to 25 million additional Americans. It must choose the most effective elements from the House and Senate bills and split the difference on the others. The controversial individual mandate is pivotal.
First, there are now 10 million Americans, “young invincibles” and “reluctant affluents,” with access to affordable employer-based insurance that they've simply chosen not to take.
Second, without a mandate, still others may delay purchasing insurance until they develop a pre-existing condition. A nod here to the House version, which starts a year earlier—2013—and imposes more onerous penalties on wealthier taxpayers. For the employer “play or pay” provision, it's the less burdensome Senate version because it has been shown in Massachusetts that a lighter touch works. As for the health insurance exchanges that enable individuals and small businesses to buy affordable insurance at large group rates, it's the House's national model. They're just too important to leave to the whims of individual states, as the Senate proposes.
As for how many Americans we can afford to subsidize via Medicaid, it's the Senate's version at up to 133% of the federal poverty level rather than the House's 150%. States, unlike the federal government, must balance their budgets. Both congressional bills offer subsidies for low- and middle-income earners up to an ambitious 400% of the poverty level, or $88,200 for a family of four. A 350% ($77,175) level would be more feasible.
To pay for it, both houses call for similar Medicare provider payment cuts to offset half the total costs. The remainder would come from new taxes. The House relies solely on a hefty 5.4% income tax surcharge on the super-rich ($1 million/couple). A 2% increase would do it if combined with two different two levies proposed by the Senate. Its Medicare payroll tax increase on incomes above $200,000 has become a political given. However, its excise tax on more expensive health plans originally projected to yield $150 billion dwindled by $60 billion after the president's last-minute deal exempting union members. It's time to take that back.
Obama must also revisit deals struck with other special interests. Drug companies got off with only an $80 billion tab by offering a 50% discount to seniors hitting the doughnut hole. Make it 75%. It won't reduce the deficit nor Medicare costs, but it will surely help seniors. Insurance companies will take their hit with 10 million fewer newly insured (i.e. customers) than they expected just a month ago. Physicians, without a comprehensive reform bill, would be left with problematic annual payment fixes. Resetting their 10-year deal at a lower inflator rate should therefore be worth something to them, and say $25 billion to us.
Finally, the lawyers: No one, save for plaintiff trial lawyers, believes the cost of defensive medicine isn't increased by existing malpractice laws. In December, the CBO estimated tort reform savings over the next decade at $54 billion. The presidential courage to cross the aisle and go for it would render that 41st vote a forgotten bad dream.
Marvin Wool, a physician, is a healthcare consultant based in Boston and a former medical director for two HMOs.
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