Archive for the 'Social Security' Category

Can We Please Stop Pretending Obama is “Capitulating” on Social Security?

Firedoglake, Wednesday, December 19, 2010

Can We Please Stop Pretending Obama is “Capitulating” on Social Security?

By: Jane Hamsher

Everywhere you look, the media narrative is that President Obama is “capitulating” to Republicans by agreeing to cuts in Social Security benefits.

And I have to ask, where is this collective political amnesia coming from?

Obama has made a deliberate and concerted effort to cut Social Security benefits since the time he took office.  FDL reported on February 12, 2009 that the White House was meeting behind closed doors to consider ways to cut Social Security benefits, and that the framework they were using was the Diamond-Orszag plan, which was co-authored by OMB Director Peter Orszag when he was at the Brookings Institute.

The birth of the now-ubiquitous “catfood” meme came on February 18, 2009 with this FDL headline:

“Hedge Fund Billionaire Pete Peterson Key Speaker At Obama “Fiscal Responsibility Summit,” Will Tell Us All Why Little Old Ladies Must Eat Cat Food”

As I wrote in August of 2010, Peterson’s keynote spot was the worst kept secret in town; I knew about it because I had been on a conference call with about 40 representatives of various DC interest groups, many of whom had received written notice from the White House that Peterson was scheduled to headline the event. But nobody wanted to go on the record for fear of jeopardizing their relationship with the administration in its early days.

After FDL broke the news, Peterson was “disinvited” from the summit. Both he and the White House denied everything, but Robert Kuttner subsequently confirmed in the Washington Post that Peterson had, in fact, been scheduled as the keynote speaker that day.

The administration backed off its immediate plans for reforming Social Security. The New York Times reported that they were “running into opposition from his party’s left” who are “vehement in opposing any reductions in scheduled benefits for future retirees.” But NYT columnist David Brooks reported that shortly after the summit, “four senior members of the administration” called him to say that Obama “is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security.”

Undeterred, the White House began telling journalists off the record that they were interested in “establishing an independent commission (outside the congressional committee structure) to look at creating a specific reform plan.”

In January of 2010, a bill sponsored by committed Social Security slashers Judd Gregg and Kent Conrad which would have created an official commission to make recommendations about the nation’s deficit was defeated by the Senate on a bipartisan vote — 22 Democrats and 24 Republicans voted no.

After the Senate defeat, on February 18, President Obama issued an executive order creating what subsequently became known as the “Catfood Commission” anyway.

Unlike Bill Clinton’s Danforth Commission, which ended in deadlock, Obama set this commission up in such a way that it was stacked with deficit hawks who largely agreed on what needed to be done: 12 of the 18 members were to be appointed by Senate and House leaders in each party, and 6 would be appointed by the President. This virtually guaranteed that Social Security privatization fetishist Paul Ryan would be on the commission, as would Gregg and Conrad.

Among the President’s six appointments:

  • As Bowles’ Republican Co-Chair, the President appointed loose cannon Alan Simpson, the former rich kid GOP Senator from Wyoming once famously said that those who were complaining that Social Security needed protection were “people who live in gated communities and drive their Lexus to the Perkins restaurant to get the AARP discount.”
  •  David M. Cote, the Republican CEO of defense contractor Honeywell

The composition of the Commission was conveniently stacked with 14 of the 18 members committed deficit hawks looking to start balancing the federal budget on the backs of old people.

And who supplied the staff to the commission? Why, Pete Peterson.

Are we to believe that the President was blissfully ignorant of the agendas of the people he appointed to this commission, created with the goal of bypassing Congressional process?

With the exception of a few public dog and pony shows, the Commission conducted its deliberations in secret.  But on June 16 of 2010, Alex Lawson of Social Security Works blew a hole in that secrecy on the front page of FDL when he caught Alan Simpson on live streaming video as he was exiting a meeting of the Catfood Commission.   In real time, Alex got Alan Simpson to say what everyone in the room was thinking but wouldn’t say publicly. Simpson told Alex that the commission was “really working on solvency”:

“We’re trying to take care of the lesser people in society and do that in a way without getting into all the flash words you love dig up, like cutting Social Security, which is bullshit. We’re not cutting anything, we’re trying to make it solvent.”

The Catfood Commission ultimately failed it is mission, due in no small part to the work of people like Alex, Nancy Altman and Eric Kingson of Social Security Works who have consistently been out there informing and uniting interest groups and educating the public to the fact that, yes, the White House has an agenda of cutting Social Security benefits.

I don’t know why Obama wants to cut Social Security benefits. I do know that Obama has been honest about it from the start. In January of 2009, even before he took office, he told the Washington Post that he believed Social Security was a broken system and that “entitlement reform” was something he wanted to achieve during his tenure in office:

“Obama said that he has made clear to his advisers that some of the difficult choices–particularly in regards to entitlement programs like Social Security and Medicare – should be made on his watch. “We’ve kicked this can down the road and now we are at the end of the road,” he said.”

Perhaps Obama wants to do what Bill Clinton couldn’t do.  It’s clear the oligarch class has decided that this is what must happen, and that in order to be considered a “serious” person, this is what a President must do.  Perhaps Obama simply wants to be considered a “serious person” by those in the ruling class.

But it’s clear that he did not arrive at the decision to “reform” Social Security and cut benefits because he is a poor negotiator, or because of Republican arm twisting.  It defies all logic and reason to look at his actions over the years and think that the President is now “capitulating” on Social Security.

The President has been very forthcoming about the fact that cutting Social Security benefits is something he wants to do.  When he said during the debate that he didn’t differ from Mitt Romney on entitlement reform, he meant it.   It’s time for people to remove the rose-colored glasses and stop projecting their own feelings on to the man.  It’s time to take him at his word.

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Social Security Chained CPI explained


Under pressure from seniors, people with disabilities, anti-racists, women, and unions, Obama had finally conceded that Social Security did not contribute to the debt and should not be part of a discussion on the debt.  He is now prepared to ditch that position and embrace cost-of-living cuts to Social Security benefits in exchange for (weakened) restoration of higher taxes on the rich.  This NT Times article explains the “chained CPI,”  the cut in Social Security inflation adjustments.

New York Times, Dec. 18, 2012

Social Security Checks Enter the Debate

Annie Lowrey

WASHINGTON — As part of a deal being negotiated by President Obama and Speaker John A. Boehner to avert the worst of the year-end tax increases and spending cuts, Social Security payments might be lower in the future for millions of Americans.

On Tuesday, Democrats and Republicans were examining a multitrillion-dollar deficit reduction package put forward by the president, though the two sides were trading barbed remarks and aides were emphasizing that nothing was final until the whole deal was done.

But the White House seemed willing to make a concession to Republicans with a switch in the formula that ensures that Social Security payments keep up with the pace of inflation — an idea that immediately proved unpopular with its liberal base.

“Any talk of shrinking the program to save money is flawed from the start because Social Security is not part of the national budget in the same way as military spending,” Representative Raúl M. Grijalva of Arizona said in a statement. “It’s paid for through a dedicated payroll tax separate from general budgeting.”

Representative Charles B. Rangel of New York was among many on the left who echoed that sentiment. “Everyone has a grandparent, a friend or a neighbor who relies on the Social Security benefits they earned to pay for medical care, food and housing,” he said in a statement. “A move towards chained Consumer Price Index would be a long-term benefit cut for every single person who receives a Social Security check.”

Democrats and Republicans are considering switching Social Security payment adjustments to a “chained” Consumer Price Index. The Consumer Price Index tracks the price of a basket of commonly purchased household goods. A chained index accounts for consumers’ tendency to substitute similar items for one another as prices fluctuate. A consumer might buy more apples when the price of oranges increases, for instance.

Though it sounds like nothing more than a technical fix, adopting a chained index would squeeze benefits over time. The chained index ends up, in a given year, about 0.3 percentage points lower than the unchained index. That difference accumulates, so after five years, it might be 1.5 percentage points lower. Using a chained index would cut Social Security spending by about $112 billion over a decade, according to an estimate by the Congressional Budget Office.

AARP, the lobbying and research group for older Americans, immediately criticized the proposal. “We would rather see a broader discussion addressing retirement security,” said Debra Whitman, an executive vice president at AARP. “We object to the context in which it’s being discussed, which is a few weeks before Christmas, without people understanding what the change really means.”

Because the payment reductions would accumulate over time, AARP and other groups argue that they would hit the oldest Americans disproportionately hard. They might also unduly burden women, who tend to live longer than men, and the lowest-income older people, who are most dependent on Social Security checks, the groups warned.

Some economists and policy experts have also argued that both the current and the chained indexes underestimate the inflation that older Americans experience. The government produces an experimental “elderly index,” for instance, that tries to capture the consumption habits of people over 62 more accurately than other measures. For instance, older people buy more health care and less education than the average family, so the elderly index puts more weight on the former and less on the latter.

In no small part because of spiraling health care costs, inflation as measured by the elderly index has grown faster than inflation as calculated by the standard index that Social Security uses. That implies that the purchasing power of Social Security payments linked to a chained index would erode more over time, given what older Americans buy.

Andrew G. Biggs of the American Enterprise Institute.Jason Reed/Reuters Andrew G. Biggs of the American Enterprise Institute.

Still, other economists and policy experts from across the political spectrum have argued that a chained index is a more accurate measure of the inflation that households actually experience, and therefore is a better policy tool. They note that the elderly index is still experimental, and that not just older people receive or spend Social Security payments.

“We know that the current measure of inflation is not adequately measuring experienced inflation, and we should hence go with the better measure,” said Christian E. Weller, a senior fellow at the Center for American Progress, a liberal research group based in Washington, and the author of a plan to modernize Social Security.

Both liberals and conservatives have at times argued against making changes to Social Security outside the context of a broader overhaul. Many analysts — particularly Democrats — argue that Social Security does not contribute to long-term deficits because it has its own financing stream in payroll taxes. But it does have a long-term fiscal challenge, as payouts would eventually overwhelm its trust fund and revenues.

“Back when the system started, the demographics were really favorable,” said Andrew G. Biggs of the American Enterprise Institute, a right-leaning research group in Washington. “You could provide decent benefits for the rich and poor alike at low cost. You can’t do that anymore, mathematically. We could provide decent benefits for the rich and the poor by raising taxes a lot, but we need to raise taxes for other things.”

Mr. Biggs said Social Security changes that provided more ample benefits to vulnerable low-income older people and less to the well-off might prove to be a better path forward.

“We oppose chained C.P.I.,” Representative Peter Welch, Democrat of Vermont, said in an interview. “But I think all of us are waiting to see the details in the final package, and we’ll make our determination then.”

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CARA Flash Mob: Hands Off Social Security, Medicare, Medicaid! Tax the Top 2%!

The nation’s richest banks and corporations have rung up billions in deficits with wars, tax cuts for the richest, bank bailouts, and reckless speculation, and now they want us to pay by sacrificing Social Security, Medicare, Medicaid, and every other part of the Safety Net!

Democrats and Republicans alike are burning the midnight oil in search of a bi-partisan Grand Bargain to screw seniors, people with disabilities, kids, and low-income workers.

No Way! Join our Flash Mob for social justice: We demand:

* No cuts to Social Security, Medicare, Medicaid, or services to low-income people.

* End the tax cuts for the rich

* Create millions of jobs

Our goal is to video our flash mob and have it go VIRAL – so the whole country puts pressure on Congress to demand that we do not cut our essential programs in order to make the Grand Bargain on the deficit and avoid sequestration before the end of the year.

Sponsored by the California Alliance for Retired Americans (CARA) and Jobs With Justice (JwJ).

See the Resolution on Social Security, Medicare, and Medicaid written by SF Gray Panthers and passed by the SF Central Labor Council.

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Obama! HANDS OFF SOCIAL SECURITY, MEDICARE, AND MEDICAID

On July 24, President Obama was twisting arms to get Congress to agree to huge debt reductions that would cripple Social Security, Medicare, and Medicaid.

Angry defenders of these programs responded by staging a noisy demonstration outside the Obama Campaign’s Oakland California headquarters, where a training session was under way to organize volunteers into the 2012 campaign machine.

We tried to get inside to speak to the volunteers and explain that 80% of the people say they don’t want our programs cut, and that corporations and the rich should be taxed to solve the debt.  During the standoff, we got many leaflets inside. You can read the leaflet here. After we went outside and began our demonstration, one volunteer came out and said we were right, that she’d tried to talk with the people inside, and she was disgusted that the Campaign was determined to go ahead with their agenda and wasn’t willing to listen to why our programs need to be saved.

Fighting to save Social Security has been much harder this year than in 2005 when Bush tried to privatize it. A big reason is that now the proposed cuts, which are much worse, are being pushed by a Democratic president, causing many to be reluctant to fight back. We need to get over this hesitation, not only in word, but also in deed. Today’s small demonstration was a start.

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What is the Fiscal Commission Co-Chairs’ Plan About?

What is the Fiscal Commission Co-Chairs’ Plan About?

Starting in less than a year (Oct. 1, 2011) when unemployment is supposedly back to normal, the Simpson-Bowles plan reduces projected deficits through 2020 by nearly $4 Trillion.  Spending cuts are twice revenue increases. (Extending all Bush tax cuts over same period would do the same deficit reduction.)    Not bailing out banks would have reduced deficit $1.5 trillion.   Discretionary spending under Congress’ control accounts for only 10% of deficit.  This will throttle any chances of lowering unemployment.  Most of deficit is caused by the recession, which the Co-Chairs’ plan will make worse, causing worse deficits.

Here are some of the pieces of the Co-Chairs’ plan:

Permanently Shrinks All Government Services by capping federal revenues at 21 pct of the GDP. The sum of Health, Education, Housing, Jobs Programs, Infrastructure Rebuilding, Social Security, and even military spending could never exceed 21% of GDP. This is less than spending from 1980-2008, when no baby boomers were starting Social Security and Medicare.

No repealing of Bush Tax Cuts for the Rich, no tax on stock or bond transactions, no eliminating the cap on Social Security Payroll taxes, no end of wars.  Instead,

Tax cuts for corporations and the rich; Tax increases for the middle class and the poor. Corporate tax rate is reduced from 35% to 26%.   The Individual rate for the richest is reduced from 10% to 8%.  There is a permanent extension of corporate tax credits for research.   There is a reduction or elimination of Mortgage Interest Deduction (while the housing market is still in disaster), and elimination of deductions for State and Local Taxes paid, contributions to your private retirement account, for charitable contributions,  and elimination of the Child Tax Credit.   Students must pay loans while still in school,   There’s a 15 cent/gallon gas tax, As Krugman says, “”(it) clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans.”

Social Security: Raises Retirement Age, Reduce benefits for middle-income recipients, Reduce Cost-of-Living Raises,  Moves Social Security from a universal plan toward a welfare plan:

  • Payroll tax cap raised to increase covered workers from 86% to 90% of workers by 2050! Even then, the rich don’t pay!

  • Cut benefits of middle-income earners: Half of Social Security recipients, who had earned above ($34,500), would be considered “high-income earners” and would be have their benefits cut from 17-36% depending on income, for example a 25% cut for people who had earned $43,000.

  • Raise Retirement Age: For full benefits, retirement age is raised from 67 to 69, an average 13% benefit cut; that discriminates against poor, who start working earlier and die earlier. To get partial benefits, retirement age is raised from 62 to 64, meaning two more years of poverty for seniors whose bodies are worn out or who can’t find jobs.

  • Reduce Cost-of-Living Raises: Raises would be based on new “chained CPI” inflation formula, .3% lower than now,  based on our alleged ability to switch to cheaper alternatives for goods and services that get priced beyond our means. What about, healthcare, which rose 4.2% last year while the regular CPI rose 1% .  By 2030, the COLA cuts would be a benefit cuts between 5-20% depending on income.
  • Means Testing, moving toward a welfare model of Social Security: Instead of raising the payroll tax cap so the rich pay the same as us on all their income, the Co-Chairs’ plan raises the payroll tax rate on the small portion of their income that’s taxed.  This undermines widespread support for the current, universal insurance model that has withstood 75 years of attacks.
  • Deficit Commission admits Social Security doesn’t increase deficit, so “savings” aren’t counted toward deficit reduction.  “Cuts are being made for Social Security’s own good.”

Medicare: Accelerate and intensify the cuts to Medicare that are in Obama Health Plan. (Increases in Medicare and Medicaid costs, are of course, the real drivers of increased future government expenses, and  single-payer, improved, expanded Medicare for All, is the only solution.  The Obama Plan greatly increases healthcare costs, and shifts the cost onto working families, particularly on Medicare.)

  • Federal health spending is supposed to be cut one-third by 2040, but no plan given.
  • The “Cadillac Insurance Tax” (a tax on insurance plans without ruinous deductibles or co-pays) would apply to less adequate insurance plans also.
  • Cuts in healthcare for veterans: “Modernize the Tricare health system” to increase premiums and co-pays for healthcare for vets.
  • It speeds up Obama Plan’s cuts to Medicare Advantage plans and charity hospitals that will serve the 23 million remaining uninsured, including all undocumented immigrants.
  • It strengthens the Independent Payment Advisory Board beyond its already-sweeping powers to cut Medicare payments to hospitals, doctors, equipment suppliers etc
  • It pushes Malpractice Reform, “tort reform,” to limit the ability of people to sue for damages in cases of medical malpractice.
  • Federal payments for Medicaid (Medi-Cal in Calif.) would be a fixed amount per year, no matter how much care was needed by poor patients in that state, making states cut their programs.  Old or sick Medicaid patients needing long-term care would have to pay more of costs.

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Alternative Deficit-Reduction Plan: Death Spiral for Medicare and Its Patients

Bipartisan Policy Center (Domenici, Rivlin) Propose Their Deficit-Reduction Plan:
Privatize Medicare, Tax Employers’ Healthcare, Tax cuts for  Corporations and the Rich, and No Payments to Social Security Trust Fund for 2011.

Rivlin and Domenici propose a deficit-reduction plan that would privatize Medicare, cut its benefits, and further weaken Medicare’s financial basis.  Under their “premium support” plan, Medicare would no longer directly pay for seniors’ healthcare.  Instead, Medicare recipients will be issued voucher checks, and they will have to shop for their own health care, either traditional Medicare or a private health plan. The premiums of the private plans will go down because they can market themselves to healthy people at gyms, marathons etc. The premiums of traditional Medicare will go up because traditional Medicare must continue to accept sicker, more expensive patients.  Moreover, the voucher checks would not grow with the rate of medical inflation, but would be tied to the GDP plus 1%, so Medicare patients would pay increasingly out-of-pocket.  Over time, increasing numbers of seniors and people with disabilities would drop traditional Medicare because of its higher premiums, leaving traditional Medicare with the sickest, who could not survive the private plans’ managed care. As traditional Medicare’s patient base drops, its finances would become more precarious.  It is a death spiral for both Medicare and its patients.

Kaiser Health News, November 17, 2010

New Deficit Report Recommends Seniors Pay More For Medicare
http://www.kaiserhealthnews.org/Stories/2010/November/16/bipartisan-policy-center-medicare.aspx

Offering the latest tough-love strategy to reduce the nation’s debt, a panel of high-profile Republicans and Democrats on Wednesday recommended that Medicare beneficiaries pick up far more of their health care costs and the government substantially curb the amount both Medicare and Medicaid programs can grow in future years.

The panel, led by former Republican Sen. Pete Domenici of New Mexico and Alice Rivlin, the budget director under President Bill Clinton, also calls for a national debt-reduction sales tax of 6.5 percent, as well as changes in Social Security and income tax rates.

The debt reduction task force was created by the Bipartisan Policy Center, established by former congressional leaders of both parties. Its recommendations come a week after the chairmen of President Barack Obama’s commission on controlling the national debt proposed increasing the age at which people qualify for Social Security to 68 by 2050.

Document: Restoring America’s Future

Backers of the latest plan said they hoped it would spur a reluctant public and elected leaders to grapple with painful choices needed to get the country’s spending under control. But others warned the political prospects of the plan seemed doubtful — particularly for some of the more far-reaching ideas, such as limiting the amount the government would spend on Medicare beneficiaries.

Right now, premiums account for 25 percent of the cost of Part B, or the physician component of the program, with the government paying the balance. The task force would increase beneficiaries’ share to 35 percent.

In addition, starting in 2018, traditional Medicare would be turned into a “premium support” program that would limit the rate of increase of federal spending per beneficiary to one percent above the growth rate of the economy. Under such a plan, beneficiaries likely would pay more to stay in traditional fee-for-service Medicare though they could save money by getting coverage though private health plans that would compete against each other for business.

“I think the premium support is a feasible way of controlling costs,” Rivlin said Wednesday at a press briefing.

But this approach has never drawn much political support over the years. “It’s hard to see either party embracing a full blown premium support plan,” said Henry Aaron, a Brookings Institution expert who helped develop the idea in the mid-1990s. “The Democrats would be largely against it because of cuts in benefits and not enough Republicans would have a stomach for it. It would mean big benefit cuts and a substantial increase in out of pockets costs.”

AARP Executive Vice President John Rother said his group would oppose premium support. Of the overall task force report, he said it “raises lots of questions because of how it shifts more costs to individuals.”

The task force also recommends slowing the growth rate of Medicaid, the joint state-federal program for the poor and disabled.  But the report did not provide any specifics other than saying the state and federal government should explore changing the way they split paying the cost of Medicaid.

In addition, the task force proposes phasing out by 2028 the tax exclusion on employer-provided health care benefits. The group also would eliminate the so-called Cadillac tax on high-cost plans, a provision of the new health law that takes effect in 2018. Taxing employee health benefits would generate about $10 trillion in savings by 2040, more than any other revenue generator, according to the report.

Labor unions have opposed eliminating the tax exemption on health benefits out of concern it would lead employers to provide stingier benefits, said Paul Ginsberg, president of the nonprofit Center for Studying Health System Change and a consultant to the task force.

Michael Cannon, a health policy expert at the libertarian Cato Institute, said the premium support change to Medicare would have greater ramifications than the ideas offered last week by the chairmen of Obama’s commission. Their report recommended increasing cost-sharing for Medicare beneficiaries, but didn’t specify an amount, and changing the way doctors and hospitals are paid to encourage more efficient care.

“You can fiddle with the price control formulas as much as you want, but the people whose incomes are determined by those formulas are probably going to carry the day,” Cannon said. He said the plan’s short-term political prospects were few.

Other recommendations:

* On Social Security, raise the amount of wages subject to payroll taxes – now $106,800 — so that 90 percent would be covered, and “slightly” reduce the growth in benefits for the top 25 percent of beneficiaries.

* Establish only two income tax rates, 15 percent and 27 percent; end deductions for mortgage interest and charitable contributions, replacing them with 15 percent refundable credits, and lower the top corporate tax rate from 35 percent to 27 percent.

But the task force also veered sharply in the direction of reviving the economy and creating jobs with a recommendation for a payroll “tax holiday” in 2011 that would excuse employers and workers from paying the 12.4 percent tax into the Social Security Trust Fund.

Taking these and other steps, by 2020 federal spending would be reduced from a projected 26 percent of GDP to 23 percent, and the federal debt would be brought down below 60 percent of GDP, the task force said.

Projected Health Care Savings By 2040

* $10 trillion: phasing out the tax exemption on employer-provided health benefits.

* $7 trillion: impact of premium support plan.

* $3 trillion: changing the way states and the federal government split the costs of Medicaid.

* $644 billion: new soda tax.

* $300 billion: medical malpractice reforms such as caps on damages.

* $123 billion: increasing Medicare premium costs for beneficiaries.

Source: Debt Reduction Task Force of the Bipartisan Policy Center

 

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The Obama Health Plan Has Serious Threats to Medicare

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The Obama Health Plan Has Serious Threats to Medicare

Michael Lyon,  SF Gray Panthers

 

Obama’s Health Plan is fatally flawed because it uses insurance companies to deliver healthcare, but the Health Plan also directly threatens Medicare.

People talk about “the healthcare crisis,” but actually there are two healthcare crises.

For us, the healthcare crisis is 51 million uninsured, stripping workers’ health plans, unaffordable health insurance that denies claims and charges high co-pays and deductibles, medical bankruptcies, a tattered safety net, dangerous mistakes in hospitals, and some of the worst health indicators in the industrialized word.

For corporations, the healthcare crisis is the high cost of healthcare premiums for employers, raising the price of US goods so they can’t compete in the world market.

As the debate over healthcare reform developed, media attention shifted from our healthcare crisis to the corporate healthcare crisis.  Obama certainly talks about the healthcare crisis from the corporate perspective, and we can see the Obama health plan reduces healthcare costs for government and business, but does not reduce costs for workers and their families.

In fact, the Obama health plan introduces huge increases in costs, by guaranteeing  trillions of dollars in profits for health corporations, particularly insurance and drug companies.  If the Obama health plan was structured to guarantee huge profits for health corporations, where is the cost containment supposed to come from?  Whose costs will get reduced?

Medicare is where costs will be reduced.  In fact, more than half the cost of the entire Obama health plan comes from scaling back increases in Medicare spending over the next ten years. The entire Obama health plan will cost about $1 trillion over the next 10 years, and $575 billion[1] will come from scaling back future Medicare increases that are needed to balance out inflation and to care for the baby boomers, who start getting Medicare in 2011.

How big a cut is this $575 billion? Total Medicare spending for 2010 to 2019 was expected to exceed $7 trillion[2], so this $575 billion reduction is up to an 8% cut, applied over the same period that 35 million baby-boomers will enter Medicare.  Put differently, for the past 20 years Medicare spending grew 8%[3] per year.  The Obama Plan will clamp down Medicare cost growth to 6%[4] per year.  It’s not fair: Medicare and its patients would have to reduce their healthcare enough to achieve overall cost savings, even though monumental waste has just been cemented in place.

What’s insidious about this plan is that most of these Medicare cuts will NOT be felt by Medicare patients as direct cost increases or healthcare restrictions.  Instead, the Medicare cuts will be to providers of  Medicare treatment: the doctors, and hospitals, and home care agencies, rehabilitation facilities, and even durable medical equipment suppliers.  These cuts will reduce providers’ incentive to treat Medicare patients, until the providers finally stop taking them. Like today’s Medicaid patients, Medicare patients will have problems finding someone to care for them.

The figure of $575 billion scaling back of Medicare spending increases from 2010-2019 was calculated by  Medicare’s own Actuary, and is considered a better estimate than Congressional Budget Office figures because the Actuary’s calculations give a more complete picture.[5] Accordingly, all the following estimates of cuts from various parts of the Obama Health Plan come from the Medicare Actuary’s April 22 report “Estimated Financial Effects of the “Patient Protection and Affordable Care Act as Amended”[6]

Some highlights of the reductions:

  • $145 billion in payment cuts to private Medicare Advantage plans, scaling their payments back to the level of traditional Medicare.
  • $233 billion cuts in direct payments to the providers of Medicare hospital and outpatient care, plus penalties for their expected failure to meet “productivity” goals.

 

  • $50 billion in cuts to  Medicare “DSH” payments to hospitals serving low-income Medicare, Medicaid, and uninsured patients.
  • Cuts in payments to “inefficient” hospitals, mostly in low-income, medically-underserved areas, often large teaching hospitals serving the poor and uninsured.
  • $24 billion in cuts ordered by the Independent Payment Advisory Board, a new, independent, high-power, cost-containment commission built into the Obama Plan.
  • Payment reforms: putting Medicare doctors under Managed Care.

 

 

Let’s look at these cuts in more detail:

 

$145 billion in payment cuts to private Medicare Advantage plans, scaling their payments back to the level of traditional Medicare.[7]

In 2012[8], Medicare will begin reducing payments to the privately-operated Medicare Advantage Plans. This will take 3-7 years, depending on how much reduction is needed to bring an individual plan’s payment down to traditional Medicare levels.  This is the Medicare cut most people have heard about. Obama has tried to get us to support the Medicare cuts by conjuring up images of him slashing the bloated payments to greedy private insurance companies administering Medicare Advantage plans. (While off-camera he gives private insurers tens of millions of new customers in 2014!)

Medicare Advantage never should have happened. Traditional Medicare was developed in the mid-1960s.  Since that time there have been significant developments in medicine such as pharmaceuticals, an increased ability to treat illness on an outpatient basis, and technical advances such as medical imaging, endoscopic surgery, and prostheses.  Also, since the mid-1960s, there has been a new attention to diseases of older people, such as chronic disease or mental problems.  The potential of these advances has unquestionably been marred by market forces, yet, on balance, they are advances.

These advances should have been incorporated into the government’s basic Medicare plan, allowing Medicare to advance in step with medical science.  Instead, corporate forces have blocked Medicare’s evolution, and many of the last 45 years of medical advances are only available to Medicare patients through private corporations.  Medicare patients’ two choices are  either (1) private Medigap insurance policies, which Medicare patients buy themselves to add benefits on top of their traditional Medicare benefits or pay for their traditional Medicare’s patient charges, or (2) private Medicare Advantage plans, which contract with Medicare to provide all Medicare services, and are paid for mostly by government payments to the corporations running the plans, and partly by patients buying into the plan.[9]

The government and Medicare didn’t intend to subsidize these private Medicare Advantage plans.  In 1997, HMOs and their lobbyists originally promoted these plans promising that these private corporations could provide traditional Medicare services plus modern medical advances and make a profit.  Almost 5 million seniors enrolled in these plans. But the HMOs found they could not make enough profits to satisfy investors, and they started withdrawing their plans. By 2003, 2.4 million patients had been dropped. [10] Rather than responding to this crisis by adding modern medical advances to basic Medicare, the government caved in to corporate pressure, and increased its payments to  Medicare Advantage plans, saying their purpose was no longer saving money but expanding benefits to consumers through the magic of private plans. With this magic, of course, also comes difficulties reaching doctors, misinformation on benefits, restrictions and denials of care, changes in benefits, and unwillingness to care for seriously sick patients.[11] Nevertheless, payments to Medicare Advantage plans have been roughly 114% of payments for comparable patients in traditional Medicare.[12]

It is this government subsidy to private plans which the Obama Health Plan eliminates.  The Obama administration is OK with letting Medicare patients bear the extra cost of buying private Medigap policies for complete and modern healthcare.  This explains why AARP, which sells Medigap policies, did not oppose the Obama Plan. And the Obama administration is OK with letting patients with just traditional Medicare pay out-of-pocket for additional services. But the Obama administration does NOT want  the government to even partly subsidize the additional benefits of some Medicare Advantage plans. Once again, the Obama health plan lowers costs for government, but raises costs for beneficiaries.

The payments cuts to Medicare Advantage plans are expected to lead to huge premium increases, benefit cuts, or outright cancellation of programs, which would decrease Medicare Advantage enrollment by 50%[13].  Before we gloat, remember, private insurers might lose up to 5 million Medicare Advantage customers, but they’ll be gaining at least four times that number in 2014 when “universal coverage” kicks in. But the millions on Medicare Advantage patients who are forced back onto traditional Medicare will be stuck with higher out-of-pocket costs or forced to buy private Medigap policies.

To be sure, people’s feelings do differ about the government’s cutting back on payments to private Medicare Advantage plans, but the important thing to remember is that these cuts to Medicare Advantage plans are only ¼ of the total Medicare cuts.  What are the rest of the cuts, and how will they affect Medicare beneficiaries?

$233 billion cut in direct payments to the providers of Medicare hospital and outpatient care, plus penalties for their expected failure to meet “productivity” goals. This will  lead to a shortage of Medicare providers.[14]

 

These two kinds of cuts apply to virtually every kind of Medicare provider except doctors. They include hospitals, long-term care hospitals, skilled nursing facilities, inpatient rehabilitation facilities, inpatient psychiatric facilities, hospices, home health agencies, and even durable medical equipment suppliers.

The first kind of cut is a scaling-back of the yearly payment increases these providers get to compensate for their increased costs in providing care to Medicare patients.  Actually, these payment increases have never kept up with inflation of medical costs. The yearly payment increases have ranged from 2.0-3.5%[15] over the last decade, but medical care costs in general have increased about 6% annually.  In spite of this, the Obama plan will deduct a significant fraction[16] of each year’s payment increase, and the deduction gets worse as time goes on.  Medicare providers will have less and less incentive to treat Medicare patients.

The second kind of cut is a one-time penalty which will be deducted from federal payments to providers  if these providers cannot increase their “productivity” as fast as the rest of the nation’s economy. CMS, the Centers for Medicare & Medicaid Services, knows it will be virtually impossible for providers to meet this “productivity” target, and its Actuary has already included these deductions as cuts in Medicare payments to providers.[17] One financial  adviser to hospital systems wrote “Within the next 6-12 months, healthcare organizations will need to find a way to reduce their expenses or increase revenue by 3-5% to offset Medicare productivity adjustments.” [18]

The combination of the across-the-board reductions and the penalties for not meeting productivity targets means many providers will experience absolute decreases in funding from one year to the next.[19]

Medicare’s own Actuary estimates these two types of payment reductions could cause 15 percent of hospitals and other institutions to become unprofitable and stop providing Medicare services by 2019. By 2030 it would be 25 percent of hospitals[20].  According to Richard  Foster’s April 23, 2010 report  “providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibility jeopardizing access to care for beneficiaries).  Simulations by the Office of the Actuary suggest that roughly 15 percent of Part A (inpatient) providers would become unprofitable within the ten year projection period (2010-2019) as a result of the productivity adjustments.”[21]

$50 billion in cuts to  Medicare “DSH” payments to hospitals serving low-income Medicare, Medicaid, and uninsured patients.[22]

The Disproportionate Share Hospital (DSH) program provides special funding to hospitals in recognition of their higher costs in treating low-income patients.  Starting in 2014, Medicare “DSH” payments to these hospitals will get big cuts.

The Medicare “DSH” payments to individual hospitals were started in 1986 to reflect the higher cost of treating Medicare patients in poor areas where Medicare patients are sicker. Over time, the rationale for Medicare DSH payments was expanded to assure hospital access for all poor and uninsured patients, and payments were based on individual hospital’s days of care for poor Medicare and Medicaid patients. In March of 2007, Medicare’s advisory board MedPAC estimated that  75% of DSH payments were not “empirically justified.”[23]

Beginning in 2014, hospitals receiving Medicare DSH funds will be assured of receiving only 25% of their normally-calculated DSH funds.

The remaining 75% of normally-calculated DSH funds have a percentage cut each year equal to that year’s percentage drop in uninsured population compared to 2013, plus an additional percentage which increases every year from 2014 to 2019. [24] The result is that the hospital’s DSH funds are cut faster than its drop in uninsured patients.

After 2019 DSH funds would be distributed to hospitals based on each hospital’s level of uncompensated care compared to total uncompensated care for all hospitals.

The CMS Actuary estimates these cuts be $50 billion from 2014 to 2019. [25]

Cuts in payments to “inefficient” hospitals, mostly in low-income, medically-underserved areas, often large teaching hospitals serving the poor and uninsured.

Obama’s speeches on his health plan have tried to reassure older people that the Medicare cuts would be benign because they would be restricted to (1) cutting the bloated payments to greedy Medicare Advantage companies, and (2) improving efficiency in the Medicare system.  The concept of efficiency has come to the forefront in the discussion of healthcare financing.  How has this happened?

For two decades, the Dartmouth Institute for Health Policy and Clinical Practice has studied Medicare hospital costs and published its results in the Dartmouth Atlas[26].   The Atlas shows big geographic differences in how much is spent, and purports to demonstrate that the high-spending hospitals don’t have better medical outcomes, and sometimes have worse outcomes.

This has all been put together into wild claims by health policy researchers and Obama officials that 30%[27] of medical spending is waste and could be cut without affecting quality of care.  Donald Berwick, Obama’s appointee to direct the Centers for Medicare & Medicaid Services, CMS, which administers Medicare and Medicaid, says 50%[28] of medical spending is waste and could be eliminated without affecting quality of care.

A cottage industry of motivational speakers has sprung up, urging seniors to empower themselves and assert their rights to refuse complex medical treatment.  For example, pathologist Dr. George Lundberg spoke at San Francisco’s Commonwealth Club in July.  He waved his arms and practically shouted to seniors in the audience “Forget those heart by-pass operations! You don’t need them!” He said the same thing about CAT scans and mammography and even advised women not to examine their breasts.  After his talk, he praised the Dartmouth Atlas to the sky, and sold autographed copies of his book Severed Trust, Why American Medicine Hasn’t Been Fixed, which advocates limiting access to the healthcare system.[29] Dr. Lundberg is currently editor of the online journal Medscape and was editor of the Journal of the American Medical Association.

Not surprisingly, Dartmouth Atlas director Elliot Fisher is a consultant[30] for the Peter G. Peterson Foundation, which has spent years trying to gut Social Security, Medicare, and Medicaid. Nor is it surprising that insurance companies help finance[31] the Dartmouth Atlas.[32]

One glaring problem with the Dartmouth Atlas studies is that they only look at patients who died 6-24 months after their hospital admission.  So patients whose costly care improved their health and saved them from dying are excluded from the study. This biases the results to say that more spending does not improve outcomes. Other studies which include survivors say the opposite: that more costly care can improve outcomes.  A December 23, 2009 NY Times article[33] focused on a comparison of hospitals treating heart failure, which included survivors. The UCLA hospital, often cited as high-cost by the Dartmouth Atlas, had 1/3 fewer deaths from heart failure.

The other glaring problem is that the high-spending poor-outcome “inefficient” hospitals cited by the Dartmouth Atlas are in urban or rural areas with high poverty, unhealthy living and working conditions, poor access to medical care, and a shortage of primary care providers.  The result is that patients are already in poorer health when they go into Medicare, and need more treatment, and more expensive treatment. Inadequacies in primary care in these areas means Medicare patients are sicker when admitted to hospitals. These patients also have fewer resources for good after-hospital care, so there are higher rates of re-admission.  So of course these hospitals’ Medicare costs are higher and their medical outcomes are worse than the “efficient” hospitals in upper-middle class white areas.

In addition, the large, high-cost, “inefficient” hospitals are usually in big cities where salaries are higher, so all healthcare is more expensive. These hospitals are also often teaching hospitals, which have added expenses that are routinely (and legally) charged to Medicare.

The Dartmouth Atlas people, and their supporters in the Obama Administration, claim that they’ve factored these differences in, but other knowledgeable health policy people say this isn’t the case.  A June 2, 2010 NY Times article[34] focuses on these issues.

The Dartmouth mania ties into Medicare cost reductions because in future years the Obama plan will decrease payments to “inefficient” hospitals with higher costs and/or worse outcomes. In 2012, incentive payments will go to hospitals with good quality-of-care data for heart attack, heart failure, pneumonia, surgeries, and healthcare-acquired infections.  In 2013, incentive payments would also reward hospitals with low spending per Medicare patient[35]. These quality-of-care provisions of the Obama Plan must be “budget neutral,” so other hospitals’ payments will be reduced to pay for the incentive payments.  There will also be penalties that will especially hit hospitals with sicker or poorer patients, and hospitals with tighter budgets. There will be $8.2 billion in penalties for  hospitals with higher readmissions[36] and $3.2 billion in penalties for hospitals with higher rates of hospital-acquired infections.[37]

The “efficiency” and “quality” rewards and punishments are the medical equivalent of the “No Child Left Behind” program, which lowers school funding overall, and closes low-performing schools in areas of poverty, non-English-speaking populations, and chronically underfunded education.

 

$24 billion in cuts ordered by the Independent Payment Advisory Board, a new, independent, high-power, cost-containment commission built into the Obama Plan.[38]

The Independent Payment Advisory Board (IPAB) is charged with clamping down the growth of average per-person Medicare costs. Its powers are essentially beyond the reach of Congress. The Board’s 15 unelected members are experts in medicine, health policy, health care delivery etc., and are appointed by the President with Senate concurrence. The Board can also recommend measures to cut total national health spending.

Starting in 2013, each year’s growth in average per-person Medicare cost will be compared with a threshold growth, based on a modified Consumer Price Index, or later, the Gross National Product.  If, in any year, average per-person Medicare cost growth exceeds that year’s threshold, the Board must recommend legislation to either (1) reduce per-person Medicare spending up to 1.5%, or (2) otherwise limit Medicare cost growth to that year’s threshold, whichever is less. [39] The CMS Actuary estimates these cuts will be $24 billion from 2010 to 2019.[40]

The Board’s cost-cutting recommendations become law unless the House and the Senate each adopt a resolution to block them, by a three-fifths majority. If Congress does reject the proposals, Congress must pass its own solutions yielding equivalent cost reduction within 7 months or Health and Human Services will implement the Board’s recommendation. No judicial review of a Board action is allowed.[41]

Since the Obama Health Plan gives insurance and drug companies such large profits and so little regulation, Medicare beneficiaries’ costs are bound to rise faster than the Consumer Price Index or the Gross Domestic Product, and the Board will have to clamp down on Medicare spending almost every year.  Medicare’s own Actuary states that if such a Board had been established 25 years ago, it would have had to act in 21 of those years.[42]

The Board is prohibited from rationing care, increasing taxes, and changing Medicare’s benefits, eligibility or beneficiary cost-sharing, and there is a Consumer Panel that advises the Board to make sure the prohibitions are not broken. So the Board has to  reduce payments to providers: physicians, home health, pharmaceutical and medical devices, durable medical equipment, and after 2020, to hospitals.[43] Medicare specialists are very worried.[44]

The Independent Payment Advisory Board is the Medicare cost-cutter of last resort. If any other cost-cutting mechanism fails, the board will make recommendations to make up the difference.

In Medicare Actuary Richard Foster’s April 22, 2010 Report, he wrote “limiting  actual Medicare cost growth to a level below medical price inflation alone would represent an exceedingly difficult challenge. Actual Medicare cost growth per beneficiary was below the target level in only 4 of the last 25 years, with 3 of those years immediately following the Balanced Budget Act of 1997; (and) the (negative) impact of the BBA prompted Congress to pass legislation in 1999 and 2000 moderating many of the BBA provisions.”[45] (The 1997 Balanced Budget Act, that ended welfare as we know it, included Medicare cuts even more severe than the Obama Plan, including the Sustainable Growth Rate, SGR, formula for limiting Medicare doctor payments.)

Champion budget hawk Peter Orzag said the IPAB is among the most important of the health reform provisions for “sustaining” Medicare, saying for Congress it represented “the single-biggest yielding of power to an independent entity since the creation of the Federal Reserve.” Orzag called it more than a means of cutting government spending, but also a means of wresting the constitutional responsibility for budgeting away from powerful Congressional committee chairmen.[46]

Payment reforms: putting Medicare doctors under Managed Care

Much attention is being given to “payment methodology” reforms in how Medicare doctors get paid.  Almost everyone is familiar with cases of real or hyped abuse of the “fee-for-service” payment system, where doctors are paid for each visit, procedure, or test they order, and so there is a profit incentive to over-treat patients.

But patient abuse also occurs under a capitated payment system, where doctors are paid a fixed amount  to cover a patient for a year. Here, there is a  profit incentive to under-treat patients or treat them as little as possible, since any treatment cuts into the amount of money the doctor was given to cover the patient.  (In fact, the only way to remove incentives to over-treat or under-treat is for doctors to be paid by salary as workers, not business-people.)

Managed Care is a variation of the capitated payment system, where an organization that hires doctors is paid the fixed amount to cover a patient for a year, and the organization maximizes its profits by encouraging the doctors to treat patients as little as possible, through either rewards, penalties, or threats.  In the late 1980s and early 1990s, managed care dominated healthcare, which led to large numbers of cases of HMOs denying necessary medical care or providing poor medical care. A major push-back of patients led to patient protection laws and letting up of managed care pressures.

The main thrust of the payment reforms in the Obama plan is to move Medicare doctors away from fee-for-service payment, and instead to work under managed care payment.

One new way to push doctors into managed care is Payment Bundling. In Payment Bundling, doctors, hospitals, nursing homes, and other providers would work together to be jointly accountable for providing care for eight kinds of patient care, such as a hip replacement or cardiac by-pass. For each patient care episode, the group would receive its set fee and divide the money between the doctor, the hospital, the nursing home etc. Hospitals already get a fixed payment for particular episodes of patient care, called the DRG system, but Bundled Payments extend this managed care payment to doctors, since they would get a fixed payment per episode. Payment Bundling is an experimental program beginning in 2013, and Health and Human Services has not chosen what kinds of patient care would use bundled payment.[47]

Another new way to push Medicare doctors into managed care is Accountable Care Organizations (ACOs).  ACOs would be groupings of doctors and hospitals who form a legal structure to (1) take responsibility for complete care of at least 5,000 Medicare patients,  (2)  accept fixed payments from Health and Human Services, and (3) distribute the fixed payments to the providers in the ACO.  If, during a 3-year period, an ACO can reduce its average per-person Medicare spending to meet a goal set by Health and Human Services, the ACO can collect an award.[48] If ACOs significantly reduce Medicare costs, planners envisage them managing the healthcare of 40-75% of Medicare patients.[49]

As with any per-capita payment method, the incentive in both Bundled Payments and ACOs is to give less care, since any care given eats into the fixed payment the group receives. If the patient develops an infection, or fails to recover as fast as expected, any extra care given represents a loss in profits.

Many of these new payment reform strategies, like Bundled Payments or ACOs are to be developed by a new Center for Medicare and Medicaid Innovation, CMI, which is to start in 2011.[50] These new payment reform strategies are sketched out in the Obama Health Plan as “pilot projects,”  meaning they are yet to be planned out and tested even on a small-scale basis. The term “pilot project´ has a legal meaning: it can be completely planned, expanded, and put into general practice by the Department of Health and Human Services, an arm of the Executive branch, without any oversight by Congress, as long as they don’t increase spending.[51] The Center is expected to develop other programs including care for chronic diseases, remote monitoring of very ill Medicare patients in local hospitals by specialists, moving doctors to salaried positions, and perhaps testing state single payer programs.[52]

Are business and government serious about making these Medicare cuts?

The Obama Health Plan stabilizes and guarantees billions in profits to insurers, drug companies, and hospitals, yet demands that Medicare alone reduce its future expenses enough to control overall health costs, even as 79 million baby boomers are about to enter the system.  This is patently unfair.  As Brookings Institution’s Henry Aaron told the House Budget Committee in his June 2008 testimony, “Growth of Medicare spending per person has closely tracked growth of per person spending on health care in general. That parallelism simply reflects the central purpose of Medicare and Medicaid: to assure that the elderly, disabled, and poor receive care similar to that available to the general population. … Holding growth of per person spending on Medicare and Medicaid below that for the general population would imply the gradual abandonment of the national commitment to assure the elderly, disabled, and poor standard health care.”[53]

 

Many critics, both from the left and the right, criticize the Obama plan, saying it cannot control costs.  Critics from the left point to the  huge profits to healthcare companies.  But many other critics are saying the Medicare cuts we’ve outlined will never happen; that as the cuts come due, Congress will reverse them.

As evidence, they point to the limits on Medicare doctor payments that were written into the severe cuts in the 1997 Balanced Budget Act.  These laws said Medicare doctor payments could not grow faster than a so-called Sustainable Growth Rate (SGR).  Year after year Congress backed away from enforcing the SGR limit, so that enforcing it  now would require a 21% payment cut to doctors.  (Attempts to appropriate money to fill this hole were called the “doc fix.”)

Nobody has a crystal ball to see the future with certainty, but I see absolutely no reason why Congress would prevent these cuts from being made. Given the determination of business and government to cut services, particularly federally mandated services to seniors, and given the enthusiasm in Congress to make the same cuts, I think it highly probable they will try to make these Medicare cuts, even as they see the wave of 79 million seniors approaching.  But before we place our bets, let’s look at some aspects of the Obama plan that might show promise.

 

Government Intervention: Quality Control?  Cost Control?  Is there a distinction?

 

These new payment reforms are being combined with much greater monitoring and oversight of doctors’ and hospitals’ practices, quality of care, and costs.  This new monitoring and oversight are described as “value-based purchasing” or “rewarding value over volume.” These methods would standardize patient care, by adopting standard care plans and prescribed drugs that would be developed through studies of comparative effectiveness and cost.  The methods would also require doctors and hospitals to report detailed data on their Medicare costs and quality-of-care indicators. “Quality-of-care” data would report both bad indicators like dosage errors, infections, bedsores, falls, etc.  Quality-of-care data would also measure adherence to the standard treatment plans and drug choice protocols.

These interventional aspects of the Obama Health Plan could actually improve patient care by promoting “evidence-based medicine”  and close monitoring of quality-of-care data. This standardization and quality control could be very welcome to committed clinicians who are discouraged because so much medical research is sponsored by drug companies or who are outraged because of the laxness and lack of uniformity in medical practice, where a doctor can prescribe powerful adult anti-psychotic drugs off-label to an 18 month old child, as reported recently.[54]

But Dr. Marcia Angell, former editor of the New England Journal of Medicine wrote an important and fresh perspective on these improvements in the Obama plan:  “Initiatives such as electronic records, case management, preventive care, and comparative effectiveness studies may improve care, but the Congressional Budget Office and most health economists agree that they are unlikely to save much money.”[55]

Marcia Angell’s position is a very different from Obama’s position, which states that these improvements in healthcare will save significant money.  Why is this difference important?  It is important because by conflating healthcare improvement with cost reduction, Obama is making the Medicare “savings” seem benign, as though the “savings” are an additional payoff of these measures to improve care.  It is similar to Obama’s casting Medicare cuts as improvements in efficiency in order to make the cuts seem benign.

In fact, these interventional measures give Health and Human Services and Centers for Medicare & Medicaid Services tremendous centralized power to ratchet back  costs to the point of compromising patient care.  It gives the government power to standardize patient care plans and drug choices,  to reduce payments to doctors for not following the plans,  to reduce payments to doctors who spend too much,  to reduce payments to hospitals for not meeting productivity standards,  to set the payments doctors and hospital get for particular treatments,  to push doctors into managed care and then set the payment for coverage per-person per-year,  and finally to give an independent commission carte blanche power to reduce provider payment.  Given the rampant deficit hysteria in Washington, and demands for corporate tax cuts “to stimulate the economy,” can we be sure these interventions aren’t to ration care to Medicare beneficiaries?

Ultimately, our decision whether to embrace these interventions as a prelude to better healthcare, or fight them as a prelude to rationing, should depend on how much influence we have over policy development.  Judging by our recent struggle just to have single-payer mentioned, I would say we have little influence,  and therefore these interventions are a threat we need to warn people about.

One can’t ignore the context in which these cuts are being introduced. – Deficit hysteria cultivated in Washington. — Strong agitation by both Democrats and Republicans to cut Social Security, Medicare, and Medicaid.  —   Demands for corporate tax breaks “to stimulate the economy.” — Economic meltdown followed by persistent, high, long-term unemployment. — Years of huge projected shortfalls in State and County budgets with deep health and welfare cuts. — Years of war projected to secure oil, pipelines for oil and gas, or containment of China or Russia.

These are times when business’s and government’s backs are to the wall.  For them, health and social services for elders, people with disabilities, kids,  and poor people are not necessary.  We are going to have to fight like hell to keep them.

My earlier remarks on health reform still apply:

First single-payer was off the table. Then a public option anyone could use was off the table.  Then the Medicare buy-in was off the table. And negotiated drug prices.  And cost controls. And .. And…

Most of us are angry, and whipsawed back and forth between pessimism and optimism. The health bill is a gigantic bailout for insurance, drug, hospital, and doctor industries, forcing us onto private insurance, while at the same time forcing down the value of that insurance and making us pay more out-of-pocket, and taking five hundred billion dollars from Medicare over the next ten years.  Our optimistic side says maybe 30 of the 50 million uninsured will get insured in four years, though many won’t be able to afford it and will choose to pay extra taxes instead.  Many of us have children barely able to keep a roof over their heads, maybe they’ll qualify for Medicaid, though Obama wants to cut Medicaid costs. And what if this awful health bill  failed?   These thoughts drive us nuts.

It has been a very bitter pill to see how marginalized we are.  Deep down, we hoped or expected  that once business realized the cost of insurance-based healthcare was unsustainable, our day would come, and our plan of removing insurance companies would be taken seriously. We were wrong.

The truth is we do not have a movement that’s capable of mounting a serious threat to the functioning of the economy or government, through strikes, sit-ins, or occupations.  We do not have the General Strikes that forced the government to cough up Social Security.  Nor the emerging sit-ins and marches against Jim Crow racism that forced them to cough up Medicare and Medicaid.  We cannot expect different results until we have the kind of movement, that can, and will, stop the gears for long enough to inflict serious pain.

Is healthcare more of a human right than food, when a quarter of US children are food-insecure. Is healthcare more of a human right than housing, when families with kids wait for months for shelter beds in San Francisco?  What about education?

We need to stop asking for our needs to be on the table.  We need to kick the table over.[56]


[7] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 26, Section 3201, “Medicare Advantage Payment”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[8] The Commonwealth Fund, “Timeline for Health Care Reform Implementation: System and Delivery Reform Provisions,” April 1, 2010, Accessed Sept 15, 2010, listed under “2011, Medicare Advantage”

(Available in cached version at http://tinyurl.com/29cqu4e )

[9] Kaiser Family Foundation, “Medicare Advantage Fact Sheet,” September, 2010,
(Available at http://www.kff.org/medicare/upload/2052-14.pdf ), also

Health and Human Services, Testimony on Medicare Advantage to House Subcommittee on Health, March 21, 2007, (Available at http://www.hhs.gov/asl/testify/2007/03/t20070321a.html )

[12] Kaiser Family Foundation, “Medicare Advantage  Fact Sheet,” April 2009,

(Available at www.kff.org/medicare/upload/2052-12.pdf )

[14] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 27, Section 3401, “Market Basket Revisions and Productivity Adjustments”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[15] Centers for Medicare & Medicaid Services, “Actual regulation market basket updates,” July 29, 2010

(Available at http://www.cms.gov/MedicareProgramRatesStats/downloads/mktbskt-actual.pdf )

[16] Congressional Research Service, “Medicare Provisions in PPACA (P.L. 111-148),”  April 21, 2010, p. 88, Appendix B.  (Available at http://www.aahsa.org/WorkArea/DownloadAsset.aspx?id=11313 )

[17] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010, p. 27, Section 3401 “Market Basket Revisions and Productivity Adjustments,” (Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[18] West Johnson  and Gordon Mountford, “Key Healthcare Reform Initiatives – Medicare Market Basket Productivity Adjustments,”  August 12, 2010.

(Available at http://tinyurl.com/2w2vnda )

[21] Centers for Medicare & Medicaid Services, “Estimated Financial Effects of the ‘Patient Protection and Affordable Care Act,’ As Amended,”  (April 22, 2010), p. 9-10

(Available at http://tinyurl.com/2cw2e2e )

[22] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 26, Section 3133, “Improvement to Medicare DSH Payment”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[23] Congressional Research Service, “Medicare Provisions in PPACA (P.L. 111-148),”  April 21, 2010, p. 9.
(Available at http://www.aahsa.org/WorkArea/DownloadAsset.aspx?id=11313 )

[26] The Dartmouth Atlas of Healthcare, a project of Dartmouth Institute for Health Policy and Clinical Practice

(Available at http://www.dartmouthatlas.org/ )

[27] Dartmouth Institute for Health Policy & Clinical Practice, “Reflections on Geographic Variations in U.S. Health Care,” May 12, 2010, p. 3

(Available at http://www.dartmouthatlas.org/downloads/press/Skinner_Fisher_DA_05_10.pdf )

[29] Personal observation at a talk by Dr. George Lundberg on reducing medical costs, Monday, July 12, 2010, Commonwealth Club, San Francisco.  Also see George Lundberg, “How to Rein in Medical Costs, RIGHT NOW,” August 11, 2010, (Available at http://tinyurl.com/oowxb2 )

[32] Dartmouth Atlas, “About Us.”

(Available at http://www.dartmouthatlas.org/AboutUs.aspx )

[35] Foley & Lardner, “Health Care Legal News Alert,” (May 2010), p. 1

(Available at http://www.foley.com/abc.aspx?Publication=7151 )

[36] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 2, Section 3025, “Hospital Re-Admissions Reduction Program”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[37] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 25, Section 3008, “Payment Adjustment for Conditions Acquired in Hospitals”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[38] Centers for Medicare & Medicaid Services, ”Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as Amended,” April 22, 2010,  Table 3, page 28, Section 3403, “Independent Payment Advisory Board”,

(Available at https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf )

[39] Timothy Stoltzfus Jost, “The Independent Payment Advisory Board,” (April 28, 2010), slides 3 and 4

(Available at http://www.fresh-thinking.org/docs/workshop_100504/Jost_4_28_2010.ppt )

[41] Timothy Stoltzfus Jost, “The Independent Payment Advisory Board,” (April 28, 2010), slides 7 and 8

(Available at http://www.fresh-thinking.org/docs/workshop_100504/Jost_4_28_2010.ppt )

[44] Fierce Healthcare, “Specialty Physicians Support Senate Bill to Repeal the IPAB,” (July 27, 2010)

(Available at http://tinyurl.com/2dplc4y )

[47] Foley & Lardner Legal Newsletter: Health, “PPACA Will Drive Quality Health Care Reform,” “National Pilot Program on Payment Bundling”

(Available at http://www.foley.com/publications/pub_detail.aspx?pubid=7141 )

[48] Foley & Lardner Legal Newsletter: Health, “PPACA Will Drive Quality Health Care Reform,” “Medicare Shared Savings Program — Accountable Care Organizations (ACOs)”

(Available at http://www.foley.com/publications/pub_detail.aspx?pubid=7141 )  and

Congressional Research Service, “Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline,” June 30, 2010, p. 31

(Available at http://www.aamc.org/reform/summary/crstimeline.pdf )

[49] National Healthcare Reform Magazine, “Bending the Curve(s),”  (August 3, 2010)

(Available at http://healthcarereformmagazine.com/article/bending-the-curve-s-.html )

[55] Boston Globe, “Held hostage by the health system,” (May 23, 2009)

(Available at http://tinyurl.com/oosgxs )

[56] Michael Lyon,” Health Reform? Off The Table,” (March 23, 2010)

(Available at http://wp.me/p3xLR-nL )


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