Obama Says Health Care Overhaul Must Be Enacted This Year

By Alex Wayne, CQ Staff

 March 5, 2009 -- President Obama said Thursday that he wants an overhaul of the nation's health care system completed by the end of the year, calling it a "fiscal imperative" vital to restoring the economy.

In opening remarks to a "Forum on Health Reform" that he hosted at the White House, Obama told an audience of about 150 lawmakers, health care industry lobbyists, labor union leaders, consumer advocates, policy experts and journalists that his administration and Congress must overcome "special interests" that have prevented sweeping health care overhauls in the past. Many of those same special interests had representatives at the forum.

Obama said that circumstances are different from the last time a full-scale health care overhaul was attempted in 1993-94 by President Bill Clinton. That effort failed, done in by fierce lobbying against it by insurers and businesses, and a lack of commitment within Congress, including among members of Clinton's own party.

"This time, the call for reform is coming from the bottom up, from all across the spectrum—from doctors, nurses and patients; unions and businesses; hospitals, health care providers and community groups," Obama said. "It's coming from mayors, governors and legislatures—Democrats and Republicans—who are racing ahead of Washington to pass bold health care initiatives on their own. This time, there is no debate about whether all Americans should have quality, affordable health care—the only question is, how?"

Obama has proposed spending $634 billion over the next 10 years as a "down payment" on a health care overhaul. He has left the details of such legislation to Congress, where Democratic leaders say they hope to move a bill to the House floor, at a minimum, before the August recess.

Broad Goals

In his fiscal 2010 budget outline, Obama said an overhaul plan should reduce in the health care system as a whole while improving the quality of care and expanding insurance coverage to most or all Americans.

In his fiscal 2010 budget outline, Obama said an overhaul plan should reduce costs in the health care system as a whole while improving the quality of care and expanding insurance coverage to most or all Americans.

Democratic lawmakers are drawing up plans that generally would expand public programs like Medicaid to cover more low-income Americans while providing subsidies for people with higher incomes to buy health insurance if they lack it.

Many Democrats would like to mandate that individuals buy insurance and employers provide it. Republicans generally would prefer to provide tax credits or other tax incentives to individuals to encourage them to purchase health insurance. Many Republicans oppose mandating coverage. Some Democrats want to create a new insurance program run by the government to compete with private insurance; many Republicans and private insurers oppose such a plan.

"Not all of the Democrats' ideas are objectionable. Just nearly all," said a skeptical Rep. Joe L. Barton of Texas, the ranking Republican on the Energy and Commerce Committee, which will write part of any overhaul.

Obama has been careful not express a position on any of those issues.

"He's been very good about not drawing lines in the sand," said Chris Jennings, a health care policy expert who was Clinton's top adviser on the subject. "He's not going to send any 'my way or no way' signals."

There is certain to be long and emotional debate about any proposals to reduce costs in the health care system. Already, some Republicans have criticized proposals for the government to underwrite studies to determine which drugs, medical procedures and devices are most effective, research that would produce winners and losers.

Obama supports such "comparative effectiveness research" and has proposed in his budget to change the way hospitals, drug companies, home health care agencies and others are paid under Medicare and Medicaid, in ways that would reduce costs in those programs by tens of billions of dollars. He has also proposed sharply reducing payments to managed care plans in Medicare run by private insurers, which his budget projects would save $177 billion over 10 years.

Participants at the health care forum, according to background information provided by the White House, "will be asked to work together and offer up ideas to bring down costs and increase coverage for all Americans.

The forum was scheduled to run from 1 p.m. until 4 p.m.

Obama Nominates Sebelius to Health and Human Services

By Drew Armstrong, CQ Staff

March 2, 2009 -- President Obama's cabinet, and his team to push health care reform, took one step closer to completion Monday when he officially nominated Kansas Gov. Kathleen Sebelius as secretary of Health and Human Services.

"Kathleen... knows health care inside and out," said Obama, announcing the pick. "Fixing what's wrong with our health care system is no longer just a moral imperative, but a fiscal imperative," said Obama, calling Sebelius "critical to that effort."

The Department of Health and Human Services oversees programs such as Medicare and Medicaid, the Food and Drug Administration, the National Institutes of Health and a constellation of other public health and welfare agencies, responsible for nearly $80 billion in discretionary spending and hundreds of billions more through entitlement programs. Obama's budget proposal, issued last week, also set aside a $634 billion fund over 10 years to pay for health care overhaul.

Obama also named Nancy-Ann DeParle director of the White House Office of Health Reform, a post Obama created specifically to help push his overhaul efforts. She will also have the title of "counselor to the president." Obama called DeParle "one of the nation's leading experts on health care and regulatory issues."

Obama also used the announcement to keep beating the drum for overhaul. "The odds are long, it's failed too many times. . . . That's the conventional wisdom," Obama said. "I didn't come to Washington to take the easy route."

DeParle was administrator of what is now the Centers for Medicare and Medicaid Services in the Clinton administration, and has also worked at the Office of Management and Budget.

She is a managing director at the investment firm CCMP Capitol, a New York-based private equity fund, heading up its health care division. According to CCMP's web site, the firm has active investments in several health care companies, including a hospital company and several other medical services companies, including one company that runs a Medicare Advantage plan—a private–sector version of Medicare funded by the government and long attacked by Democrats.

The company, CareMore Medical Enterprises, is a Los Angeles-based firm that runs private Medicare programs known as Medicare Advantage. Medicare Advantage plans are paid by the government as a private-sector alternative to traditional Medicare. Obama and Democrats have promised to cut payments to the plans in order to pay for health care overhaul efforts.

Another company, National Surgical Care, specializes in developing for-profit surgical centers owned by physicians, hospitals and investors. Some congressional Democrats, notably Rep. Pete Stark of California, have tried to strictly curtail physicians' ability to own such hospitals and surgical centers.

Obama's choice of Sebelius won praise from senators, who must confirm the nomination.

"Gov. Sebelius is a strong choice for Health and Human Services secretary," said Senate Finance Committee Chairman Max Baucus, D-Mont., who was at the White House with Obama for the announcement. "Passing comprehensive health care reform is an absolute imperative this year, and as a former insurance commissioner Gov. Sebelius really gets what needs to be done."

And Sebelius has already won the backing of two of the Senate's more conservative Republicans, fellow Kansans Sam Brownback and Pat Roberts. The two issued a joint statement over the weekend praising the pick, though not administration policy.

"Obviously we will have different viewpoints than the administration on many issues including health care reform especially given the huge price tag," said the senators. "We look forward to talking with Governor Sebelius about the details of the president's plan," they said.
Roberts sits on the Senate Finance Committee, which will hold Sebelius' confirmation hearing, as well as the Health, Education, Labor and Pensions Committee, which will also have a hand in any health care overhaul legislation.

Sebelius' confirmation will first go before the Finance Committee before proceeding to the full Senate. "We'll go through our regular vetting process for nominees and announce a hearing when that's complete," said committee spokeswoman Carol Guthrie.

The administration is already stocked with aides who can be considered health care overhaul experts. OMB Director Peter Orszag is a health care expert who made study of overhaul options a priority while he was director of the Congressional Budget Office. And academic Jeanne Lambrew is second in command at the White House Office of Health Reform.

As governor, Sebelius has called for universal health care, a major theme for Democrats during the 2008 presidential campaign. "We must commit ourselves to universal coverage, improved quality of care, and increased affordability," she said in her Jan. 10, 2007, state of the state address. No such program was enacted.

Before she was elected governor of Kansas in 2002, Sebelius was the state's insurance commissioner for eight years. In that job, she fought a major battle with the health insurance industry. In 2001, Indiana-based health insurer Anthem announced it would buy Blue Cross Blue Shield of Kansas. Unlike private, for-profit health insurers, Blue Cross Blue Shield of Kansas is owned by its state policy holders.

Though Blue Cross Blue Shield of Kansas' members approved the sale to Anthem, Sebelius used her power as insurance commissioner to block the move, taking the fight all the way to the state supreme court, where she eventually prevailed.
Sebelius is Obama's second pick to head HHS. His original choice, former Senate Majority Leader Tom Daschle (1987–2005), was forced to withdraw after revelations that he had paid $140,000 in back taxes and interest in early January.

Obama Appoints Savvy Insider to Key White House Health Post

March 2, 2009 -- In appointing Nancy-Ann DeParle to head his Office for Health Reform, President Obama is getting a consummate health policy insider who knows not only key federal health programs, lawmakers, health aides, health policy wonks, reporters, and the budget process but also the health industry.

DeParle's ties to industry could evoke the firestorm of criticism that engulfed the nomination of Tom Daschle to become Health and Human Services Secretary, but it also gives her an edge in bringing an industry perspective into the conversation over revamping the health care system. Unlike Hillary Rodham Clinton when she headed the White House health overhaul effort in the Clinton administration, DeParle is unlikely to be at loggerheads with a health care industry angry that it has been shut out of the process.

DeParle did not immediately respond to an email message Monday seeking comment.

DeParle's health policy career in Washington includes stints at the White House Office of Management and Budget overseeing federal health care budgets, her service administering the Medicare and Medicaid programs and several years serving on the Medicare Payment Advisory Commission (MedPAC). She also is familiar with health care issues from the perspective of the states.

Obama praised DeParle as "one of the nation's leading experts on health care and regulatory issues" in announcing her appointment Monday along with his nomination of Kansas Gov. Kathleen Sebelius to become secretary of the department of Health and Human Services.

Obama said of DeParle: "As commissioner of the Department of Human Services in Tennessee, she saw firsthand our health care system's impact on workers and families. In the Clinton administration, she handled budget matters for federal health care programs and took on the tremendous task of managing Medicare and Medicaid."

As administrator of the Health Care Financing Administration, which later became the Centers for Medicare and Medicaid Services, DeParle faced enormous administrative challenges implementing the sweeping changes in the Medicare payment system required under the 1997 Balanced Budget Act. She also had the job of assuring that Medicare and Medicaid payment systems wouldn't crash because of the "Y2K" glitch that required a major review of software systems as the millennium approached.

DeParle's ability to work tirelessly and to prioritize and focus under heavy pressure allowed her to meet both challenges. In doing so, she earned the goodwill of key Republicans in the GOP-controlled Congress, such as then House Ways and Means Health Subcommittee Chairman Bill Thomas, R-Calif. DeParle also worked with Republicans on the Hill in the successful launch of the State Children's Health Insurance Program.

Her administrative and political skills and ties to academia could be strong assets in negotiating something so delicate, complex and massive as an overhaul of the U.S. health system. Her academic credentials include a degree from Harvard Law School and a degree in politics, philosophy and economics from Oxford University.

DeParle fits the Obama pattern of appointing left-leaning, business-savvy pragmatists. She counseled fellow Democrats hostile to the Bush administration Medicare prescription drug proposals to go along with the new benefit, saying its flaws could be improved later. DeParle has served on the board of various companies at the center of innovation and private sector cost control, according to Bloomberg News, such as the pharmacy benefits manager Medco Health Solutions, the health information technology company Cerner Corporation and the heart device maker Boston Scientific Corp.

She also has served as managing director of the investment firm CCMP Capitol, a New York -based private equity fund, where she headed up its health care division. The fund has investments in CareMore Medical Enterprises, a Los Angeles-based firm that runs private health plans in Medicare; and National Surgical Care, which develops for profit surgical centers owned by doctors.
DeParle may face criticism from the left or from watchdog groups for her connections. Daschle's nomination began to founder because of unpaid taxes but also because of fees he received from speaking to health care organizations and his work as a special public policy advisor for clients of the Washington, D.C. firm Alston & Bird.

Like Daschle, DeParle wasn't a lobbyist and so complies with the Obama directive against hiring employees who had lobbied Congress or the federal government in the previous two years. But her service on the board of companies is likely to raise questions about what compensation she received. Unlike Daschle, DeParle's appointment will not have to be confirmed by Congress.

Initial reaction to DeParle's appointment from the left was favorable. "Nancy-Ann DeParle's extensive experience with health and budget issues, her relationships on the Hill, and her relationships within the Administration make her a great pick to head the new White House Office for Health Reform," House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif, said in a news release Monday.
Roger Hickey, co-director of the left-leaning Campaign for America's Future, said "Nancy Ann DeParle, with her experience in state health programs and as director of the Health Care Financing Administration in President Clinton's administration, clearly has the experience and health care expertise to help the president win what the American people voted for – quality affordable health care for all."

Dan Mendelson, who served as Clinton's top budget official overseeing federal health programs, said of DeParle's corporate ties, "she worked in those organizations from a business standpoint" on issues such as governance and compensation. "You are not advising the company on getting things through Congress" in such a role, Mendelson said.

White House Press Secretary Robert Gibbs said when asked whether DeParle's board service was a conflict of interest, "the White House has confidence in her and her abilities as part of the health care reform effort here."

Another White House official who spoke on background said DeParle "does not need a waiver" from Obama's ethics policies. "She wasn't a lobbyist," the official said, adding that the White House has "full confidence" in her compliance with the ethics policy. The official late Monday could not provide any information regarding DeParle's board compensation.

The official added that DeParle would recuse herself from any meetings involving the companies with which DeParle has had financial ties and that she is ending her connection to those companies and with the private equity firm. While DeParle's role would entail bringing in a wide range of viewpoints and ideas, the official downplayed her role in meeting with industry groups, saying she would lead interagency efforts on health reform, coordinating the work of HHS, the White House National Economic Council and the White House Office of Management and Budget.

Mary Agnes Carey contributed to this report.

MedPAC Backs MA Cuts Relating to Coding Behavior

By John Reichard, CQ HealthBeat Editor

March 6, 2009 -- The Medicare Payment Advisory Commission is backing a proposal by Medicare officials to trim payments to private health plans to adjust for the way they assign "risk scores" used to vary reimbursement based on how sick an enrollee is.
The lobby that represents the plans says that the proposal goes too far, and would have the effect of lowering rates 3.74 percent below what they otherwise would be.

Medicare carries out a process known as "risk adjustment," which is meant to avoid overpaying plans that have unusually large numbers of healthy enrollees and to avoid underpaying those with a disproportionate number of sick enrollees. The process involves assigning risk scores to enrollees.

The Centers for Medicare and Medicaid Services (CMS) wants to adjust the risk scores to reflect the difference between coding practices in the private health plan side of Medicare, known as Medicare Advantage (MA), and the traditional fee-for-service (FFS) side. The Medicare Payment Advisory Commission (MedPAC) says that what CMS is proposing is consistent with the law.

"When payment systems change and the amount providers or plans will be paid is affected by changes in their behavior to emphasize more coding and documentation, adjustments to the payment system are necessary to maintain the integrity and accuracy of the payment system," MedPAC said in a March 5 letter commenting on the CMS proposal.

MedPAC estimates that MA plans receive payments on average that are 14 percent higher than payments to providers in traditional Medicare. The commission says that the coding changes would not lower that 14 percent differential. "The differences in coding practices between MA and FFS that CMS has identified result in payments beyond the 14 percent by which MA payments currently exceed FFS," the MedPAC letter says.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said MA plans do a better job than traditional Medicare of identifying patients with chronic illnesses and should not be penalized as a result. AHIP also is concerned about how quickly CMS would phase in cuts from the adjustment for coding behavior, he said.

According to the MedPAC letter, "CMS found that even after controlling for patient characteristics, risk scores were persistently higher for beneficiaries in MA."

Medicare Advantage plans are bracing for lower-than-expected payments next year.

Waxman Predicts Panel Will Okay Overhaul by August

By John Reichard, CQ HealthBeat Editor

March 3, 2009 -- House Energy and Commerce Committee Chairman Henry A. Waxman, D-Calif., said Tuesday that he expects the panel to approve health overhaul legislation before the August recess and that he would meet later in the day with the chairmen of two other key committees to coordinate efforts.

Waxman made the comments in response to questions following his speech at a Washington, D.C. conference sponsored by the Federation of American Hospitals in which he urged for-profit hospitals to help him put together legislation that can get through Congress. "You can be and must be our partners in this endeavor and I look forward to working with you," Waxman said. "I commit to you we will work with all of you" to create legislation that works.

Waxman said in his remarks to the hospital executives that he, along with House Ways and Means Committee Charles B. Rangel, D-N.Y., and House Education and Labor Committee Chairman George Miller, D-Calif., are "all working hard and are determined to pull in the same direction" on a health overhaul. Energy and Commerce has jurisdiction over the Medicaid program and State Children's Health Insurance Program and shares jurisdiction over the Medicare program with Ways and Means, which also would handle tax issues relating to an overhaul. Education and Labor handles issues relating to health benefits offered by self-insured corporations.

Waxman said after his speech that there may be differences at the committee level in terms of legislation but predicted that a unified bill would be ready in time for House floor action. He offered no specifics on when he would unveil an Energy and Commerce Committee proposal or on its provisions. "You're asking me questions I don't know the answer to," Waxman said when asked whether a public plan option would set a fee schedule for providers, for example.

Separately Tuesday, Senate Finance Committee Chairman Max Baucus, D-Mont., said he hoped to have a health overhaul bill on the Senate floor by June or July, even as he acknowledged the complexity of the legislative task before him.

Waxman repeated earlier statements praising President Obama for urging an overhaul that builds on the existing system and allows Americans to keep the coverage they have. And he reiterated earlier assertions that the proposal must offer Americans a choice between signing up for coverage in private plans and in a government-run plan.

The overhaul should build on employer-sponsored coverage, the Medicare program for seniors, and Medicaid and the State Children's Health Insurance Program for lower-income Americans, Waxman said. Medicaid meets needs that "quite frankly" will never be adequately met by private health plans, he added.

Rather than pick a system in which the uninsured could only select private plans or a government-run plan, "there has to be a significant role for both," he said. That's the best way to avoid gridlock between those who favor a single-payer, government-run system and those who want a private-sector based system, according to Waxman.

The California Democrat praised Obama's proposal for a reserve fund setting aside some $630 billion over 10 years as a down payment on a universal coverage system. "When it covers half the funds you need you've got a fiscally responsible approach," he said.

Obama would come up with the $630 billion by reducing the value of tax deductions for those with incomes more than $250,000 a year, cutting payments to private health plans offered by Medicare in the Medicare Advantage program, raising premiums paid by affluent Americans for Medicare prescription drug coverage and reducing federal outlays under current law for hospitals, home health agencies, medical imaging and pharmaceutical companies.

Waxman said he realizes these are "difficult policies for many," and that he doesn't like all of them himself. But given the goal of universal coverage he is willing to listen to them, he said. Asked later whether there were any specific cuts he would oppose, Waxman said, "none that I can single out at this point."

Obama's outline leaves it up to Congress to come up with another $600 billion or so to fund universal coverage. Waxman was non-committal about how that could be done but in comments after his speech didn't rule out tax code changes such as limiting the deductibility of employer-paid health insurance premiums in counting individual income and additional cuts in payments to providers. Waxman said there would not necessarily be added provider cuts. Asked about deficit financing, he said, "that's a big issue. I think we're going to have to pay for it," he said of overhaul provisions.

Waxman got a warm introduction from Federation of American Hospitals President Chip Kahn. "He's a man who cares about those most in need," Kahn said of Waxman. And Kahn expressed confidence that Waxman can lead the nation to an overhaul "we all can be proud of."

Democratic Leaders Discussing Budget Reconciliation Option

By David Clarke, CQ Staff

March 5, 2009 -- House Majority Leader Steny H. Hoyer said Thursday that House and Senate Democratic leaders are discussing whether to use the filibuster-proof budget reconciliation process to move major elements of President Obama's agenda this year.
At the top of that list are the president's health care overhaul and his climate change proposal, which would impose a cap on carbon dioxide emissions and then sell emission permits that companies could use or trade. A Hoyer aide said changes to federal student loan programs also are on the list.

The Maryland Democrat emphasized that no decisions have been made, and that leaders have just begun discussing how to proceed a week after Obama released a preliminary fiscal 2010 budget blueprint. A more detailed budget will be released in April.

"I think it would overstate to say that we're urging them to do that," Hoyer said of House leaders' discussions with their Senate counterparts over whether to use the reconciliation process "It would not overstate to say this is the discussion so that we can facilitate the adoption of policies that we think are important in a procedural way in the Senate that can be effective."

Under the budget reconciliation process, legislation affecting tax and mandatory spending programs can be moved through the Senate by a simple majority vote, rather than the 60 votes needed to overcome a filibuster. That is an appealing prospect for Democrats, who would have to hold all 58 of their senators in line and win over at least two Republicans to advance Obama's agenda by the normal legislative process. With Edward M. Kennedy, D-Mass., battling brain cancer, they probably would need three Republicans for most votes.

Senate Hesitation
Since taking back control of Congress in 2007, House Democrats have often been frustrated by the ability of the GOP minority in the Senate to block or dilute Democratic legislation.

But some key Democrats in the Senate are hesitant to use reconciliation to get around this problem. Senate Finance Chairman Max Baucus, D-Mont., has said he would prefer not use it to advance health care legislation because he wants as much bipartisan support as possible for that initiative. If Democrats use reconciliation and therefore only need 51 votes to advance the bill, they are likely to make fewer concessions to Republicans—and to draw few if any GOP votes as a result.

"Easy is not always best," Baucus said. "It becomes partisan, and if it becomes partisan, even if you get a partisan solution, it tends not to be lasting. You can jam something down somebody's throat ... but the point is it's by far better to be inclusive than exclusive."
Senate Budget Chairman Kent Conrad, D-N.D., said he has been resisting use of reconciliation for health care or climate change legislation, arguing the process was designed to move bills whose primary purpose is to reduce the deficit.

Obama laid out an aggressive agenda last week that will be difficult to achieve, but congressional Democrats plan to move as much of it as possible this year.

"The president has put forward a very ambitious—not unrealistic, but ambitious—proposal. He has done so consistent with what he has told the American people," Hoyer said.

Budget Timing
The House plans to consider the fiscal 2010 budget resolution the week of March 30, Hoyer said.

The resolution is a blueprint that does not become law but sets the cap on discretionary spending—the funding controlled by the Appropriations panels—for the fiscal year and establishes the parameters for tax and mandatory spending policy. It also can include reconciliation instructions to any committee.

These provisions instruct a committee to produce legislation by a certain time that would impact revenue or mandatory spending levels. That legislation, which can address a variety of policy issues so long as it meets the tax or spending targets, can then be moved on the Senate floor without threat of a filibuster.

Hoyer said he expects the House to move an energy bill before the Memorial Day recess but was not sure that it would include the administration's cap-and-trade proposal.

He said the target for moving a health care overhaul through the House is before the August recess, and that Democratic leaders in both chambers want to work together closely on the legislation so that the House doesn't pass a bill that would be rejected by the Senate.
Hoyer said he did not think the budget produced by the House would show lower deficits than what the Obama administration has projected over 10 years. He said the unique economic situation would make it difficult to do so, and that he expects deficit hawks in his own party, including the 51-member Blue Dog Coalition, will not balk if the congressional budget does not attack the deficit more aggressively than the administration's plan.

"I think most of the members understand it will be difficult to get better numbers than are projected," he said. "The Blue Dogs are pragmatic realists who have a principle of getting to balance that I share passionately but also a realistic understanding of how you can get there politically and fiscally."

Drew Armstrong contributed to this report.