By John Reichard, CQ HealthBeat Editor

January 28, 2011 -- It's pretty clear by now that worries over deficit spending are going to frame Washington's big policy debates in the coming year. And health care is at the top of the list.

Already, cost issues have dominated discussions over changing parts of the new health law—or getting rid of it altogether. That's because supporters of the law argue that it will save money over the long run, and opponents say the law will add to the government's health care spending.

And beyond that, there are several more places where the deficit debate is expected to be intertwined with health care. We can also expect talk of taxing health care benefits, restructuring Medicare and overhauling all of health care to be based on a "defined contribution system"—which essentially means less generous health benefits.

Congress won't act on any of this soon. But debate helps to set the boundaries around what is likely to happen eventually, and lawmakers have indicated the issue is at the top of the agenda. "Let's put it very simply," said Paul D. Ryan, the marquee man of GOP fiscal policy, on Jan. 26 at his first hearing as House Budget chairman. "Our fiscal problem is a health care problem. Health care spending is driving the explosive growth in our spending and in our debt."

Democrats say big tax breaks for the wealthy and high levels of defense spending have much to do with the growing debt crisis, but they don't deny that the issues of deficit reduction and health care will intersect in a big way in the new Congress.

At a recent policy forum on health care, Chris Jennings, the top health policy adviser in the Clinton White House, and Dean Rosen, who was a top health policy aide to Bill Frist when Frist was Senate Majority Leader, said they already are hearing that message every day from lawmakers.

"When you look a lot of members in the eye, as Chris and I both do, they will tell you that a lot of them don't care if they don't get re-elected," said Rosen. "This is a significant issue for them. They just do not think that we can continue to prosper and survive as a country unless we can keep our deficit spending under control."

Meanwhile, the back and forth on the fiscal impact of the law continues. The day after the president's State of the Union address, Ryan ushered experts into his hearing room to topple public confidence in a Congressional Budget Office estimate that the law would cut the deficit by $230 billion in 10 years and by well over a trillion dollars in 20 years.

If they are right, and CBO's estimate is wrong, scrapping the law may really keep deficit spending from growing worse. But Republicans go further, saying that repealing the law would actually reduce deficit spending, not just keep it from getting worse. Instead of financing expanded health coverage, they say the $500 billion in Medicare cuts in the law can be applied to deficit reduction.

But Jennings says that's an illusion, because hospitals and other providers only agreed to those cuts because they'd make up the losses by having more insured customers. They would block any effort to apply the Medicare cuts to deficit reduction. "How many providers are going to say, 'thank you, cut me, and don't reinvest in coverage expansion'? I mean they're going to be furious," Jennings says. "There's just no way that's a sustainable political policy."

Beyond the Repeal

Rosen agrees that cuts in Medicare and Medicaid payment rates set by the government won't be the ticket to deficit reduction. So what will be on the table?

"Tax reform will be a piece of it," he says. That includes ending or capping "the exclusion"—the provision that excludes employer-paid insurance premiums from an individual's taxable income. Doing so would raise revenue and prod workers to pick plans that have lower premiums and don't overpay for services, advocates say.

He also says significant changes to Medicare and Medicaid should be part of the debate. "The interesting question is whether we do say for the first time ... we just can't afford the Medicare program as it's structured now. We're going to have to look at something that does look different for people who are younger," Rosen said.

Ryan's "Road Map" for deficit reduction would keep Medicare as is for most baby boomers. But when Americans 54 and younger became eligible for Medicare they'd be given vouchers for a fixed sum to choose among competing private plans. Market forces, not the government, would dictate payments to doctors and hospitals.

The right-leaning American Enterprise Institute, along with George W. Bush administration health budget official James C. Capretta, is backing this fixed-dollar approach as part of a 'Beyond Repeal and Replace' project. The idea: Medicare, Medicaid, and private insurance should be based on "defined contributions," not a promised package of "defined benefits." Payers would decide what they could spend, not just pay whatever benefits cost. "Instead of planning for disaster, you could plan for solvency," Capretta told a recent AEI forum. Each American would get a refundable tax credit to buy coverage financed by ending the exclusion.

It's all politically unthinkable, of course. But that's what deficit reduction is.

By Jane Norman, CQ HealthBeat Associate Editor

January 28, 2011 -- Exactly one year ago, Democratic Sen. Al Franken had the unenviable job of urging health care advocates at the annual Families USA conference to keep their spirits up as they contemplated a bleak landscape in Congress for passage of a health care overhaul. It wasn't a celebration but it wasn't a funeral, either, Franken told them.

The scene could not have been more different, when President Obama addressed a cheering, applauding, ecstatic throng at the conference and thanked them for their work in seeing the health care law enacted. "I couldn't be prouder of you," he told them. "This is making a real difference for families across this country as we speak."

Despite the celebration for real this time around, Obama's remarks also came as Republicans in Congress are pushing very hard to repeal, rewrite and defund the law, and attack it specifically on the close-to-home question of health care costs. Republicans and the insurance industry contend the law does little to control premium increases, and they're hoping that message gets through to Americans looking at health insurance bills that never seem to go down.

The administration says that the law indeed will control costs for consumers and businesses across the board—at the same time it expands access to millions of the uninsured and extends new consumer protections. The Department of Health and Human Services (HHS) issued a report to drive home the point using, in part, a 2009 Congressional Budget Office (CBO) letter.

"This law will lower premiums. It is limiting costs," Obama told the conference. "It is reining in the worst abuses of the insurance industry with some of the toughest consumer protections this country has ever known."

As in his State of the Union address, he poked fun at the claims of critics. "You may have heard once or twice this is a job-crushing, granny-threatening, budget-busting monstrosity," said Obama. "That's about how it has been portrayed by opponents. And that just doesn't match up to reality. I mean, this thing has been in place now for 10 months, right?"

Estimates from the Business Roundtable, a group of corporate CEOs, are that the overhaul could save large employers $2,000 to $3,000 per family a year, said Obama, statistics used earlier in the week by administration officials at congressional hearings. And he said that "health reform is part of deficit reform," a line that drew applause, because it will slow cost increases in Medicare and Medicaid. Repeal would "send middle-class premiums up, would force large employers to pay that $2,000 to $3,000 per worker, and shift control of your health care right back to the insurance companies," he said.

Republicans pushed back on Obama's remarks and on the report. Ways and Means Committee Chairman Dave Camp, R-Mich., said that the report "would be laughable if it wasn't so disingenuous." Camp said that if administration officials were interested in reports they should circulate the findings of Centers for Medicare and Medicaid Services (CMS) Chief Actuary Richard Foster, who's predicted that national health care spending will rise under the law. Camp also said the same CBO letter cited by HHS for its report said premiums will increase, because insurance policies people will be required to buy will offer a richer package of benefits.

In addition, Senate Republicans sent out a list of news articles citing highly publicized, double-digit premium increases this year in California, Iowa, Connecticut and Washington. Administration officials say health care costs have been on the rise for years and such proposals are a continuation of the trend.

And Sen. Michael B. Enzi, R-Wyo., the top Republican on the Senate Health, Education, Labor and Pensions Committee, said the HHS report ignored CBO's bottom line conclusion that premiums will rise.

Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP), said in a statement that the new law will expand coverage to millions of Americans but doesn't address the crisis in health care costs. "Reducing health care cost growth is one of the most important economic challenges facing the nation," Ignagni said.

Obama told the Families USA crowd that the law may need a "tweak," and he's willing to work to correct a "flaw" such as the 1099 tax-reporting requirement. He's also "open to other ideas, including patient safety innovations and medical malpractice reform," he said. Aides say the reference to safety innovations was in connection to reduction of medical errors, which would reduce the number of lawsuits in the first place. Pilot projects funded by HHS are looking at prevention of medical errors.

But as in the State of the Union address, Obama made it clear there's only so far he will go and it doesn't include repeal. "I'm not open to efforts that will take this law apart without considering the lives and livelihoods that hang in the balance," he said.

By Jane Norman, CQ HealthBeat Associate Editor

January 28, 2011 -- In advance of a speech by President Obama on the health care law, Health and Human Services officials released a new report that says families will save on premiums as well as out-of-pocket costs.

The issue is key as congressional debate over whether to repeal the law continues and as lawsuits filed against it move through federal courts. Without some kind of slowing in health care costs for both individuals and businesses, it will be difficult for proponents to continue to argue that the law is necessary or that it's the right approach.

Based on Congressional Budget Office (CBO) projections, "In 2014, annual premiums are projected to fall compared to what they would have been without the Affordable Care Act," the HHS report says. "Without health reform, American consumers and businesses would face higher premiums, fewer insurance choices, and rapidly rising health care costs."

The president is scheduled to speak to a national conference of Families USA, an advocacy group that has been a strong ally of the administration during the legislative process and as implementation has begun.

The report comes after a week in which two House committees held oversight hearings critical of the law and a third session before the Senate Health, Education, Labor and Pensions Committee included yet more salvos from Senate Republicans. Democrats are turning to their allies such as the grass-roots network in the states developed by Families USA to help them shape their defense of the law.

The report says that when exchanges are up and running in 2014, a family of four with an income of $33,525 could save as much as $14,900 a year in health care costs because they would qualify for tax credits and reduced cost sharing.

The report also says that small businesses could save up to $350 per family on average because of lower costs through the exchanges and also might qualify for tax credits to offset the costs of health insurance. Large businesses that provide employer-sponsored coverage could save money because of lower health costs brought about by the law, the report says.

Republicans were strongly critical of the report. House Ways and Means Committee Chairman Dave Camp, R-Mich., said that the report would be "laughable if it wasn't so disingenuous." He said a CBO letter upon which the report is based predicted that premiums will rise because a better benefit package will be required for consumers.

Sen. Michael B. Enzi of Wyoming, the top Republican on the Senate Health, Education, Labor and Pensions Committee, said the CBO report showed the net impact of the health care law would be a 13 percent increase in premiums because of the mandated benefit package. "The argument that this new law will decrease premiums demonstrates either a lack of understanding of the CBO report or basic math," said Enzi.

And Karen Ignagni, president and CEO of American's Health Insurance Plans, said the document overstated cost savings and ignored other provisions that will increase premiums such as changes in age rating that will impact younger workers.

By Dena Bunis, CQ HealthBeat Managing Editor

January 26, 2011 -- When it came to health care, President Obama's remarks in the House chamber were predictable and safe.

He told his base that he would continue to defend against any attempts to beat back the health overhaul law, his signature domestic achievement. And he continued to throw familiar bones to Republicans: that he's behind fixing the 1099 tax-reporting requirement and willing to talk about changes to medical malpractice laws.

Obama segued from the section in the speech about reducing barriers to growth and investment to the short passage on health care with a dig at the insurance companies. "It's why we passed reform that finally prevents the health insurance industry from exploiting patients.

"Now, I've heard rumors that a few of you have some concerns about the new health care law,'' Obama said, without mentioning the R word. Instead of talking repeal he used two people in first lady Michelle Obama's box to make his point about why he wouldn't entertain a rollback of the law.

"What I'm not willing to do is go back to the days when insurance companies could deny someone coverage because of a preexisting condition,'' Obama said. "I'm not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered. I'm not willing to tell Jim Houser, a small-business owner from Oregon, that he has to go back to paying $5,000 more to cover his employees ... So instead of refighting the battles of the last two years, let's fix what needs fixing and move forward." The checkerboard seating arrangement of Republicans and Democrats was clear after that line as virtually every other lawmaker—Democrats—applauded.

"It is not surprising, but always reassuring, that the president reaffirms his conviction that we should build on, rather than destroy, the huge advances made by the Affordable Care Act,'' said Ron Pollack, head of Families USA, which has been battling for an overhaul bill for many years. Pollack said he believes Obama will expand on his State of the Union address when he talks to Families USA's Washington meeting on Jan. 28.

Longtime Washington hands agreed that the president played it safe.

"The law is contentious with the new House members, many of whom were elected in part because they said they would repeal the law,'' said Dan Mendelson, president of the Washington consulting firm, Avalare Health. "Dwelling on the Affordable Care Act would not have been perceived as a conciliatory bipartisan posture, which is what he struck in the speech overall."

Even though Obama gave no specifics about what he would be willing to accept when it came to revamping medical malpractice laws, America's trial lawyers did not like what they heard.

"As many as 98,000 people die every year from preventable medical errors, with countless more injured,'' American Association for Justice (AAJ) President Gibson Vance said in a statement. "President Obama should direct his focus towards tackling this startling figure, not promoting efforts that could eliminate the legal rights of patients." AAJ is the nation's largest trial bar group.

Also predictable was the portion of House Budget Chairman Paul D. Ryan's Republican response that dealt with health care.

"What we already know about the president's health care law is this: Costs are going up, premiums are rising, and millions of people will lose the coverage they currently have," Ryan, of Wisconsin, said in his prepared remarks. "Job creation is being stifled by all of its taxes, penalties, mandates and fees. Businesses and unions from around the country are asking the Obama administration for waivers from the mandates. The President mentioned the need for regulatory reform to ease the burden on American businesses. We agree—and we think his health care law would be a great place to start."

Pollack pushed back on the GOP message after reading Ryan's comments.

"It is beyond absurd that he talks about people losing health coverage due to the Affordable Care Act,'' Pollack said in an e-mail. "The House Republicans' repeal proposal would result in 32 million people unnecessarily remaining without health coverage."

Grace-Marie Turner, president of the conservative Galen Institute, said that Obama "had to acknowledge that his health plan is not popular after the House voted to repeal it. But he still sounds very stubborn in saying that he will only work with them to make coverage better and more affordable. Why didn't he do that in the first place? Of all the things the president talked about in his speech, health care is the thing they are going to have the hardest time finding common ground about. The Republicans have a very different vision of how you get to a more affordable, patient-centered system, and they can't build their plan on top of the infrastructure of the president's law that relies on government and central planning."

Ryan delivered his remarks from the Budget Committee hearing room. "Last week, House Republicans voted for a full repeal of this law, as we pledged to do, and we will work to replace it with fiscally responsible, patient-centered reforms that actually reduce costs and expand coverage,'' he said.

House committees already have begun that work. Last week the Judiciary Committee held a hearing on medical malpractice. Ryan's committee holds a hearing on the fiscal impact of the law and the Ways and Means Committee has a hearing on its the economic and regulatory impact.

By Lauren Smith, CQ Staff

January 27, 2011 -- Members of the Senate's new Social Security Caucus lambasted House GOP proposals to partially privatize Social Security and convert Medicare to a voucher system, which Democrats contend could be offered on the House floor as early as next month.

In a strategic move to link those proposals to Republican pledges to cut as much as $60 billion from the federal budget during the current fiscal year, four senators from the Democratic caucus argued that neither program is causing a fiscal crisis and that tinkering with their operation would dismantle entitlement programs on which millions of Americans depend.

"For anybody to come forward and say you've got to cut Social Security, you've got to privatize Social Security, you've got raise the retirement age because it's a crisis right now is just not true," said Sen. Bernie Sander, I-Vt.

Sanders, along with Democratic Sens. Charles E. Schumer of New York, Sherrod Brown of Ohio and Sheldon Whitehouse of Rhode Island, held the news conference.

Democrats have traditionally fought hard—and successfully—against Republican efforts to allow the diversion of Social Security payroll taxes into private, individual accounts. When President George W. Bush championed such a plan in 2005, congressional Democrats, their labor allies and AARP, the nation's largest seniors' organization, launched a furious campaign in opposition to his proposal. Many Republicans deserted the president, and the effort died.

Some of the current push to transform the programs dates from the "Roadmap for America's Future," which Rep. Paul D. Ryan, R-Wis., the new House Budget Committee chairman, released last year. His proposal, which has never been officially embraced by the GOP leadership, would shift the government-run Medicare program to a voucher system, requiring Medicare to make payments to seniors (initially averaging $11,000) to buy private insurance. It would raise the Medicare eligibility age from 65 to 69. As for Social Security, the Roadmap would offer workers younger than 55 the option of investing over one-third of their current Social Security payroll taxes in personal retirement accounts, similar to the Thrift Savings Plan available to federal employees.

House Republican Conference Chairman Jeb Hensarling, R-Texas, said that a privatization plan could come to the House floor as early as next month as part of the GOP budget and that he expects Republicans to support it.

"We're not crying wolf here," Schumer said. "This is a serious movement to undo the most successful government program of the 20th century that has huge and broad popularity."

According to a Gallup poll taken before President Obama's Jan. 25 State of the Union address, 61 percent of Americans said they oppose cuts to Medicare and 64 percent said they oppose cuts to Social Security.

"In their eyes, they think they're speaking for larger numbers than they are," Brown said of the GOP. "It's going to likely be a major thrust of the Republican effort this year."

Brown and Sanders said Democrats need Obama to take a more forceful role in the debate, with Brown calling on the president to be "combative" in order to beat back the Republican effort.

"Does this country have a serious deficit?" asked Sanders. "Yes we do; it's a real issue. But for people to come forward and say Social Security is collapsing and we've got to cut benefits tomorrow is totally untrue, and we will not let it happen."

By Rebecca Adams, CQ HealthBeat Associate Editor

January 28, 2011 -- A leading health care quality assessment organization, the National Committee for Quality Assurance (NCQA), will release updated standards to give health providers who operate medical home programs a guide to earning accreditation.

Certification by NCQA can serve to validate the providers to payers and to patients who are trying to figure out which medical services to use. The NCQA model is the nation's most widely-used medical home program. Its preferred medical home practices often have a significant influence on the behavior of providers, such as physician practices or clinics. The goal behind medical homes is to offer a coordinated strategy for managing patients and providing responsive care that reflects the preferences of each patient.

In its new standards, NCQA encourages providers to adopt the new health information technology guidelines being pushed by the Department of Health and Human Services this year. The NCQA evaluation standards adopted HHS criteria and language, often word-for-word. NCQA officials will encourage providers to take such steps as electronic prescribing; maintaining a current list of diagnoses and medications; checking on drug interactions and allergies; recording patients' demographics; charting vital signs; recording smoking status; reporting on outpatient care quality measures; and implementing clinical decision support rules.

Some of the practices by medical providers that also will win points from NCQA evaluators include: after-hours care provided to patients; information in patients' preferred language; tailored explanations for pediatric patients; and evaluations from patients of their experience.

The quality assessment organization also is collaborating with the Agency for Healthcare Research and Quality to develop a survey evaluating patients' experiences in medical homes. The survey will be based on the NCQA's widely-used Consumer Assessment of Healthcare Providers and Systems (CAHPS) Clinician and Group Survey. NCQA expects to release the survey information for medical homes in the second half of 2011.