By David Clarke, CQ Staff

February 20, 2009 -- As President Obama gets set to hold what is being called a "fiscal responsibility summit" on Feb. 23, battle lines are being drawn over how the new administration should address long-term budget challenges.

In one corner are fiscal hawks who believe the aging of the population and the rising cost of health care require aggressive action to deal with the long-term costs of Social Security, Medicare, and Medicaid. They also advocate an overhaul of the tax system because the rising tide of debt will soon deal another blow to the economy.

On the opposite side are liberals concerned that a focus on the major entitlement programs will lead to cuts in the social safety net when the real issue is not the efficacy of the government-run programs but the rising cost of health care across the economy.

While an agenda for the White House event has not been released, administration officials said it will be an attempt to start a dialogue about the long-term debt and budget shortfalls facing the government and will include breakout sessions on different issues.

The White House is expected to release more details about the guest list and agenda Friday, but the offices of House Speaker Nancy Pelosi, D-Calif., and Majority Leader Steny H. Hoyer, D-Md., said the two leaders plan to attend. Senate Majority leader Harry Reid, D-Nev., will not because he will be at the National Clean Energy Project meeting at the Newseum on that day.

At a time when the government is spending unprecedented amounts of money to try to jump start the economy and ensure that the financial and housing sectors stabilize, Obama has been making efforts to show he also is concerned about the growing deficits and debt, in part as a way to quiet the concerns of moderates in his own party.

There is a similar sensitivity among Hill leaders. Pelosi wrote to House committee chairmen Thursday urging them to hold hearings on the budgets of programs and departments under their jurisdiction.

The challenge for Obama is that if he wants to begin addressing the fiscal problems confronting the government, he will face the enormous task of building a political coalition that would allow him to address some of the thorniest political issues facing Washington: making changes to Social Security and Medicare.

Liberal groups are concerned that Obama's recent overtures to deficit hawks could put in motion efforts to make cuts to their favored programs.

"The concern is that in an effort to get bipartisan consensus, the White House could get locked into a path of austerity as the way to achieve long-term budget balance," said Roger Hickey, co-director of the Campaign for America's Future, a liberal group that organized a conference call on the subject Thursday. "The concern is that as soon as the economy is in recovery or declared in recovery, the White House and the Congress could start cutting—cutting entitlements at a time when people are still losing health care and retirement savings; cutting public investment at a time when our fragile economy has no other engine of growth."

Hickey and others on the call argued that Social Security is not in trouble because it will be able to meet its obligations through 2049, according to the Congressional Budget Office, and that the problem with Medicare and Medicaid is the growing cost of health care in general, not anything unique to these two programs.

"We don't have an entitlement crisis, we have a health care crises," said Dean Baker, an economist at the liberal Center for Economic and Policy Research.

Meanwhile, budget hawk groups made clear they want the summit to lead to legislation creating a commission or task force to propose policy prescriptions for long-term budget shortfalls facing the government, which Congress would then have to vote on.

"Tackling these problems will require a degree of sacrifice impossible under the existing policy process, which discourages bipartisan compromise and encourages procrastination and obstructionism," said a statement issued by 14 members of the Brookings-Heritage Fiscal Seminar. The group includes prominent Washington budget wonks from the conservative side of the spectrum, as well as moderate Democrats such as former Clinton Budget Director Alice M. Rivlin.

Baker argued the commission idea was undemocratic.

"They have no evidence that the system is broke," he said. "What they have is a system, a democratic system, that is not giving them the result they want."

By Will Matthews, CQ Staff

February 19, 2009 -- A health system that includes an individual coverage mandate, a mix of public and private insurance and a shift away from the current fee-for-service system would slow U.S. health spending growth by $3 trillion and achieve nearly universal coverage by 2020, according to a report released Thursday by the Commonwealth Fund Commission on a High Performance Health System.

Under the Commonwealth plan, all individuals would be required to have coverage, either from private insurance or a newly created public plan, and all employers would be required to provide coverage or pay into a trust fund.

The public option, with premiums as much as 20 percent lower than currently charged by private plans, would "challenge private insurers to innovate and reduce administrative costs," according to the Commonwealth report, which was based on policy specifics developed by The Commonwealth Fund Commission and evaluated by the Lewin Group.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, which represents health insurers, said his group agrees that changes to the health care system should improve access, reward quality and "get costs under control." But, he said, an "appropriate balance" needs to be found between public and private systems.

"It's important to consider the impact that lower payments will have on providers," he said.

The Commonwealth plan would shift from the current payment system, which pays per service performed, to more 'bundled' method of payment that would encourage more coordinated care and hold providers accountable for the results.

The plan also calls for investment policies to increase the use of health information technology and creation of a center for comparative effectiveness research to help determine which medical procedures and treatments work best.

While health care spending would rise under the Commonwealth plan, it would do so at a slower rate. The report projected annual growth of 5.5 percent under the plan, compared with 6.7 percent under current conditions.

Commonwealth Fund President Karen Davis said the group's plan is consistent with approaches backed by President Obama and Senate Finance Chairman Max Baucus, D-Mont., but that it "makes some of the tough choices" on the details lawmakers will encounter as they hammer out the specifics.

The estimates are based on the assumption that all policies discussed in the report will be enacted as a group in 2010, with effects unfolding through 2020.

By Anne L. Kim, CQ Staff

February 19, 2009 -- The left-leaning Center for American Progress Action Fund released a report Thursday calling for health care overhaul to address increasing numbers of people losing insurance coverage and to stimulate the economy.

Growing unemployment has led to an estimated 14,000 people losing their health insurance daily, according to the report titled "Health Care in Crisis: 14,000 Losing Coverage a Day."

"This is what we can expect as long as the job market remains in crisis," said Judy Feder, a senior fellow at the Center for American Progress Action Fund.

The report expressed support of recent legislation, including the economic recovery package and the expansion of the State Children's Health Insurance Program.

"But we can't stop here," Feder said. "We've got to go the rest of the way to cover everybody."

But health care overhaul is important because without it, costs to government, taxpayers, families and businesses will grow, said Richard Kirsch, national campaign director for Health Care for America Now, a coalition of organizations of which the Center for American Progress Action Fund is a member.

"Unless we get everyone covered, we're going to have a tremendous amount of waste in this system," Feder said.

People are sicker than they need to be and "the whole economy suffers," she said.

The Center for American Progress Action Fund also reported that compared with many other industrialized countries like the United Kingdom and Japan, the United States spends twice as much per capita on health care. It also estimated that $650 billion of the slightly more than $2 trillion in annual health care spending may not effectively improve care.

The report also cited numbers from the Congressional Budget Office estimating that while Medicare and Medicaid spending is currently approximately 4 percent of the Gross Domestic Product, the percentage is expected to rise to 19 percent by 2082.

Kirsch said he anticipates arguments that the country currently can't afford to pay for health care overhaul with an economic stimulus package already enacted.

"That kind of thinking is the same kind of pennywise, pound foolish thinking that got us into this current mess," he said.

The current health care system will bankrupt our economy, Kirsch said.

The report also advocated for expanding health care coverage as a way to stimulate the economy.

"Providing additional Medicaid funding to states is consistently rated one of the most effective ways to stimulate the economy," according to the report. "CHIP funds can boost the economy quickly because states already have programs in place."

President Obama is slated to deliver his first budget address next week and Kirsch said he hopes to hear about major investments in health care.

But those investments worry analysts like Dennis G. Smith of the right-leaning Heritage Foundation. Smith, who directed the federal Medicaid program under the Bush administration, said in a Feb. 12 analysis that "many Americans who have private health insurance will lose their coverage if major health care policy proposals advanced" by Obama and Senate Finance Committee Chairman Max Baucus, D-Mont., become law.

While Obama has said those with private coverage can keep it, he, along with Baucus, "has coupled these assurances with a counterproductive proposal for a new public health plan to compete directly with private-sector plans in a national health insurance exchange," Smith wrote, adding that "such a provision would displace the private health coverage of millions of Americans."

Obama and Baucus also would expand existing government programs, Smith added. "Given the inevitable dynamics of such program expansions, assurances to Americans that they would be able to keep their private health coverage are meaningless. Their employers would have powerful incentives to dump them into public coverage." Smith also asserted that the Obama and Baucus proposals "directly undermine the historic accomplishments of the 1990s welfare reform, was designed to get Americans off of dependence on government programs."

By Mary Agnes Carey and Alex Wayne, CQ Staff

February 19, 2009 -- It seems like medical common sense: In order to reduce health care costs and increase the quality of care, many lawmakers and health care experts say more research should be done to study which medicines, devices, and procedures work best at treating different diseases.

But a modest proposal to accelerate such "comparative effectiveness" research—signed into law this week by President Obama as part of the $787 billion spending bill intended to stimulate the economy—concerns some Republicans and health industry groups. They fear that Medicare, other government health programs and private insurers may use the results of the studies to deny coverage for treatments deemed less clinically effective—or even more worrying, simply less cost-effective — thereby interfering in doctor-patient relationships.

Lobbyists for drug and medical device makers, as well as some Democrats and patient groups, pressed Democratic leaders, with some success, to alter the wording of the legislation in ways they prefer, and to include language in the conference report accompanying the bill saying Congress doesn't intend for Medicare or other "public or private payers" to use the research to make coverage decisions.

But the vociferous opposition to the provision took Democrats somewhat by surprise and portends difficult fights ahead when President Obama seeks to make broader changes to the health care system, including an expansion of the comparison studies. Compared to the overall size of the stimulus, the $1.1 billion dedicated to comparative effectiveness research—while far more than the $50 million the government spent in fiscal 2009 on such research—is a pittance. Advocates for the research say the concerns are overstated, and opponents are simply trying to protect the interests of health care industry groups worried that their products could be deemed less effective.

"Opponents of health reform are now using scare tactics in a misguided attempt to stop progress in its tracks, blocking attempts to fix the broken health care system that is hurting American families and our economy," AARP chief executive Bill Novelli said Feb. 10.

Insurers also are strong supporters of comparative effectiveness research.

"As a nation, if we can better align treatment with medical best practices, that will improve the quality of care patients get and bring down costs across the board," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the trade association for the insurance industry.

The insurance industry's support for the research is not reassuring to people suspicious of the new policy. Rep. Charles Boustany, R-La., a physician, knows firsthand about insurance companies refusing to pay for treatments he thought his patients needed.

"We've had care denied that was absolutely necessary, not only based on my clinical judgment but on the clinical judgment of others," Boustany said in an interview. He worries Medicare might adopt similar practices, using comparative effectiveness research to support its decisions.

When the House Ways and Means Committee debated the stimulus measure in January, Boustany offered an amendment that would have prevented Medicare from basing coverage decisions on cost alone. It was defeated.

Boustany said he would have voted against the stimulus bill even if the comparative effectiveness provision had been written to his liking. He said he hadn't read the version of the provision that became law.

"While I see some value in doing research to see what's the best clinical approach, taking into consideration cost and quality, I'm just deeply concerned about cost alone being a factor in making clinical decisions," he said.

Suspicion of the policy runs even deeper among some conservatives, who see a slow conspiracy unfolding to eventually ration health care. The Washington Times published an inflammatory editorial Feb. 11 comparing some of the stimulus bill's health policy provisions, including the comparative effectiveness language, with the euthanasia programs of Nazi Germany—accompanied by a picture of Adolf Hitler.

Scott Gottlieb, a resident fellow at the American Enterprise Institute who has advised some Republican lawmakers, including Boustany, warns that the comparative effectiveness program could eventually evolve into a policy more far-reaching and controlling than the stimulus describes.

"In terms of the potential for this to morph into my undesirable scenario of having a big government agency making clinical judgements and imposing across clinical practice, I think this is a big victory toward that end," he said this week at an AEI roundtable with reporters.

Some Democrats say they do hope Medicare and other programs will someday use the research to guide decisions about what treatments they will cover.

"If this research gives us useable information that a drug is killing someone, or one drug is preferable to another because the other one has bad side effects, to then say that Medicare couldn't use that information to drive coverage is asinine," said a Democratic aide involved in developing the policy. "It's life-threatening and a ridiculous restriction on federal funds and lives."

But other Democrats, as well as members of the Congressional Black Caucus, have expressed concerns that comparative effectiveness research could hurt patients' access to medical treatments they need. In a Feb. 9 letter to House Democratic leaders, 17 of the chamber's Democrats, including Reps. Jim Moran of Virginia and Allyson Y. Schwartz of Pennsylvania, said while comparative effectiveness research had the potential to make health care more efficient and less expensive, they urged that the stimulus package protect "against the use of this research to deny access to care solely based on cost."

On April 23, 2008, Congressional Black Caucus members wrote the bipartisan leadership of the House Ways and Means Committee asking that any comparative effectiveness research recognize and account for the variation in medical treatment outcomes and "bolster and expand information and knowledge about quality without restricting access to care."

Zirkelbach deflects speculation that insurers expect to use the research to deny payment for less effective treatments.

"You don't have a lot of people out there who want treatments that aren't proven to be as effective as other treatments," he said. "This information will be very valuable at informing the coverage decisions that health plans make. But in no way is it going to dictate the coverage decisions."

Novelli, of AARP, says drug and medical device makers don't want the research performed because "they fear it will cut the profits they make on ineffective drugs and equipment."

"But they won't tell you that this research could save your life by giving your doctors better information so they can prescribe the best treatments available to you."

But AARP has its own concerns about the way the research might be used. Sarah Thomas, director of health for the organization's Public Policy Institute, said there needs to be significant public discussion before Medicare or other public programs start using comparative effectiveness studies to guide coverage.

"I think we would feel very strongly that we really don't want to get in the way of good decisions that physicians make for their patients," she said.

Similarly, health industry lobbyists say their concerns about the policy are more nuanced. David Nexon, senior executive vice president at the Advanced Medical Technology Association, or AdvaMed, which represents device makers, says his organization generally supports comparative effectiveness research—even though, he said, the members of his association recognize that the research will result in winners and losers among them.

Like Boustany, Nexon said his concern is how the research is used.

"I think it would be a mistake for Medicare to make blanket non-coverage decisions based on what treatment works best on average," Nexon said, because different patients respond differently to treatments. "That's typically what these comparative effectiveness research studies find."

"On balance," he said, "while [the research] may be bad for a particular product, or a particular brand a company's making, I think it'll be good for the industry."

Billy Tauzin, a former House Republican who now heads the Pharmaceutical Research and Manufacturers of America, said the public will not support the use of comparative effectiveness research to deny treatment that patients need. "For the government to start deciding that doctors can't provide a medicine that you need ... is not what was intended in these studies. It never was, it never should be," Tauzin said.

By Melissa Attias, CQ Staff

February 20, 2009 -- Although no states in 2008 passed universal health coverage initiatives in the midst of a struggling economy, some states were able to enact laws that extended coverage for children and promoted cost and quality transparency, according to a BlueCross BlueShield Association (BCBSA) report released Friday.

The report, entitled "State Legislative Health Care and Insurance Issues," analyzes how state governments addressed key health issues in 2008.

"I tend to say the states are the leaders in health care reform," BCBSA Director for State Research and Policy Susan Laudicina said Friday at a news conference. "So far we've only had incremental change from the federal government on down. States can tell you what works and what doesn't."

According to the report, the states' efforts to expand health coverage for children were constrained by a lack of state and federal funding sources due to the weak economy. Nevertheless, five states—Colorado, Florida, Iowa, Kansas and Minnesota — modestly expanded their State Children's Health Insurance Program, while New Jersey mandated that all children ages 18 and younger have health insurance. Laudicina said the results of the New Jersey law are currently limited, however, since the legislation lacks an enforcement mechanism and has not specified funding source.

The report also shows that nearly half of the states considered establishing requirements to collect and publish data on provider charges and medical outcomes in 2008.

Nine states—Colorado, Florida, Iowa, Kentucky, Louisiana, Rhode Island, South Dakota, Washington and West Virginia—passed transparency laws, while five states—Iowa, Louisiana, Rhode Island, Washington and West Virginia—passed laws that require health providers to release their hospital-based infection rates and/or medical outcomes.

Because of the budget crisis, however, Laudicina said states are not showing much enthusiasm for universal coverage mandates. California 's universal coverage bill was defeated in the state Senate Health Committee last January and the New Mexico legislature adjourned without passing Democratic Gov. Bill Richardson's universal coverage legislation.

"Covering adult independent children is the one area where I see more mandates," Laudicina said.

Nevertheless, she said that several states considered creating and expanding subsidy laws for insurance premiums and allowing health insurers to offer incentives to promote wellness programs during 2008. In addition, she said health insurance technology (HIT) legislation is currently pending in 12 states, while 33 states passed HIT legislation during the past three years.

During Friday's news conference Alissa Fox, senior vice president of BCBSA's Office of Policy and Representation, also outlined BCBSA's positions on key components of health care overhaul.

Fox said BCBSA does not support a public government health insurance plan open to everyone because it believes private health plans are best equipped to provide every American with health insurance

"We question why that's needed," Fox said. "We see the private sector and we innovate in ways we think, quite frankly, the federal government could never do."

Instead, BCBSA believes health care overhaul should build on the employer-based system to focus attention on the cost and quality of health care.

Fox also said BCBSA opposes the development of federal agencies called "connectors" that would facilitate health insurance shopping for individuals and small businesses.

"We do not want a new federal bureaucracy," Fox said. Instead, BCBSA supports a state-based approach to overhauling purchasing arrangements.

Fox also noted that BCBSA is pleased with federal SCHIP legislation and provisions for HIT, subsidies for the unemployed and provisions to accelerate comparative effectiveness research in the economic stimulus package.

Fox also said BCBSA would support the appointment of Democratic Gov. Kathleen Sebelius of Kansas as Secretary of Health and Human Services.

"She's very knowledgeable about insurance," Fox said. "We think she'd make an excellent candidate."

By Daniela Feldman and Leah Nylen, CQ Staff

February 18, 2009 -- With a debate rapidly approaching on how to control entitlement spending, liberal and conservative groups weighed in on the issue Wednesday at separate events, with analysts on the left arguing that any crisis is being miscast and those on the right saying entitlements need to be more focused on lower-income Americans with the long-term costs involved more accurately depicted in the budget process.

President Obama has brought the affordability of entitlement programs such as Social Security, Medicare, and Medicaid into the spotlight by scheduling a fiscal responsibility "summit" starting Feb. 23. Senate Budget Committee Chairman Kent Conrad, D-N.D., and ranking Republican Judd Gregg of New Hampshire hope the event will help build support for their plan to create a commission to produce legislation subject to an up-or-down congressional vote that would rein in entitlement spending.

At an event sponsored by the right-leaning Heritage Foundation, panelists said Congress should change the budget process to an "accrual-based model" that would require the federal government to include all its future obligations including entitlement spending in the federal budget.

The accrual-based budget process would help make the real cost of programs more clear, said Andrew Yarrow, vice president and director of Public Agenda, which describes itself as a non-partisan group focused on public opinion research and civic engagement. "All programs are done with the best intentions to help more and more Americans live decent lives," Yarrow said. "The problem is in the details: how the program are funded and not funded in the long term."

Under the current budget system, the Congressional Budget Office only estimates the effects of new laws 10 years into the future. This can obscure the real cost of programs such as Medicare, Medicaid, and Social Security, Yarrow suggested.

Other panelists suggested that Americans should reconsider its priorities related to government health care spending.

The current system provides too many benefits to middle-income Americans instead of focusing help on those with the lowest incomes, said Stuart Butler, a Heritage Foundation vice president for domestic and economic policy studies. The problem is "not the money that gets spent, it's who gets to spend it and for what," Butler said.

For example, the British and American health care systems diverge because of the expectations of patients, he said. In America, patients discuss a course of treatment with their doctor without considering cost and send the bill to the government. In the British system, health care is community-based and takes into account cost and need, he said. "The cost of health care is related to the way in which we buy," Butler said. "We cannot solve the rising health care costs without looking at [people's expectations] about health care."

Butler said he was heartened by President Obama's decision to hold the fiscal responsibility summit, expressing hope that the president would have a discussion on the underlying issues rather than use the event as a photo opportunity.

Meanwhile, members of the left-learning National Committee to Preserve Social Security and Medicare (NCPSSM) rejected the entitlement commission approach at an event Wednesday and asked for the refinancing of Social Security. The committee asserted that "enacting restrictive timelines and prohibiting amendments to push through changes of this importance to millions of Americans, especially senior Americans, ultimately disenfranchises the public and hurts the political process."

The leader of the group argued that the issue isn't entitlements per se but addressing the rising costs throughout the health care system.

"We do not have an entitlement crisis, the health care program needs financing," said Barbara B. Kennelly, president and CEO of NCPSSM and a former member of Congress.

Virginia Reno, vice president for income security at the National Academy of Social Insurance, urged a separation between Social Security and the health care overhaul issue.

"Health care has a crisis, but Social Security does not," Reno said.

"Social Security finances have a long-time horizon and are expected to be in balance," she said.

Henry Aaron, a senior fellow at The Brookings Institution, said health care needs revamping because spending for Medicare and Medicaid is five times larger than the growth of Social Security.