Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



March 2, 2009

Washington Health Policy Week in Review Archive fe470bd7-bbb2-4507-9261-7b9da81e2f4c

Newsletter Article


Health Care, Taxes Will Test Obama Budget Plan

By Joseph J. Schatz and David Clarke, CQ Staff

February 26, 2009 –- President Obama sent Congress a $3.6 trillion budget Thursday that proposes costly efforts to expand health care coverage, address global climate change, and also rein in swelling deficits.

The proposal, which projects a $1.17 trillion deficit in 2010, will immediately test the limits of the new political dynamic on Capitol Hill in the midst of a recession.

To help pay for his priorities, Obama is proposing a tax hike on affluent Americans after nearly a decade of tax-cutting under the Bush administration. In addition, he proposes selling carbon emission credits to polluters as part of a cap-and-trade system to combat global warming, and asks Congress to squeeze savings from Medicare and Medicaid, as well as a variety of other programs.

The budget outline also includes a $250 billion placeholder for further efforts to address the banking crisis on Wall Street, even as the administration begins to use the second half of the $700 billion bailout enacted late last year (PL 110-343). The placeholder funding would support $750 billion in asset purchases, according to the administration.

The budget comes as the economy is in a deep recession and attempts to revive it are driving the agenda in Washington.

"While we must add to our deficits in the short term to provide immediate relief to families and get our economy moving, it is only by restoring fiscal discipline over the long run that we can produce sustained growth and shared prosperity," Obama said at the White House.

The budget calls for creation of a "reserve fund" of $634 billion over 10 years to cover a health care expansion. But it provides no details about what this overhaul would look like. It does, however, say that $316 billion of the cost would be covered by savings from Medicare and Medicaid programs, such as reducing Medicare overpayments, prescription drug prices, and hospital readmissions.

The remainder would come from a tax hike on the wealthy, including putting a cap on their tax deductions. That is sure to draw fire from Republicans, who argue taxes should not be raised on anyone during a recession.

The budget also assumes that legislation enacting a cap-and-trade system aimed at reducing carbon emissions would bring in $645.7 billion over 10 years.

The budget proposes dedicating $120 billion of that to renewable energy programs, with rest being used to making permanent the "Make Work Pay" tax provision in the recently enacted economic stimulus or recovery bill (PL 111-5) at a cost of $536.8 billion. The idea is that extending this tax reduction for most working families would help offset increased energy costs resulting from the cap and trade program.

The budget also would expand the earned income tax credit at a cost of $32.9 billion.

Declining Deficits Projected

Obama has promised to cut the deficit in half by fiscal 2013. His budget shows the deficit soaring this year before falling quickly. The fiscal 2009 deficit will be $1.8 trillion, according to the budget, easing to $1.2 trillion in fiscal 2010 and $533 billion in fiscal 2013.

One reason for the steep decrease: the fiscal 2009 and 2010 deficits include costs that are not expected to recur, such as this year's stimulus package and last year's financial rescue plan. The administration is also assuming the economy will grow faster next year than other forecasters expect.

While Obama plans a different approach to Iraq and Afghanistan than President George W. Bush, his budget shows the military operations there are still costly.

He is requesting an additional $75.5 billion in fiscal 2009 for war costs and then $130 billion in fiscal 2010. The budget includes a $50 billion per year placeholder figure for war operations through fiscal 2019. In total, the budget includes $580 billion over 10 years for what it describes as "overseas contingency operations."

To help pay for the health care reserve fund, Obama proposes to increase taxes on upper-income earners by capping at 28 percent the tax rate at which taxpayers can take itemized deductions – a tax hike that would raise $318 billion.

Obama would let the 2001 and 2003 tax cuts for upper-income Americans lapse in 2010, raising $636.7 billion over ten years.

The Obama budget also takes a large swing at so-called corporate tax loopholes, including $353.5 billion in revenue-raisers and tax hikes aimed at groups ranging from oil companies to hedge fund managers.

Senate Budget Committee Chairman Kent Conrad, D-N.D., called the budget proposal "a good beginning," but said, "The greatest concern that I have is the buildup of debt in this budget. The president has acknowledged that we need to do more. I believe we do."

The proposal drew immediate fire from the top Republican on the Ways and Means Committee, Dave Camp of Michigan, in a sign that Republicans will stringently oppose the proposed tax increase.

"This budget taxes 100 percent of Americans, not just the wealthiest 2 percent," he said in a statement.

"The hidden taxes within the president's budget on energy alone are staggering and will fall directly on every American worker and family," he warned.

"These new taxes will drive up the cost of everything from your utility bills to your grocery bill. Worse yet, the small business and investment tax hikes will increase the cost of staying in business and creating new jobs," Camp said. "Those taxes will in turn be passed on to consumers. These tax hikes may be the worst direction we could head in during a recession."

- Bart Jansen contributed to this story.

Publication Details

Newsletter Article


Senate Help Committee Probes Problem of Underinsurance

By Melissa Attias, CQ Staff

February 25, 2009 -- Many Americans with health insurance are forgoing needed medical care because of costs, witnesses said during a Senate Health, Education, Labor, and Pensions Committee hearing on underinsurance.

"When people have cost concerns, they delay care even when it's really important to get it," said Diane Rowland, executive vice president of The Henry J. Kaiser Family Foundation and executive director of The Kaiser Commission on Medicaid and the Uninsured.

Sen. Jeff Bingaman, D-N.M., who chaired the hearing held Tuesday, defined underinsurance as "an insured individual whose family medical expenditures total 10 percent or more of their income or whose health plan includes deductibles greater than 5 percent of income."

According to Cathy Schoen, senior vice president of The Commonwealth Fund, the number of underinsured adults increased by 60 percent from 2003 to 2007. Schoen said an estimated 25 million adults under age 65 were underinsured in 2007 and more than half of them went without recommended treatment, medication or follow up care or did not see a doctor when they were sick. In comparison, two thirds of the uninsured went without treatment.

"It's getting harder to tell the underinsured and the uninsured from each other," Schoen said.

Rowland said the experience of many cancer patients exemplifies the holes in health care coverage. Despite the fact that they have a life-threatening disease, Rowland said that 5 percent of insured cancer patients say they delayed or decided against care because of costs.

"High levels of cost-sharing and caps on covered benefits can compromise the level of protection health insurance provides and lead to both reduced access to needed care and serious financial burdens and medical debt," she said.

Rowland also said that three in 10 non-elderly adults with health insurance reported problems paying medical bills in October 2008.

Congress should expand comparative effectiveness research to lower costs, said Gail Shearer, director of health policy analysis of the Consumers Union. Shearer said the research would increase the knowledge base for making treatment and coverage decisions and cut health care costs.

"The underlying problem is that health care costs are high," Shearer said. "People were hurting, but as of October the level of hurt has just expanded exponentially."

Grace-Marie Turner, president of the Galen Institute, said that employers should provide flexibility in benefit offerings to keep health care insurance affordable. All but 5.5 percent of Wal-Mart employees have health insurance compared with a nationwide uninsurance rate of 18 percent in part because the company provides their employees with many health insurance options, Turner said.

Turner also recommended the use of Health Savings Accounts, which allow individuals to combine health insurance covering large medical expenses and preventive care with a tax-free health spending and savings account for routine health expenses.

In addition, Turner said the success of Medicare Part D exemplifies how increasing competition among health care providers can improve quality and lower costs.

"Companies have been forced to provide comprehensive and affordable coverage or they're going to be left out of the market," Turner said.

Schoen said dedicating attention to insurance design is essential to providing affordable health care coverage. Among other measures, policy makers should provide income-related premiums, set a minimum floor and standard for health insurance with benefits and establish lower cost sharing and ceilings on out-of-pocket expenses for low-income families, she said.

Publication Details

Newsletter Article


MedPAC Recommends Medicare Cut Home Health Payments in 2010

February 27, 2009 -- Home health providers would see their Medicare reimbursements cut by 5.5 percent in 2010 while payments to skilled nursing facilities and inpatient rehabilitation facilities would be frozen at current rates, according to the Medicare Payment Advisory Commission's March report released Friday.

For hospitals, the panel known as MedPAC recommends that Congress increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index. Congress should also implement a hospital quality incentive payment program funded by a 1 percent reduction in indirect medical education payments.
The report also reiterates previous MedPAC recommendations on increasing payments to primary care providers and decreasing payments to private insurers in the Medicare Advantage program.

While Medicare payments to physicians should be increased by 1.1 percent, MedPAC also recommends that Congress establish a budget-neutral payment system that would give primary care physicians higher payments, with those payments financed by lower Medicare reimbursements to some medical specialists. In the report, MedPAC Chairman Glenn M. Hackbarth said Congress should "redesign and rebuild our deteriorating system of primary care," basing those payments "on the value of primary care to a well-functioning health care system."

MedPAC recommends that Medicare Advantage plans be paid the same as providers in the traditional fee-for-service plan, with "MA" plans that provide higher quality care receiving higher payments for better performance. Congress should "revamp MA so that private plans offered to Medicare beneficiaries are rewarded for excellent performance, not just because they are private," Hackbarth wrote.

On average, MedPAC said, Medicare Advantage plans are paid 14 percent more than traditional fee-for-service Medicare, with private fee-for-service plans paid 18 percent more. Separately, a budget outline that President Obama submitted to Congress on Thursday would have the plans submit bids to Medicare rather than be paid on the current per-county reimbursement rate that is set by law.

If Congress changes the current MA payment rates, "there will be fewer managed care plans and the generous plans they have now will be less generous," MedPAC executive director Mark Miller said at a breakfast briefing with reporters.

The MedPAC report also recommends that manufacturers and distributors of drugs, biologicals, medical devices and supplies publicly report their financial relationships with doctors, doctors' groups, pharmacists, health plans and other medical professionals and that information be available to the public. MedPAC is also recommending that Congress require all hospitals and other entities that bill Medicare to annually report the ownership share of each physician who directly or indirectly owns an interest in the entity, excluding publicly traded trade corporations.

MedPAC is also urging Congress examine Medicare's hospice benefit. In some cases, the report concludes, MedPAC has found that Medicare's hospice payment system contains incentives for very long stays, which have been profitable for the hospice provider but may led to the benefit being used inappropriately in some cases.

Publication Details

Newsletter Article


Report: Areas With High Rates of Uninsurance Have 'Spillover Effect' on Insured Communities

By Stacey Skotzko, CQ Staff

Living in a community with high rates of uninsured individuals could be detrimental to the financial and physical well-being of even those with health insurance, according to a new Institute of Medicine (IOM) report issued Tuesday.

The report found that health care providers and physicians, as well as the latest medical technologies, are often found in more affluent, insured areas. In addition, insured individuals are more likely to have difficulty getting care and to be less satisfied with the care they receive because of local high rates of uninsurance, the report found.

Report committee member Christine Ferguson, a research professor at George Washington University, called the findings some of the most "alarming" in the report, which is a review of a six-part series IOM published from 2000 to 2004 on the impact a lack of health insurance has on children, adults, families and communities.

"Of all the things in the report that it is clear we need to keep a very close eye on, this is the one area," Ferguson said.

The report found that some areas with high rates of uninsurance have problems in specialty care and health care delivery, namely limits on inpatient bed capacity, timeliness of trauma care and outpatient emergency services. In these areas, physicians also may believe they cannot make clinical decisions in the best interest of their patients without losing income, the report says.

"Lacking health insurance is hazardous to your health," said Harvey Fineberg, president of the IOM. " . . . If you lack insurance, you suffer the consequences and your family suffers the consequences and your community suffers the consequences."

Kathleen Stoll, deputy executive director at Families USA, noted the financial impact the uninsured have on the population. According to a previous Families USA study, privately insured families paid, on average, $922 more in 2005 because of health care costs for the uninsured, Stoll said.

"The big takeaway is that we all have a stake, whether we have insurance or not," she said.

The report, sponsored by the Robert Wood Johnson Foundation, also found that changes in employer-based insurance are driving many to do without health coverage. Report committee Chairman Lawrence Lewin, a health policy consultant, said there has been both a reduction in employers offering insurance and employees deciding to take the insurance up, mainly due to the high cost of premiums. Lewin added that even the expansion of public health insurance is in "jeopardy" because of the current fiscal climate in many states.

The report "makes clear that health reform is as much about protecting the health of people who have health coverage today as it is about covering the millions of Americans who are uninsured," House Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., in a statement.

"Until we have a health system that covers everyone, we will exacerbate disparities in access to medical treatment around our country. We need to reform our health system for the health of us all," Stark said.

Obama wants to put the pay-as-you-go rules into law and has a goal of reducing the deficit to $533 billion in fiscal year 2013, according to an administration official.

Vice President Joseph R. Biden Jr. opened the summit by saying it would "begin to tackle the challenges of our nation's long-term fiscal situation."

"The problem will not be solved overnight, that's not news to anyone in this room," he said.

Other keynote speakers stressed what they called the crucial importance of getting health care costs under control, noting that they are driving up expenditures for entitlement programs like Medicare and Medicaid.

"The path to fiscal responsibility must run directly through health care," said White House budget director Peter R. Orszag.

Publication Details

Newsletter Article


Study: Health Care to Gobble Far Bigger Chunk of GDP This Year

By John Reichard, CQ HealthBeat Editor

The year 2009 will mark the biggest-ever one-year jump in health care's share of the Gross Domestic Product (GDP), with health care outlays rising a full percentage point to 17.6 percent, government economists say in a new report.

Projections released by economists at the Centers for Medicare and Medicaid also show health care outlays rising from $2.4 trillion in 2008 to $4.4 trillion by 2018, or 20.3 percent of the GDP.

The unprecedented one-year jump in 2009 is largely a result of the recession, according to the analysis posted Tuesday on the Web site of the academic journal Health Affairs. Although the rate of health care spending growth will slow in 2009 compared to 2008, health care will bite off a big chunk of GDP because the economy is projected to actually shrink this year, according to the study.

For 2009, health spending will grow 5.5 percent, down from a growth rate of 6.1 percent in 2008. But GDP is expected to decrease 0.2 percent. "In 2009, the United States is expected to experience a decrease in nominal GDP for the first time since 1949," Health Affairs noted in a news release announcing the findings. A GDP figure is "nominal" if it hasn't been adjusted for inflation.

Even if health spending growth is moderating because of the recession, the one-year jump is likely to figure prominently in arguments that Congress must address overhaul health care this year. The Obama administration emphasized in a "fiscal responsibility" summit Monday that bearing down on health care costs is the key to controlling spending in the Medicare and Medicaid entitlement programs.

Government analysts said the recession would dampen health spending growth in the private sector while tending to boost outlays in government health spending as more jobless Americans enroll in Medicaid.

The study projects that private health insurance enrollment will drop from 195.5 million in 2008 to 189.5 million in 2010.

A "significant" recession would also have a big impact on Medicare, the program's chief actuary Richard Foster said at a press briefing Monday on the projections. The Medicare trust fund that pays for inpatient care in the hospital would suffer from higher unemployment and slower wage growth because "right away you get a drop in the payroll taxes" that go into the fund, Foster said. The exhaustion of the trust fund, projected for 2019 in a 2008 Medicare Trustees report, could come one to three years sooner, or as early as 2016 depending on the extent of the recession, Foster said.

As incomes grow more slowly and private health insurance coverage declines, growth in private health spending will fall to a 15-year low of 3.9 percent in 2009, the study also noted. At the same time, the growth rate in health spending among public payers will accelerate from 6.4 percent in 2007 to 7.4 percent in 2009. But the cooling off of private spending growth will be temporary. The forecasters said that as economic conditions improve starting next year, the growth rate for private spending will rise from 4.2 percent in 2010 to 6.1 percent by 2018.

But public spending growth also will accelerate largely because baby boomers will begin enrolling in Medicare. Public spending will grow faster than private spending over the next decade, and will account for more than half of all U.S. health spending by 2018.

The study predicts that final spending figures for 2008 will show Medicare spending of $466 billion for the year, 8.1 percent more than in 2007. The biggest factors driving the increase are spending for prescription drugs, hospital and physician care. The boomer-fueled enrollment increase will increase spending growth from 6.2 percent in 2011 to 8.6 percent by 2018, the study projected. Spending for Medicaid will rise from $352 billion in 2008 to $801 billion by 2018.

Medicaid enrollment grew at a rate of 4 percent in 2008 compared to 0.2 percent in 2007 owing to the effects of the recession, analysts said.

The study estimates the following spending growth rates for overall health spending in 2008: prescription drugs, 3.5 percent; hospitals, 7.2 percent; physician and clinical services, 6.2 percent; home health care, 9.1 percent; and nursing homes, 4.6 percent.

Publication Details

Newsletter Article


Baucus Appeals To CBO For Help On Health Overhaul

February 25, 2009 -- Senate Finance Committee Chairman Max Baucus called on the Congressional Budget Office Wednesday "to help us find a way to make health reform work," saying that the agency's assessment of how much overhaul proposals will cost or save "will make or break this enterprise."

CBO Director Douglas W. Elmendorf was the sole witness at the session, where he and Finance members discussed various options to control health care costs and provide health insurance to the 45 million Americans without coverage. As he opened the hearing, Baucus, D-Mont., said that comprehensive change "is no longer simply an option. It's an imperative" and that delays will cause millions more Americans to lose health coverage and drive costs higher for both the federal government and for individuals who have health care insurance.

Elmendorf's predecessor, Peter Orszag, who now heads the Office of Management and Budget, had signaled that investments in areas such as health care information technology or research to compare the effectiveness of drugs and medical procedures could save money over time, a departure from previous CBO scores which estimated no savings from such proposals.

The impact of efforts aimed at reducing health care costs, such as bundling payments for hospital and post-acute care or encouraging better care coordination among health care providers, depend on how they are used, Elmendorf said. CBO has not previously scored some of the concepts under discussion in health care overhaul. "We are in areas we do not have experience with," he said.

When asked about something CBO has previously ruled on — allowing the secretary of Health and Human Services to negotiate prescription drug prices on behalf of Medicare beneficiaries — Elmendorf concurred with the agency's past analysis that such a move would have "little if any effect" on drug prices because private plans are already negotiating discounts with drug makers.

Elmendorf and the panel discussed several options for financing an overhaul of the current health care system, including developing health care pools to help individuals find affordable coverage and providing subsidies to make health insurance less expensive for individuals and families. Subsidies are particularly important, Elmendorf said, if individuals were required to purchase coverage.

Taking steps to make the health care system more efficient, such as linking payment to the quality of care delivered, or broader use of "comparative effectiveness" research could also help reduce health care costs and increase efficiency, Elmendorf said.

One proposal that generated a lot of discussion at the hearing was changing the current tax treatment for employer-sponsored health insurance. Replacing the tax exclusion for those benefits or restructuring it "to encourage workers to join health plans with higher cost-sharing requirements and tighter management of benefits" could help provide billions, Elmendorf said. At a Finance hearing on the issue last July, Massachusetts Institute of Technology professor Jonathan Gruber estimated that there are $250 billion a year in foregone tax revenues from excluding employer expenditures on health insurance from taxation.

Finance member Sen. Ron Wyden, D-Ore., said that giving individuals "a very generous deduction" of $16,000 to $17,000 a year would be more than the $12,000 most families spend for health insurance and would produce new revenue for health care overhaul. Wyden is sponsoring legislation (S 391) that would shift the focus of health insurance away from employers to state-based pools where people choose from a menu of private health insurance plans, with households receiving a $17,000 deduction for family coverage. Individuals and families would be required to carry coverage and would receive subsidies to help pay the costs if they had lower incomes.

But other Finance members urged a "go-slow" approach to adding more money to the health care system as the nation's fiscal situation worsens. The panel's ranking member. Charles E. Grassley of Iowa, said spending more on health care programs like Medicare and Medicaid could add to the deficit. With health care spending now consuming 16 percent of U.S. gross domestic product "it's hard for me to understand why we'd want to put more money into the system," said Sen. Kent Conrad, D-N.D., who also chairs the Senate Budget Committee.

Publication Details