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For Blue Dogs, Health Budget Raises Questions of 'When,' Not Just 'How'

By David Clarke, CQ Staff

March 16, 2009 -- As the congressional budget panels prepare to write their fiscal 2010 blueprint, members of the Blue Dog Coalition of fiscally conservative Democrats want to make sure that any expansion of health care coverage is fully paid for—and that its tax or spending offsets are guaranteed to yield savings down the road.

Leaders of the 51-member coalition wrote to the House and Senate Budget committees as well as congressional leaders stating their support for President Obama's goal of offsetting the cost of a planned health care overhaul. But the Blue Dog leaders said they do not want the savings to be achieved too far in the future if new spending in the short term is going to exacerbate already high federal deficits.

"While we agree that reforming our health care system will eventually lead to savings, it would be irresponsible to take on additional large-scale deficit spending in the short term without the ability to definitively quantify future savings," Blue Dog leaders wrote March 13 in a two-paragraph letter.

The Blue Dogs are major boosters of the congressional "pay as you go" budget rule that requires new mandatory spending or tax cuts to be fully offset with increases in revenue or spending cuts elsewhere. The rule was put in place during the 110th Congress to signal Democrats' concern about rising deficits.

But as Congress has passed financial bailout and economic stimulus laws in recent months, the deficit has jumped sharply, with the Obama administration estimating that it will total $1.8 trillion this year, a post-World War II record.

In his budget, Obama proposed establishing a $634 billion reserve fund as a "down payment" for policies to expand and improve health care coverage. He proposes fully offsetting the cost of this fund by reducing the amount of money high-income taxpayers can deduct from their tax bills—which the administration estimates will bring in an additional $317.8 billion in savings over 10 years- and by making changes to the Medicare and Medicaid programs.

But the idea of limiting tax deductions has already run into resistance from key congressional Democrats, and there are some questions about how much the proposed changes to Medicare and Medicaid will save—and when that savings will occur.

The budget proposes a variety of ways for finding savings in the Medicare and Medicaid programs, such as requiring wealthier participants in the Medicare drug program to pay more their prescriptions, encouraging hospitals to lower their readmission rates and making cuts to Medicare Advantage, a program in which private insurers provide Medicare benefits. Overall the administration estimates this part of the proposal would save $316 billion over 10 years.

Most of the savings from Medicare and Medicaid would be achieved in the second part of the 10-year window presented in the budget. During the first five years the administration estimates that only $83.7 billion of the $316 billion in savings would be achieved. This lag that is what concerns the Blue Dogs and some other Democrats.

Senate Budget Chairman Kent Conrad, D-N.D., who says he supports efforts to overhaul the health care system this year, has expressed concerns about expanding the amount spent on these programs as well as waiting too long to pay for new policies.

"When I hear we aren't going to see any savings for 10 years I become skeptical," he said last week.

In hearings Peter R. Orszag, the director of the White House Office of Management and Budget, has defended the ideas in the president's budget for wringing savings from Medicare and Medicaid as being among the best ideas offered by government analysts and academics.

"I think we're as forward-leaning as you possibly can be in investing in health [information technology], comparative effectiveness, changing incentives for providers, investing in prevention, and I'd welcome other suggestions, because I think that is the whole ball game," he told the Senate Budget Committee on March 10.

Many industry and advocacy groups, meanwhile, have urged the Budget committees not to insist that health care legislation be fully offset over 10 years. Several groups wrote a letter to the committees earlier this month, arguing that savings from an overhaul will only be evident as new policies have time to work. The list of signers included the U.S. Chamber of Commerce, the Pharmaceutical Research and Manufacturers of America, AARP, the AFL-CIO and hospital, physician, and patient advocacy organizations. The Blue Dog letter is, in part, a response to these groups.

Paul M. Krawzak and Drew Armstrong contributed to this story.

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