Consumer Power Report #316
Washington, DC witnessed a confrontation last week that encapsulates, for good and for ill, the dire situation facing the United States – and the choice we must make if we are to recover and return our nation to prosperity.
Treasury Secretary Timothy Geithner, the last standing member of President Barack Obama’s “economic dream team” of individuals brought in to save America’s economy, testified before the House Budget Committee on Obama’s fourth, and perhaps final, budget proposal.
“We’re not coming before you to say we have a definitive solution to that long-term problem,” Geithner told House Budget Chairman Paul Ryan (R-WI). “What we do know is we don’t like yours.”
It’s rare you have as obvious a contrast in leadership as what was taking place across Capitol Hill on the same day, where Sens. Tom Coburn (R-OK) and Richard Burr (R-NC) were unveiling their approach to Medicare reform, a bold, comprehensive reform that combines a more honest view of the math involved with the more pragmatic steps of the Coburn-Lieberman proposal. The most important element of it, from my perspective, is the timing: Coburn and Burr are actually assuming that what the actuary’s office tells us is in the trust is true, and that our problem arrives in 2016, not 2020.
One key difference between Burr-Coburn and Wyden-Ryan in this regard is that Burr-Coburn implements competitive bidding and premium support in 2016, not in 2022. On the plus side, this six-year difference has a huge impact on the long-term cost savings of Burr-Coburn. On the other hand, Wyden-Ryan makes an effort to ensure that imminent retirees are not required to endure any changes to the program, instead asking those under age 55 to pay more. “The numbers require us to do something now, not in 2022,” says Sen. Burr. “So the politically smart way has been tried, but it doesn’t answer the mathematical challenges that we’re up against. Tom [Coburn] and I believe, if we say we’re saving Medicare, we want to save it on all fronts.”
Burr-Coburn creates a new independent agency, the Medicare Consumers’ Protection Agency, that would stand outside of the Department of Health and Human Services. This is key, as the HHS bureaucracy would otherwise be likely to undermine competitive bidding and premium support as to maintain its bloated Medicare budget. “The intent is not only [regulatory] compliance,” says Sen. Burr, “but also decisions around the construction of the plans, so people have the security of knowing they’re getting the plans they purchased.”
The MCPA is modeled after the Office of Personnel Management, which administers a very similar plan for the Federal Employee Health Benefits Program (FEHBP). “We see markedly less inflation [in FEHBP] than in the private market,” notes Sen. Coburn. “People start to pay attention to where they’re getting their health care and what it costs.”
Seniors would be able to change plans once every year, and unlike Wyden-Ryan, they would get to keep part of the difference if they chose a plan that is less expensive than the level of government-provided premium support, providing further incentives for seniors to engage in cost-conscious behavior.
Coburn and Burr acknowledge their approach is more politically dicey. They concede we’ve tried the politically safe approach, and now offer a more honest one. But in this formulation, the politically safe approach was Ryan’s budget and earlier proposals – many of which the Washington establishment does not view as politically safe at all. What Coburn and Burr offer instead is a more honest starting point for discussion and debate: recognizing that the numbers really are this devastating, that something must be done, and that leadership like Geithner’s has for too long allowed the entitlement bomb to tick. We’ll see who notices.
-- Benjamin Domenech
IN THIS ISSUE:
Or, more accurately, Illinois will actually start enforcing the law, in spite of Washington’s demands.
Illinois has been debating this issue with officials in Washington for nearly a year now and has decided not to wait any longer for a final answer. Starting March 1, the state plans to implement new Medicaid enrollment restrictions, which include electronic cross-checks on residency and income data. According to Medicaid agency estimates, the new procedures will eliminate thousands of current beneficiaries and save the state more than $1 million.
Most states are facing big shortfalls in the money needed to pay their mounting Medicaid bills. Illinois’ deficit is one of the worst. According to Democratic Governor Pat Quinn, the state must shave $2 billion from its $14 billion program in order to balance this year’s budget.
Numerous Republican governors have previously sought blanket relief from the maintenance of effort requirement in the federal health law. But so far, Washington has not budged.
Maine’s Republican governor, Paul LePage, is getting pushback from the U.S. Department of Health and Human Services for his proposal to remove about 65,000 adults from the rolls. Florida’s GOP Governor Rick Scott recently got a federal “No” on his proposal to charge Medicaid beneficiaries a $10 monthly premium, a fee the federal government said would force many low-income people to drop out of the program.
Quinn and a majority of Illinois lawmakers support the health law and its plan to expand Medicaid coverage in 2014. But when it comes to fraud prevention, also known as “program integrity,” most align with their Republican counterparts in supporting stricter enrollment measures.
SOURCE: Stateline 
Legislators in Minnesota’s House and Senate introduced bills to create an Obamacare health insurance exchange, but without expanding bipartisan support for it.
A bill introduced today in the House of Representatives by Rep. Joe Atkins, DFL-Inver Grove Heights, features bipartisan support, but that does not signal a breakthrough in crafting legislation that Republicans opposed last year.
The federal overhaul that Congress passed in 2010 calls on states to create health exchanges that are intended to be marketplaces – largely online – for individuals and small employers to purchase health insurance coverage starting late next year.
Last year, Republicans who control both chambers of the Minnesota Legislature did not pass a bill to create an exchange for Minnesota because many in the party want nothing to do with the federal health care law.
Rep. Greg Davids, R-Preston, said at a news conference Thursday that he also opposes the federal law, but is supporting the Atkins bill because he thinks Minnesota must comply with the overhaul – at least for the time being.
“I’m not a supporter of ObamaCare,” Davids said, using the term that many opponents use to describe the federal law. “(But) I believe in states’ rights. ... I do not want the federal government to write our exchange for us.” …
Last year, Davids also supported legislation to create a health exchange in Minnesota, even though many in his party did not. He said Thursday he did not know of any Republicans who this year are newly supportive of passing a bill.
SOURCE: Insurancenewsnet.com 
Only 45,000 people have signed up for Obamacare’s high-risk pools – far short of the 375,000 figure that had been predicted by CMS by the end of 2010. Why?
Even as enrollment falls well short of the administration’s own projections, some states have already burned through the cash, and at least nine have come back to the administration hand outstretched for more. More may do so within the next two years.
It’s a sign that the pools’ unique customers have even more health needs than state and federal officials could have imagined. To enroll, individuals must have a pre-existing condition and – here’s the real kicker – they must have been without health coverage for at least six months. ...
Yet despite that, just about 45,000 people have signed up – well short of the 375,000 the Medicare actuary had predicted for the end of 2010. So why haven’t there been more?
Cost, for starters. Premiums for really needy people still aren’t cheap and enrollment suffered because of it. That prompted the federal government to slash premiums in the 24 state high-risk pools run by the Health and Human Services Department last summer to attract more people. Enrollment has grown since then, but still more slowly than anticipated.
The ACA’s high-risk pools are also competing with ones that 35 states already had established before the law was even in place. Those 35 states’ legacy plans have almost 222,000 enrollees – still only a small segment of the roughly 50 million uninsured Americans. Some of the state pools are still growing, according to figures from the National Conference of State Legislatures. Others aren’t taking in new people because of the costs.
SOURCE: Politico 
The Manhattan Institute’s Andrew Von Eschenbach in the Wall Street Journal:
The FDA is the regulatory gatekeeper for every drug and medical device sold in the U.S. But there is a growing recognition – at the agency, in the industry and among patients’ groups – that it is at serious risk of falling behind its core responsibility of evaluating new medical products in a timely and predictable manner. Without an FDA that is as innovative and sophisticated as the companies it regulates, patient health and U.S.-based innovation will suffer.
FDA Commissioner Margaret Hamburg conceded to Congress in 2010 that “the FDA is relying on 20th century regulatory science to evaluate 21st century medical products.” That’s not the only problem.
Unanticipated side effects of high-profile drugs like Vioxx have pushed the agency to require more data and larger clinical trials from companies to search for rare adverse events. The Tufts Center for the Study of Drug Development has reported that clinical trials from 2003–2006 were nearly 70% longer than those from 1999–2002. Longer (and more complicated) trials have led to skyrocketing drug-development costs. High costs discourage investment in much-needed new therapies for conditions like obesity, diabetes and heart disease.
The agency is also broken into Centers dealing with drugs, biologics and devices. Yet increasingly, diagnostic devices will be paired with therapeutics.
And crucially, efforts to prevent diseases like Alzheimer’s will require an entirely new approach to designing clinical trials – one that relies on “biomarkers” to rapidly measure a drug’s effectiveness and safety in small, targeted groups of patients rather than in large, randomized clinical trials with thousands of patients that can take years to complete and analyze. In a world where science is advancing at an exponential pace, the FDA must be capable of ensuring that its reviewers know just as much about advances in emerging sciences as the creators of the products they regulate.
Other countries such as Israel, Singapore and China are already preparing to leapfrog the U.S. for leadership of the global life-sciences industry. And investors and companies are shifting jobs and research abroad as part of an offshore strategy to cut costs and reach the market faster.
SOURCE: Wall Street Journal 
Reason’s Peter Suderman on the requirements of Medicaid.
Can a technically voluntary program also be coercive? The 26 states challenging the federal government’s expansion of Medicaid called for by ObamaCare are going to the Supreme Court to argue that it can.
When the Supreme Court hears the state challenge to ObamaCare later this year, most of the attention will likely be on the challenge to the law’s individual mandate to purchase health insurance and its implications for the Constitution’s Commerce Clause. But in a somewhat unexpected move, the Supreme Court has decided to allow for a full hour of oral argument regarding another part of the case: the expansion of Medicaid, the joint federal-state health program for the poor and disabled, which is expected to account for half of the law’s health coverage expansion.
Technically, Medicaid is a voluntary program. But the states’ case rests on the argument that ObamaCare’s expansion is unconstitutionally coercive, and a violation of congressional power under the Spending Clause.
To understand why, consider the following thought experiment with your own budget in mind: After decades of taking a very large tax break – one worth perhaps a fifth of your total income – the government changes the qualification requirements. Qualifying in the future will require substantially more effort, and will also require significant additional spending on some recurring expenditure you’re already having trouble paying for. You can avoid the new requirements by declining the tax break entirely, but doing so would leave you with a mangled budget and impossible fiscal obligations.
In a technical – and perhaps the legal – sense, you’re free to opt out. But most people would probably feel that being forced into such a choice amounts to coercion: They would have no real choice but to comply.
SOURCE: Reason.com 
J.D. Foster on premium support, and why it is a more responsible and incremental approach than other alternatives.
Under the premium support model as described in Saving the American Dream, the Wyden–Ryan plan, and elsewhere, seniors would enroll in the health plans of their choice. Medicare would then cover a portion of the premiums (the premium support, also sometimes called a defined contribution) associated with a senior’s chosen plan. This approach is similar to the federal contribution that millions of federal employees and retirees receive through the Federal Employee Health Benefits Program (FEHBP) and is typical of most health plans purchased today by non-seniors in the private sector. Most importantly, it is very similar to the structure for Medicare Advantage and Medicare Part B and Part D. Essentially, the current structure for the rest of Medicare would be extended to Part A, the sole holdout and the oldest element of Medicare. Further, as with the Part B and Part D premiums, the amount of premium support would decline once the senior’s income exceeds a certain threshold.
In some premium support plans, such as the Heritage plan, seniors would still have the option of buying traditional Medicare fee-for-service, or they could purchase their insurance from private insurers. However, in designing their plans, private insurers would remain subject to Medicare’s basic insurance rules, much as the FEHBP provides rules and oversight for federal employees. Additional mechanisms to ensure proper oversight would also be needed. For example, the new system could preserve and strengthen Medicare’s Center for Drug and Health Care Plan Choice, which is tasked with identifying abuse and overseeing marketing rules for Medicare Advantage and Medicare drug plans under Part D.
Finally, the premium support model does not inherently presuppose a specific level of overall Medicare spending. The choice of moving toward a premium support model is about improving the options for seniors to buy the insurance that best fits their needs and circumstances, in part by fostering a stronger private health insurance market. As a matter of budget policy, Medicare spending may increase, remain on its current trajectory, or decline under a premium support model depending on the level of support provided to low-income, middle-income, and upper-income seniors. There are good reasons to believe Medicare spending would decline under a premium support model even without changing the subsidy structure while providing seniors as good or better health care coverage and health care services, but the level of resources committed to Medicare through the budget is ultimately a separate policy issue. The distinction is between how much to spend and what to buy.
SOURCE: Heritage Foundation 
An example of how people exchange compatible kidneys – without government help.
What made the domino chain of 60 operations possible was the willingness of a Good Samaritan, Mr. Ruzzamenti, to give the initial kidney, expecting nothing in return. Its momentum was then fueled by a mix of selflessness and self-interest among donors who gave a kidney to a stranger after learning they could not donate to a loved one because of incompatible blood types or antibodies. Their loved ones, in turn, were offered compatible kidneys as part of the exchange.
Chain 124, as it was labeled by the nonprofit National Kidney Registry, required lockstep coordination over four months among 17 hospitals in 11 states. It was born of innovations in computer matching, surgical technique and organ shipping, as well as the determination of a Long Island businessman named Garet Hil, who was inspired by his own daughter’s illness to supercharge the notion of “paying it forward.”
Dr. Robert A. Montgomery, a pioneering transplant surgeon at Johns Hopkins Hospital, which was not involved in the chain, called it a “momentous feat” that demonstrated the potential for kidney exchanges to transform the field. “We are realizing the dream of extending the miracle of transplantation to thousands of additional patients each year,” he said.
SOURCE: New York Times