Why Obama Opposed His Medicare Rationing Approach Before He Supported It

Published October 8, 2012

Consumer Power Report #345

A rather surprising amount of time was spent in the first presidential debate discussing the Independent Payment Advisory Board and its role in cutting the costs of Medicare. It’s worth drilling down into the defense President Barack Obama offered of IPAB’s approach. President Obama, from the transcript:

Let’s get all the doctors together at once into one test instead of having the patient run around with 10 tests. Let’s make sure we are providing preventive care so we are catching the onset of something like diabetes. Let’s pay providers on the basis of performance as opposed to on the basis of how many procedures they engage in. What this board does is basically identify best practices. Let’s use the purchasing power of Medicare and Medicaid to help institutionalize all of the good things that we do. The fact of the matter is that when Obamacare is fully implemented, we are going to be in a position to show that costs are going down … This board we are talking about cannot make decisions about what treatments are given here – that is explicitly prohibited.

This is a flawed depiction of what IPAB will do. But even if he were more accurate, the president would have an additional problem with what he’s saying. Last week David Hogberg reported on a little noticed quote from January 2009, with then president-elect Obama discussing his approach to Medicare reform, which provides a notable contrast with his remarks in the debate:

ObamaCare caps annual Medicare growth at GDP + 1%. In his 2013 budget, President Obama proposed an even stricter cap of GDP + 0.5%. But it seems that Obama was against capping Medicare before he was in favor of it.

In a 2009 interview with the Washington Post, Obama said, “What I think is probably the wrong approach is to think, well, the way to solve this is Medicare is spending X, and we’re just going to cap it at Y, and whatever that means in terms of people being thrown off the rolls or cutting benefits, you know, then so be it. Because that doesn’t solve the underlying problem which is health care costs themselves are still escalating at a 6 or 7 or 8 percent rate. All we’re doing is we’re just saying to people, you know what, you’re going to get less health care.

Audio here. So yes, it turns out Obama was against a Medicare cap before he was for it.

The real problem here is that Obama is trying to have his cake and eat it too. He says he wants to have one test instead of ten, but then says the board can’t make decisions about which treatments are given (only which ones that are paid for, which is the same thing). Obama has slowplayed IPAB since it became a political lightning rod – he was required by law to submit nominees for the board by the end of last month, but failed to do so, kicking the can until after the election. What’s more, there remain serious questions about whether IPAB can work at all even from the most generous interpretations:

Health policy experts say the IPAB won’t turn out to be as sinister as Romney described it, but it also might not be as effective as Obama envisions. In fact, it could be a struggle to even get the board up and running.

The Affordable Care Act sets up the IPAB as a 15-member board including doctors, academics and other “individuals with national recognition for their expertise in” health economics and other parts of the healthcare system. The board members will be appointed by the president and confirmed by the Senate. And that’s the hitch – only about 57 percent of Obama’s civilian nominees have been confirmed in the 112th Congress, and finding consensus could get even harder if Republicans pick up seats, if not the majority, in November.

And the White House has had an especially hard time with nominees to controversial positions, including the Consumer Financial Protection Bureau and the National Labor Relations Board. Obama resorted to recess appointments for those positions, and Republicans challenged the legality of that move.

The IPAB is just as controversial. If Romney wins the presidency, one healthcare lobbyist said, he might not appoint anyone to the IPAB, assuming Republicans can’t repeal the healthcare law. Democrats would likely have to offer enormous concessions just to get a vote on IPAB nominees, the lobbyist suggested. The White House did not respond to questions about what would happen if the IPAB board cannot be confirmed.

Both Obama and Romney ultimately want people to get less health care; the difference is that Obama wants that determined from the top down, from Washington, and from bureaucrats insulated from the political realities that would prevent them from capping effectively. Romney’s approach instead believes people will demand less health care if they approach it from the ground up and are not thoroughly insulated from the costs of their choices – something more true of health care than any other marketplace in the country.

— Benjamin Domenech



From the New York Post:

The GOP-run House has launched a probe into the Obama administration’s decision to shower $340 million in health-care loans on the “politically connected” Brooklyn-based Freelancers Union, The Post has learned.

House Oversight and Government Reform Chairman Daniel Issa (Calif.) claims the loans doled out to the Freelancers Union and other groups – to set up nonprofit health-insurance co-ops under the Affordable Care Act – are a repeat of the financial scandal that plagued the administration’s green-energy program, most notably the infamous $500 million Solyndra solar-panel boondoggle.

In a stinging, five-page letter to Freelancers Union Executive Director Sara Horowitz, Issa questioned whether she and the group were even qualified to obtain the loans under the program guidelines. Freelancers Union is helping fund three new health insurance co-ops in New York, New Jersey and Oregon as a potentially affordable alternative to the private, for-profit medical-insurance market.

Kenneth Artz covered this story for Health Care News a few months ago. We’ll see what comes next.

SOURCE: New York Post


More taxpayer money for more uncertain mechanisms:

The federal government has spent $2.2 billion to help states establish their health insurance exchanges, which require creating websites to let millions of small businesses and individuals in every state buy health insurance from qualified health plans.

Spending to establish these state exchanges, which must be operational by Jan. 1, 2014, exceeded the $2 billion mark with the announcement last week that Arkansas, Colorado, Kentucky, Massachusetts, Minnesota, and the District of Columbia will receive a new round of Exchange Establishment grants totaling $224 million.

The total amount awarded to date in both Level One and Level Two Exchange Establishment grants is $1,899,469,108. The amount awarded to date in Exchange Innovator grants is $249 million, and the total awarded in Exchange Planning grants is $49 million.

In May, the U.S. Department of Health and Human Services (HHS) said it had spent $1 billion over a two-year period toward establishing state insurance exchanges. Since then, grants totaling nearly $1 billion were announced after a U.S. Supreme Court decision in June upheld the constitutionality of the Patient Protection and Affordable Care Act. In August, HHS announced that California, Connecticut, Hawaii, Iowa, Maryland, Nevada, New York, and Vermont would receive a total of $765 million in grant funds for their exchanges. The additional $224 million announced last week means that federal spending on HIXs this year nearly equals the amount spent in the previous two years.

SOURCE: Information Week Health Care


An interesting point raised by a new working paper by Isaac Ehrlich and Yong Yin: Will the uninsured be particularly expensive under a mandate environment? Here’s an explanation of what the paper has to say if you don’t have the time to read the whole thing:

At the “Risk and Choice” conference in honor of Louis Eeckhoudt, Isaac has presented “The Problem of the Uninsured: Implications for Health Insurance,” which is coauthored with Yong Yin. The point of this paper, indicated in the title of my post, reminds me of another paper quoted a lot by high school debaters in 1976-1977: Sam Peltzman’s argument that requiring people to wear seat belts would make them feel safer, and therefore lead them to drive faster. This is now called the Peltzman effect …

In his presentation, Isaac points out that there will be the same kind of effect if you require people to have health insurance. They will feel safer in relation to their health, and so will take more risks. For example, a young person who has to pay full price for the visit to the doctor for antiobiotics to treat an STD may be more careful to use or insist on a condom. He and his coauthor Yong Yin have a theoretical model showing that such effects can be substantial in size.

Notice that it should be possible to get good empirical evidence on such effects. This is a great dissertation project for a graduate student in labor economics, public finance or health economics who wants to do empirical work in the “natural experiment” tradition. All it will take is finding a time when the government changed health insurance coverage in a reasonably exogenous way, plus data on behaviors that might plausibly be changed by feeling more safe given health insurance. If you know of anyone has done this already, please write in a comment.

When we talked during the break, Isaac pointed out to me that people who have looked have often found very little relationship between having health insurance and good health in places where they expected to see a relationship. He argues that this suggests some negative effect of health insurance on health like the “take more risks” effect he was talking about to cancel out the simple direct positive effect of health insurance on health that one would think must be part of what is going on.

SOURCE: National Bureau of Economic Research


Maybe they don’t?

Conservatives argue that allowing a plan from a state with relatively few benefit mandates – say, Wyoming – to sell its package in a mandate-heavy state (like New York) would give consumers access to options that are more affordable than what they get now.

Liberals tend to argue this is a bad idea, contending that it would create a “race to the bottom,” where insurers compete to offer the skimpiest benefit packages.

A new paper from Georgetown University researchers suggests a third possible outcome: Absolutely nothing at all will happen. They looked at the three states – Maine, Georgia and Wyoming – that have passed laws allowing insurers from other states to participate in their markets. All have done so within the past two years.

So far, none of the three have seen out-of-state carriers come into their market or express interest in doing so. It seems to have nothing to do with state benefit mandates, and everything to do with the big challenge of setting up a network of providers that new subscribers could see.

“The number one barrier is really building that provider network that’s attractive enough to get patients to sign up,” said lead study author Sabrina Corlette. “To do that, you have to offer providers attractive reimbursement rates, which makes it difficult to get them in network.”

The paper referenced is here. My own view is that this is far too small a sample size, and that regional networks are likely to appear given enough time and an insurance marketplace that isn’t about to get completely remade by Obamacare. It’s difficult to invest in cross-state efforts in such a climate.

SOURCE: Washington Post


An update on Maine vs. HHS:

Daniels figures her family’s annual income is close to 133 percent of the federal poverty line, which translates into an annual income of $30,657. Maine used to cover parents making up to 200 percent of the federal poverty level, but it now restricts eligibility to parents making up to 133 percent, putting Daniels and Perez on the knife’s edge in terms of receiving health benefits.

Now Maine Governor Paul LePage wants to go even further by cutting off eligibility for parents at the poverty line itself. If he succeeds, the couple would definitely lose their Medicaid coverage. LePage, a Republican, also wants to limit eligibility for seniors, the disabled and young people. In all, the governor’s cuts would trim the rolls of MaineCare, the state’s Medicaid program, by more than 23,000 people and reduce benefits for nearly 3,800 others.

The governor argues the cuts are necessary because the rapid growth of the program, which is funded jointly by the federal government and the states, is squeezing Maine’s budget. In 2011, Maine spent 28.6 percent of its budget on Medicaid, according to the Council of State Governments. The LePage administration says Maine has been too generous in the past, and that the proposed changes would bring the state closer in line to national averages on Medicaid funding and coverage rates.

Under the Affordable Care Act , beginning in 2014 every state is supposed to expand Medicaid coverage to all adults and children in households earning 133 percent or less of the federal poverty level. But in June the Supreme Court struck down that provision, making Medicaid expansion optional.

LePage, like at least six other Republican governors, has already declared that Maine will opt out of the expansion. But he’s the only governor who is taking his opposition to the federal health law even further by attempting to scale back his state’s Medicaid enrollment. Other states, particularly those led by Republicans, are watching closely to see whether LePage’s proposed cuts, which will likely be reviewed by a federal court, are upheld.

SOURCE: Pew Charitable Trust


The New York Times discovers the trend:

Though data on private practices is scanty, a new survey of 13,575 doctors from around the country by The Physicians Foundation found that over the next one to three years, more than 50 percent plan to take steps that reduce patient access to their services, and nearly 7 percent plan to switch to cash-only or concierge practices, in which patients pay an annual fee or retainer in addition to other fees.

When doctors stop taking regular insurance or drop a health plan, patients are free to take their business elsewhere. If they have health plans that cover out-of-network expenses, these patients may be reimbursed for fees they pay in cash, but probably not for the entire sum.

The cash-upfront trend raises an uncomfortable question. Can the Affordable Care Act, intended to widen access to health care, succeed by expanding insurance coverage if primary-care doctors are walking away from insurance?

“If all it means is that doctors who serve the wealthy are figuring out ways to avoid the hassles of insurance, I’m not sure it’s a public policy problem,” said Marsha Gold, a senior fellow at Mathematica Policy Research in Washington and an expert on health care financing. “The real problem comes in if it really restricts the choices people have and makes it worse than it is now. We don’t really have the data to know.”

The country is already facing a shortage of physicians, according to the Association of American Medical Colleges. By 2025, the nation will have 100,000 fewer doctors than needed, according to the association. With fewer medical students choosing to go into primary care, shortages in this area are expected to become especially acute.

SOURCE: New York Times