Yo, Tea Party Freshmen...

By John Ballard

Yesterday's saber-rattling by both Tea Party insurgents and their GOP colleagues made me want to turn off the TV and watch chick flicks with my wife. Combing through some neglected links I found this from a couple days after the election that made me feel better. As Aaron Carroll said at The Incidental Economist, "Igor Volsly continues to commit actual journalism..." quietly ticking off a few ways that health care reform is apt to be tweaked but not repealed as yesterday's talking heads were advocating.

This is from the Wonk Room.

PHARMACEUTICAL INDUSTRY: The industry doesn�t expect Republicans to reopen the doughnut hole, but it does want Congress to �reauthorize the Prescription Drug User Fee Act, or PDUFA, which allows companies to pay fees to the Food and Drug Administration to accelerate product reviews.�

LARGE EMPLOYERS: �They don�t want to repeal it,� said Geoff Manville, principal in Mercer�s Washington Resource Group. �But large employers for their part want to amend the law and make changes, largely around provider payments and delivery-system reform.� Big employers �would like to see more aggressive pay-for-performance measures that aim to improve patients� health results while reducing costs in the Medicare program, he said. �That�s the 800-pound gorilla that drives the entire health-care system.�

INSURERS: �The insurance industry is working to persuade the next Congress to roll back a roughly $70 billion tax on insurance companies that takes effect in 2014, saying it will disproportionately hit small businesses that insure their workers. It also wants lawmakers to allow insurers to widen the rating bands that dictate how much more insurers can charge older customers. Insurers also want to tackle the growth of health costs by enacting a new measure to give robust protections against medical malpractice lawsuits to doctors who follow certain �best practice� guidelines.�

HOSPITALS: The American Hospital Association formally came out �in support of Sen. Cornyn�s bill to repeal reform�s Independent Payment Advisory Board (IPAB).� �America�s hospitals support the repeal of IPAB because its existence permanently removes Congress from the decision-making process and threatens the long-time, open and important dialogue between hospitals and their elected officials about the needs of local hospitals and how to provide the highest quality care to their patients and communities,� they wrote in a letter.

DOCTORS: �The American Medical Association (AMA) is warning of �a catastrophe� if lawmakers don�t step in to block the 23 percent cut, which is scheduled to take effect Dec. 1, and another 6.5 percent cut that�s due a month later.�

My reading leads me to believe most of these are realistic expectations, particularly since the various interests involved basically crafted the law in the first place. Insurance and doctors concerns are likely to be met for different reasons.

The new tax on insurance companies (so-called "Cadillac policies") is red meat for Tea Baggers and very apt to be trimmed or cut in the current political climate. 

A Medicare payment cut to doctors would be on the same track, except that (a) these threatened "cuts" are nothing new and (b) something has to happen in the next 21 days (they will go into effect Dec 1 unless Congress intervenes. Medicare reimbursement rates have been an idle threat for years but at the last moment Congress caves and kicks the can down the road a little further.  That's why "the AMA, under pressure from anxious members, is urging Congress to provide a 13-month fix in the lame-duck session." Notice 13 month fix,  not a permanent fix. They know how these things work.

The letter from the AHA to Senator Cornin is nakedly revealing, stating specificlly we are deeply concerned that removing elected officials from the decision-making process could result in even deeper cuts to the Medicare program in the future. Indeed so. Why should something as important as whether or not rates are justified by comparitive market rates, professional standards or (imagine this) outcomes when politicians have historically done such a great job?

Medicare payment rates have been one of the most expensive parts of legislative pork for years.  That's why the so-called Medicare Improvement Act of the Bush years had so many "conduct a study" and "submit a report" phrases in it. That same panel is what the Hospitals are now worried about,  MEDPAC was set up in 1997 as an advisory panel of experts charged with makiing recommendations to Congress about how Medicare could be better operated. That word recommendations is important. Congress then either had to enact those recommendations or let them die the administrative death of being overlooked.

Reform rebranded MEDPAC as IPAB and gives it new life in how that "recommendations" are sent to Congress. Under PPACA those recommendations will take effect unless Congress has the balls to intervene. Ezra Klein explained it well some time ago.

The IPAB is a 15-person, full-time board composed of health-care experts and stakeholders. Members need to be confirmed by the Senate and will serve six-year terms, with one possible reappointment. But the important thing isn't who serves. It's how they vote. Or, as the case may be, don't vote.

If Congress approves the board's recommendations and the president signs them, they go into effect. If Congress does not vote on the board's recommendations, they still go into effect. If Congress votes against the board's recommendations but the president vetoes and Congress can't find the two-thirds necessary to overturn the veto, the recommendations go into effect. It's only if Congress votes them down and the president agrees that the recommendations die. �I believe this commission is the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve,� says Peter Orszag, who's been one of the idea's most enthusiastic supporters.

The board will propose packages of reforms that bring Medicare in line with certain spending targets. Those reforms won't increase cost sharing or taxes and they won't change eligibility or benefits. Instead, they're reforms of what Medicare pays for and how it pays for it. By 2018, the target growth rate is the average five-year increase in GDP plus one percentage point. So if GDP has been growing at 3 percent, the target is 4 percent. If Medicare's growth is faster than that, then the board is charged with saving the lesser of 1) the difference between the target growth rate and the real growth rate, or 2) 1.5 percentage points off the projected growth rate.

There are some weaknesses in the board. If Congress can find 60 votes, it can amend the board's recommendations without finding offsetting savings elsewhere. The board can't seriously change payment rates until 2018. And if Medicare is growing more slowly than the rest of the health-insurance market, then Congress can protect it from the board every other year (so it would have to save more money in, say, 2020, but not in 2021).

As a tax payer I'm looking forward to the day when I no longer have to look at TV commercials for motorized chairs and scooters that are FREE because "Medicare and my insurance took care of everything." That's the most egregious tip of a private-sector iceberg tearing a gigantic hole in the Medicare boat. Earmarks? Who needs earmarks when Congres has the power to stop this kind of crap and still does nothing?

Nothing has been said thus far about "medical malpractice insurance" also mentioned. That's the animal behind the phrase tort reform which HCR critics love to mention and Democrats routinely ignore. The argument against it (that malpractice awards are an insignificant part of overall costs) is really a good reason to make a few adjustments in the name of "tort reform" in order to placate complainers, but there is a stubborn partisan reluctance on the part of advocates to touch the issue.The president mentioned it out loud in the SOTU speech but it was never mentioned again by either party.

One alternative to what is currently a wildly unpredictable system would create special "health care courts" to litigate malpractice lawsuits.

Studies have repeatedly demonstrated that the current ad hoc system of justice, with verdicts that vary widely from one jury to the next, has spawned a culture of legal fear and self protection. Studies also show that the system fails injured patients -- a claim takes an average of five years to resolve and nearly 60 cents out of every dollar spent in the malpractice system ends up going to lawyers or administrative costs.

That's why most of the important health-care constituencies, from the American Medical Association to AARP, favor creating pilot projects for special health courts. Mr. Obama has recently talked about the need "to explore a range of ideas about how to . . . scale back the excessive defensive medicine."

But one interest group hates the idea. You guessed which one. Sen. Mike Enzi (R., Wy.) discovered just how powerful the trial lawyers are when he proposed creating health court pilot projects. His proposal was only to permit experiments, not broad-scale tort reform, and it had been developed with Sen. Max Baucus (D., Mt.), chairman of the Finance Committee. But when Mr. Enzi offered this modest proposal, other members of the Senate Committee on Health, Education, Labor and Pensions killed the idea, declaring that the Constitution requires juries to be the ultimate decision maker in civil lawsuits.

That's not true. Special courts without juries are common in America and include courts for bankruptcy, tax disputes, workers compensation and more. America has a long history of using expert courts when there is a need for expertise and consistency. It's hard to imagine any area that needs consistent justice more than health care.

But that can has been kicked so far down the road there is no knowing when it will be seen again.