The ACP Advocate Blog

by Bob Doherty

Wednesday, July 27, 2011

The latest on the chaos in Washington

As the clock ticks down to a possible U.S. default—and downgrading of government securities—Washington still has not found a way to move forward on resolving the debt limit. It is no longer a fight between Republicans and Democrats, or Congress and the White House, or between the Senate and House of Representatives, but within each party and each chamber.

Senate Majority Leader Reid and House Speaker Boehner have produced bills that would reduce discretionary spending and create a process to address entitlement spending and tax reform, but neither appears to have the votes in Congress to get it through their own respective chambers, never mind a single bill that both the House and Senate could agree on and send to President Obama for his signature. Speaker Boehner is having difficulty in winning over “Tea Party” conservatives within his own conference; Majority Leader Reid would have to get 60 votes to overcome an expected filibuster by some Republican Senators. The White House has said that it supports the Reid bill and has threatened to veto Boehner’s bill if it reached the president’s desk—but the President also continues to call for a self-proclaimed “balanced” compromise that can pass both chambers.

Although there continue to be some GOP politicians who do not think that it would be a disaster if the debt ceiling isn’t increased, this is not the position of Speaker Boehner, Senator Reid, Senator Minority Leader McConnell, or President Obama—or the credit rating agencies that will decide if U.S securities will be downgraded. And, as I have written before in this blog, the arithmetic of the federal budget shows definitively that the federal government will not have enough cash on hand to meet all of its legally mandated obligations if no deal is reached to increase the debt ceiling. Suspension of Medicare and Medicaid payments and/or a shut-down of critical health and safety agencies, like the FDA and CDC, is a growing possibility with each day that there is no solution and as we approach the August 2 date when the government won’t have enough cash to pay its bills.

Here is the latest on what is on the table. Both the Reid and Boehner bills attempt to reduce federal discretionary spending by $1.2 trillion over the next decade, although Reid includes savings from winding down the wars in Iraq and Afghanistan and Boehner would not. (Although the Ryan budget resolution passed earlier by the House includes the same savings from ending both wars.) The Reid bill includes defense cuts, the Boehner bill does not. Both would mandate across-the-board cuts as a fall back to enforce the discretionary program savings if both chambers didn’t agree on legislation to achieve them.

Both create a special joint committee of current members of Congress to recommend changes in Medicare, Medicaid, Social Security and tax policy to achieve another $1.8 trillion in deficit reduction, which would be voted up or down by Congress (with no amendments or filibusters) using a fast-track “base closing” model. The major difference is that Speaker Boehner would require that Congress vote a second time on increasing the debt ceiling in 2012 and could disapprove an increase at that point (resulting in another potential default scenario) if Congress didn’t agree to the additional $1.8 trillion in tax and entitlement savings; Majority Leader Reid would authorize an increase in the debt ceiling with no additional votes to authorize through 2012. The White House has stated that it likely would veto anything that would require a second vote on the debt ceiling in 2012, arguing that this would further de-stabilize the market.

Because neither the Boehner and Reid proposals include Medicare and Medicaid cuts at this time (punting the issue to the special joint committee), Medicare GME/IME payments, imaging pay cuts, lab co-pays, advancing the age of eligibility, and other savings that had been under consideration earlier are not now on the table. Neither is a permanent solution to the Medicare SGR doc pay cuts sought by organized medicine. All of these—and other potential entitlement savings—likely would be among the items that would be considered later by the special joint committee for a “fast track” vote by Congress.

Despite the differences in the Reid and Boehner bills, there have enough things in common to see a way to a bipartisan, bi-chamber solution, if they can resolve the issue of Congress having to vote again on the debt ceiling in 2012, the biggest sticking point, and can get their own conferences to agree. Speaker Boehner almost certainly will need the help of House Democrats since there is as many as several dozen Tea Party Republicans who have pledged to vote against any increase in the debt, and Reid will need Republican votes to overcome a filibuster. If they can’t or won’t come to a solution in the next few days that the White House will also accept, we could see chaos starting next week as the government ends up in an unprecedented situation of trying to decide what bills it can afford to pay, coupled with a potential downgrading of U.S. securities, potentially leading to higher interest rates (and ironically, an increase in the deficit because the U.S. Treasurer would have to pay more interest on its debt) and instability in domestic and world markets.

Today’s question: What is your reaction to the chaos in Washington, and what do you think it could mean for health care?

Thursday, July 21, 2011

Who is trying to kill Grandma now?

I came across this provocative commentary about why the “death panel” myth lives on, and how it continues to poison debate on changing the status quo. You will recall that the “death panel” charge was originally leveled at a proposed provision in the health reform law that would have reimbursed doctors for end-of-life care, leading to the provision being dropped from the Affordable Care Act (ACA). Now, the charge is being leveled at the Independent Payment Advisory Board (IPAB) authorized by the ACA. Some critics outrageously equate IPAB to the Soviet Union’s politiburo, as if IPAB had gulags in Siberia to enforce its recommendations!

Actually, IPAB is a 15 member advisory committee (not yet appointed) that will propose to Congress ways to reform payment policies to reduce Medicare spending, but only if overall spending exceeds an allowable rate of growth. It is specifically prohibited from “rationing” care or denying benefits the Secretary of Health & Human Services (HHS) would be required to implement the provisions included in the IPAB proposal, unless Congress, under “fast track” rules, passes an alternative proposal with an equivalent amount of budgetary savings or “supersedes” the IPAB recommendations with a supermajority vote of three-fifths of the Senate.

ACP agrees with critics who say that IPAB gives too much authority to an unelected board and too little authority for Congress to reject its recommendations, but those problems could be easily be fixed. In a statement submitted to a congressional hearing on IPAB, ACP had this to say:

“Current discussions within Congress and the healthcare community focus on the dichotomous options of maintaining IPAB as defined in the legislation or repealing it. The College offers an alternative position---one that maintains the provision’s positive elements that both informs Congress on means to effectively control the unsustainable growth of Medicare healthcare expenditures and provides an increased requirement for Congress to address this important issue, but amends the provision to maintain Congress’ authority to control Medicare expenditures and be appropriately accountable to the public.”

Specifically, ACP proposed that Congress be able to over-ride IPAB’s recommendations with a simple majority vote of the House and Senate, instead of a “super-majority” of Senators. This would ensure that IPAB was accountable to the democratic legislative process, while still recognizing the value of having an independent expert board, with sufficient oversight and accountability, being able to propose policies that would be less affected by undue special-interest influence than Congress. (Just look at how poorly Congress has handled the Medicare Sustainable Growth Rate (SGR) . . . or for that matter, the debt ceiling debate! )

I understand that some people—and it isn’t just conservative critics, since some liberal Democrats also are calling for IPAB’s repeal—would say that it can’t (or shouldn’t) be fixed as ACP proposes, that it needs to be repealed in its entirety. And some supporters of IPAB will argue that subjecting its recommendations to a simple majority vote, as ACP proposes, would make it ineffective by making it too easy for Congress to override it. These are reasonable points of view that should be debated. But the debate is not helped by comparing IPAB to a Soviet dictatorship and claiming that it will put seniors to death.

I feel the same about liberals’ claims that Paul Ryan’s Medicare contribution (voucher) proposal will “kill seniors.” ACP is concerned that the voucher proposal would shift too many costs to beneficiaries, especially since the value of the voucher would not keep pace with health care costs. And there are reasons to question the logic that private insurance companies would run the program better and more efficiently than the current government-administered programs, when that has not been the case with the Medicare Advantage program. These too are reasonable issues to be debate, but I don’t think that the issues are illuminated by telling seniors that House Republicans want to kill them.

The problem with hyperbole is that the only way to reduce the federal deficit and debt is to explore ways to reduce Medicare spending without hurting seniors. IPAB or the Ryan voucher plan may not be the best approaches, but if so, critics who really care about seniors –and about the public debt—need to offer constructive alternatives or ways to improve them, as ACP is trying to do. Otherwise, we will be left with an unsustainable status quo.

Today’s question: What do you think about the scare tactics on IPAB and the Ryan voucher plan?

Friday, July 15, 2011

You can argue debt politics, but you can’t repeal arithmetic

Politicians can argue all they want about the best policies, but try as they like, they can’t repeal mathematical certainties. If the debt ceiling is not increased by August 2, the federal government will not have enough cash on hand in August to meet its legal obligations.

Let’s look at the arithmetic.

According to the highly respected Bipartisan Policy Center, the U.S. in August will take in a total of $172.4 billion in revenue against obligated payments of more than $306 billion. This will leave a $134 billion shortfall if the debt ceiling is not increased. The Treasury department would then have to decide which among 80 million monthly payments would be paid and which ones would not.

A new interactive tool based on the Bipartisan Policy Center’s analysis, shows how difficult such choices will be. I used the Washington Post’s tool to see what would happen if the government started out by funding only Social Security checks, Medicare and Medicaid reimbursement, active military duty pay, Defense contractors, IRS refunds, and the VA.

Guess what? The Treasury would be left with $2.8 billion in cash on hand and $137.1 billion in remaining obligated payments due. Here is a list of what it wouldn’t be able to fund, according to the Post’s tool:

  • Tuition assistance for college students, special education programs
  • Current and retired Federal workers
  • 3.7 million people on unemployment benefits
  • Food stamp recipients, child nutrition programs, and the Women, Infants, and Children program
  • HHS grants, such as National Institutes of Health, Centers for Disease Control and Prevention and Food and Drug Administration, for research and projects
  • Housing assistance for 1.2 million poor households, rental assistance recipients
  • Support of local and state governments in design, construction and maintenance of the national highway systems and programs involving the national transportation infrastructure
  • Energy research, national nuclear programs
  • FBI, federal courts
  • Job training and employment services
  • Programs that support public transportation systems such as buses, ferries, light rail and subways
  • Programs protecting health and the environment, such as oil spill cleanup and air quality
  • Programs for small businesses, such as loans, training and contracting
  • Smaller costs in such agencies as State Department, Agriculture Department, Federal Railroad Administration, and U.S. Post Service money orders and District of Columbia funds

The Treasury could take its remaining $2.8 billion cash on hand under this scenario to fund a few of the above programs—but almost the entire federal workforce ($14.2 billion for salaries and benefits) would still have to be laid off.

This is why I still think it is very possible that the Treasury department would suspend paying doctors and hospitals for taking care of Medicare patients, freeing up $50 billion to keep more agencies open and public servants on the payroll.

The numbers don’t settle the political argument, of course, but maybe it will get people to put aside their ideological talking points for a second and look at the facts.

The fact is that small, across-the-board cuts in every federal agency, as one reader of this blog suggested, won’t be enough to make up for the cash shortfall. The federal government simply won’t be able to meet its payments on the debt, send ending out Social Security and Medicare checks, and issue paychecks to active duty personnel, without eliminating much of everything else the government does including most of the federal workforce. The safety of food and drugs, medical research, the VA, and many other programs of concern to physicians and patients would be among those at risk.

Or it can cut off payments to doctors and hospitals to keep some of these programs open.

Just do the math.

Today’s question: Try out the Debt Interactive Tool yourself and tell us what you think it says about the consequences for Medicare and Medicaid, the VA, CDC, NIH, and many other public health and safety programs if the debt ceiling is not increased.

Tuesday, July 12, 2011

Why physicians should speak up about the debt deadlock

Joe Scarborough reminds us that the divisions in American government are hardly new, paraphrasing Benjamin Franklin’s observation that “When you assemble a number of men, to have the advantage of their joint wisdom, you inevitably assemble . . . all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views. From such an assembly can a perfect production be expected?” (This comes from a September 17, 1787 speech by Mr. Franklin to urge ratification of the U.S. Constitution, read on his behalf because he was too ill to deliver it in person. The Constitution was ratified the same day.)

I suppose we should be encouraged that Congress’s prejudices, passions, errors of opinion, local interests and selfish views are as American as apple pie, and the Republic has somehow survived nonetheless. Still, I find it deeply troubling that today’s politicians can’t find their way to agree on the debt ceiling.

No one should expect a “perfect production” to come out of this Congress and this administration, given how far apart they are on the need for tax increases and entitlement reforms. But they need to agree to something, and they need to do it soon.

I will leave it to others, who know a lot more about global economics than me, to explain what likely will happen to the economy if the debt ceiling isn’t increased by August 2. Let’s talk about the impact on health care, something I know quite a bit about—and why physicians especially should be concerned:

For one thing, as I blogged last week, physicians will be hit squarely in their pocketbooks if the debt ceiling is not increased by August 2. The government will experience a massive and growing cash flow shortage; and as a result, “handling all payments for important and popular programs (e.g., Social Security, Medicare, Medicaid, Defense, active duty pay) will quickly become impossible.”

Without enough cash on hand, the federal government will be forced to prioritize its payment obligations. Is there any doubt that if the choice is between suspending Social Security checks to seniors or Medicare payments to doctors, doctors will the first ones to be shorted?

Physicians should be very, very concerned that weeks could go by in August before they would get even one dime from the federal government for their services to patients. The same is true of hospitals, who may not receive any payments for treating Medicare patients or for paying residents’ salaries.

Failure to reach agreement on the debt ceiling also would result in more than half of the 1.9 million government civilian employees losing their jobs overnight, according for former GOP Senate budget committee staffer Steve Bell. Included will be federal employees who work for the CDC, NIH, FDA, CMS, and the other regulatory agencies that physicians and patients alike count on to keep our food and drugs safe, the protect us from communicable diseases, conduct medical research and administer Medicare and Medicaid.

Let’s say that the politicians do find a way to authorize an increase in the debt ceiling in time to avert massive lay-offs and an immediate suspension of payments to physicians. Physicians should be paying very close attention to how Medicare, Medicaid and other critical health programs may be affected. President Obama has put on the table major structural changes in Medicare, including gradually advancing the age of eligibility to coincide with Social Security—but only in the context of a $4 trillion “grand bargain” on deficit reduction that includes tax revenues, which the GOP has rejected.

The GOP has countered with a smaller deficit reduction package that over ten years would cut Medicare by $250 billion. Included in the GOP proposal, which was rejected by the president, is a $14 billion cut Medicare GME/IME funding, $1.1 billion in savings from requiring prior authorization for high-cost imaging, another $0.8 billion by cutting payments for imaging, $8.5 to 16 billion by charging co-pays for laboratory services, and $38 billion by requiring higher income beneficiaries to pay more into the program. None of the proposals being offered so far by either party appear to include permanent repeal of the Medicare Sustainable Growth Rate formula, a top priority of organized medicine.

Given the high stakes, it has been especially surprising to me that more physicians aren’t speaking up. To recap: if a deal is not reached, they and their patient will bear the brunt of suspended payments. They and their patients will suffer the consequences of massive lay-offs in the agencies charged with protecting public health. If, on the other hand, a deal is reached, the changes it may make in Medicare, Medicaid and other entitlement and discretionary health programs will have a lasting impact on American health care, potentially for generations to come.

Physicians shouldn’t count on politicians, with “all their prejudices, their passions, their errors of opinion, their local interests, and their selfish views”, to come to a responsible debt agreement, never mind a perfect production. They need to enter the debate and join with ACP to urge agreement on a debt ceiling package that lowers the rate of growth in Medicare and Medicaid spending by addressing key cost-drivers, that permanently repeals the SGR, and that preserves funding for essential programs, in time to avert an unprecedented disruption in payments and mass lay-offs of federal employees that are responsible for ensuring public health and safety.

Today’s question: Why do you think physicians have not been more engaged in pressing Congress and the President to reach a debt deal that averts any suspension of payments, responsibly reduces Medicare and Medicaid spending growth, eliminates the SGR, and ensures sufficient funding for critical programs?

Friday, July 8, 2011

"Don't cut him. Don't cut me. Cut that man behind the tree!"

The late Senator Russell Long described Americans' aversion to taxes as being a case of “Don’t tax him. Don’t tax me. Tax that man behind the tree!”

The same can be said about federal spending. Most people say they are in favor of reducing government spending and the deficit, but they want someone else—the proverbial man behind the tree—to take the hit, and pay the taxes. Not out of their own government check, or their own taxes, mind you.

Just look at the frenzied reaction from liberal Democrats to the news that President Obama is seeking a much bigger debt ceiling deal that would include previously sacrosanct cuts in Medicare, Medicaid, Social Security – and continued insistence by conservative Republicans that any increase in tax revenue is off the table. (It isn’t just the politicians: a new poll finds that most Americans are opposed to cuts in Medicare, Medicaid, and Social Security.)

Meanwhile, interest groups are going into high gear to ward off potential cuts. AARP has issued a statement and launched a massive grass roots lobbying campaign against Social Security and Medicare benefit cuts. The Association of American Medical Colleges (AAMC) has told President Obama that it is “gravely concerned” about proposed cuts in Graduate Medical Education (GME). The American Hospital Association and Federation of American Hospitals are spending millions on an advertising campaign against “further funding cuts in Medicare and Medicaid.”

And so it goes.

Yesterday, the American College of Physicians took a decidedly different tack in a press release and letter to President Obama and Congressional negotiators.

First, ACP urged Congress and the Administration to reach agreement on an increase in the debt ceiling before care of Medicare and Medicaid patients is disrupted. If a deal isn’t reached on the debt ceiling before August 2, Medicare won’t have enough cash on hand to pay physicians for taking care of Medicare and Medicaid patients.

Second, a credible and fiscally responsible agreement should eliminate the Medicare Sustainable Growth Rate (SGR), instead of counting savings from cuts that Congress has no intention of allowing to go into effect.

Third, spending growth on Medicare and Medicaid should be reduced as part of a broad agreement, but not by cutting funding for essential programs to improve access, quality and ensure a sufficient supply of physicians, especially primary care physicians.

And fourth, Congress and the Administration should partner with physicians to support bold initiatives to address the real cost drivers behind increased federal spending.

Yes, ACP’s letter, like those from many other interest groups, expressed opposition to cuts in “essential” programs “that are designed to improve access, quality, and ensure a sufficient physician workforce”—such as GME funding for primary care training programs.

The difference is that instead of drawing a line in the sand against any and all Medicare and Medicaid spending cuts, ACP proposed nine strategies to reduce per capita health care spending, which would also lower Medicare and Medicaid spending.

Provide physicians and patients with evidence on comparative effectiveness. Support efforts by the medical profession to encourage judicious and appropriate use of health care resources. Consider requiring people to pay more for less effective care. Take clinical effectiveness and cost into consideration in deciding what Medicare and Medicaid will cover. Reform payment and delivery systems to align incentives with the value of care. Establish a better process to identify mis-valued services. Reduce defensive medicine costs by enacting no-fault health courts and caps on non-economic damages. Allow the federal government to negotiate Medicare Part D drug prices. Encourage innovation at both the federal and state levels in delivery services to Medicaid patients while preserving the existing guarantee of coverage for all lower-income persons.

The fact is that it is impossible to reduce the federal budget deficit and debt without reducing Medicare and Medicaid spending—it is only a question of how. Isn’t it better for physicians to offer their own ideas to reduce health care spending, as ACP has done, instead of declaring that cuts are off-the-table and that the “other guy behind the tree” should take the hit?

Today’s questions: What do you think of the effort by some politicians and interest groups to say that Medicare and Medicaid spending reductions or increased revenues are off the table? What about ACP’s efforts to urge agreement on a debt deal that would protect key programs while offering ways to reduce per capita health spending?

Tuesday, July 5, 2011

Who’ll be harmed if there is a budget train wreck? Doctors and their patients.

Watching the negotiations over the debt ceiling legislation is like watching an impending train wreck.

You see a train hurtling down the track, you see an unobservant trucker about to cross, you know that the train engineer and the truck driver have only a few moments to avert disaster, you try to yell and scream to get them to pay attention before disaster strikes—but you have this sinking feeling that your voice won’t be heard until it is too late.

Well, that is how I feel watching the collapsing negotiations over raising the debt ceiling. Responsible persons in both political parties know that a failure by Congress to authorize an increase in the debt ceiling will create incalculable harm to our country, even though some politicians seem to think that default would be no big deal.

But it would be a big deal, and here is why. If August 2 rolls around and Congress hasn’t authorized the government to borrow more, the federal treasury won’t have enough money to pay its bills. It is a simple matter of arithmetic.

According to a new report by the highly respected Bipartisan Policy Center, the federal government on August 3 would have a cash deficit of $20 billion (obligated spending in excess of revenue collected). On August 4, it will have a cash flow deficit of $26 billion.

On August 5, the daily cash flow deficit would be $31 billion. By, August 9, the daily cash flow deficit would be $39 billion and by August 15, the gap between cash on hand and obligated spending will be a whopping $74 billion. According to the Center, the U.S. government would immediately have to cut spending by 44% creating enormous “economic disruption.”

The Treasury Department would effectively have to choose among 80 million monthly payments so that 40–45% of bills are NOT paid.

Excluding interest on the debt, Social Security and Medicare and Medicaid are next in line in obligated federal spending, followed by defense contractors, unemployment insurance benefits, and military active duty pay.

Given the cash flow shortfall, “Handling all payments for important and popular programs (e.g., Social Security, Medicare, Medicaid, Defense, active duty pay) will quickly become impossible.”

As a result, many service providers would be unpaid, including Medicare and Medicaid providers (e.g. physicians, hospitals), defense contractors, and individuals now receiving government checks, creating “widespread uncertainty as decisions are made day by day.”

If physicians think that dealing with the uncertainties of Medicare SGR cuts is too much, how about not getting paid at all for the care they deliver to Medicare and Medicaid patients? Without knowing for how long? With no promise that the government will ever pay them back?

Up until now, much of the debate over the debt ceiling has been about generalities about government spending and taxes, but the numbers don’t lie: failure by Congress to authorize an increase in the debt ceiling will result in millions of people not getting the benefits they’ve been promised and government contractors not getting paid for the services they’ve provided. Not to mention the potential harm to the economy.

And physicians could soon find that they are among those who won’t be paid when the government runs out of cash and Congress won’t let it borrow more.

Today’s questions: What do you think most physicians would do if Congress doesn’t agree to increase the debt limit, and the government stops paying them for treating Medicare and Medicaid patients? What would the impact be on patients?

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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