The House Budget Poverty Report

A few people have asked why I didn’t blog about the release of Rep Ryan’s House Budget Committee poverty report that came out on Monday. I did tweet this Monday:

and this

I didn’t blog about it because the Medicaid portion of the document is really quite bad given that the report was hyped as the precursor to a major policy push by Rep Ryan and House Republicans. It is essentially a poorly done annotated bibliography that would get about a C- in my intro U.S. health system course. The biggest problem with the Medicaid portion of the document is not even the one-sided summary of the literature that is cited that could be forgiven in such a document, but ignoring the issue of the dual eligibles almost completely in something that is meant to set up the need for Medicaid reform is quite a big miss. So, the document is not serious enough on the Medicaid issue to warrant much blogging time.

I didn’t read the remainder of the report (on other federal poverty programs) after looking at the Medicaid parts. Here is a blog tag on the many things I have written about the dual eligibles and the need for reform.

ACA redistribution via Medicaid: what it means for future reform

The self imposed redistribution from mostly poor (mostly red) states, to mostly rich (mostly blue) states via the ACA Medicaid expansion is a direct result of the June 2012 Supreme Court ruling that made it voluntary.

That 7-2 court decision, and the subsequent state decisions, mean that the primary liberal/progressive health reform goal of expanding insurance coverage is being thwarted in some of the most needy states. Liberals/progressives have two choices: fight out the state-by-state Medicaid expansion decisions, or seek a health reform deal with conservatives that would be more likely to expand coverage in the non-expanding, poorest states, sooner. The first is not a pleasing outcome, and the second seems like a political impossibility.

This result was likely inevitable given the SCOTUS decision coupled with the re-election of President Obama; as I said in my post the day the decision was released:

…in the Medicaid aspect of the ruling the court identified the penalty of losing all of your states’ Medicaid funding if you don’t undertake the prescribed Medicaid expansion, to be something that the Federal Government could not do because it would be coercive to states. While this may seem to Conservatives a bit like the question “other than that Mrs. Lincoln, how was the play?” in the long run I suspect this precedent will be important going forward in policy debates.

Leaving the Medicaid expansion in place, while allowing states to not undertake the expansion without losing all medicaid funding has set up a fascinating test of ideology v. financial self interest for Conservative states. People’s lives are at stake here and I don’t mean to minimize that, but again, elections are important and I suspect what State politicians plan to do about the Medicaid expansions will be a key question in some states this Fall.

Reihan Salam has persuasively noted that a default insurance option is needed for health reform, motivated at least in part by the difficulties of I agree with him–if I could do just one thing to the ACA, it would be to add such a default option.

However, I have long felt that a political deal on health reform was needed, and such a deal was at the heart of a book I put out in September 2011 that claimed to identify a health reform deal between Democrats and Republicans, that had at its heart replacing the individual mandate with a default insurance option in the form of universal catastrophic health insurance implemented via the Medicare program. My overriding political point in Fall 2011 was that a Super Committee deal that made the SCOTUS case go away could have removed the doomsday outcome for both sides. We didn’t get such a deal, and also got a mixed SCOTUS decision, that has lead directly to an uneven Medicaid expansion.

My proposed deal is not a liberal/progressive dream, but then neither is the uneven Medicaid expansion.

Paradoxically, a SCOTUS ruling that had struck down the individual mandate as unconstitutional and invalidated premium supported private insurance sold in exchanges but that left the Medicaid expansion untouched would have produced what would have seemed like a bigger loss for Democrats at the time, but that would have at least resulted in all persons up to 133% of the poverty level being guaranteed health insurance. From such a base, the parties could fight another day and the red states, especially in the South, could have continued their tradition of saying they hated the federal government (all the way to the bank). But that is not where we are, so where do we go from here?

I think Liberal/Progressive reformers need a health reform deal because of the uneven Medicaid expansion, but we are in a difficult position because we have no control over the the biggest block to a health reform deal: the fact that elected Republicans do not hold any coherent health reform position(s) for which they are willing to vote (old posts here, here, here, here, here, etc)

It takes two sides to make a deal. This doesn’t mean there aren’t conservative intellectuals with reform ideas–Capretta, Moffit, Ponnuru, Roy, Salam, Douthat and others–these are thoughtful people with ideas that I think are reasonable to differing degrees. But whatever I think of them, some amalgamation of their ideas desperately needs to meet the Republican-controlled Commerce Committee in the House of Representatives, ground zero for any actual health reform effort; and then the CBO.

I think that all of these intellectuals realize that the Republican party is the only way for their ideas to reach legislative fruition, and they know that eventually the Party will have to be for something in health reform. And I believe they are quietly working towards making this case within the Republican Party. The entire country, but especially Liberals/Progressives who know that more must be done on health reform, should be rooting for them to succeed.

Update: while I wasn’t attempting an exhaustive list of conservative public intellectuals with reform ideas, I should definitely have included Yuval Levin.

Should we take Ryan’s health policy plans seriously?

Only if the focus of attention quickly shifts to the Commerce and Ways and Means committees in the House of Representatives. That is where the heavy lifting of any health reform proposal must be done, as it was with the Affordable Care Act. As long as the Budget committee and Rep. Ryan remain the focus, the health policy aspects of the proposal are mostly talk.

Rep. Ryan this morning unveiled the beginnings of the House Budget committee’s budget resolution for the Fiscal Year 2013 budget, and here is CBOs early take, though it is important to remember that they have not analyzed the specific policies contained in the Budget Resolution.

The calculations presented here represent CBO’s assessment of how the specified paths would alter the trajectories of federal debt, revenues, spending, and economic output relative to the trajectories under two scenarios that CBO has analyzed previously. Those calculations do not represent a cost estimate for legislation or an analysis of the effects of any given policies. In particular, CBO has not considered whether the specified paths are consistent with the policy proposals or budget figures released today by Chairman Ryan as part of his proposed budget resolution.

CBO has essentially said, if this budget performs exactly as Chairman Ryan says it will, this will be the top level result; CBO will eventually weigh in on whether they believe the numbers add up, but they have yet to do so.

On the big picture health policy front, Marilyn Serafini has a quick take, and notes that the FY 2013 budget sets a Medicare growth target of GDP growth plus 0.5%–more aggressive than his 2012 budget target of GDP plus 1.0%–but matching the goal set out by President Obama’s budget. So, they have agreed on an overall health care cost inflation target for Medicare, but not on the details of how to get there.

The details are really important.

That is where the Commerce and Ways and Means Committee’s come in. They have jurisdiction over health care (as does the Budget Committee) and they will have to discuss, mark up and pass very detailed health policy legislation to bring about any sort of premium support/competitive bidding policy (TIE FAQ key reading on topic) such as what is suggested in this budget. It is instructive to remember that the health policy provisions contained in last year’s budget resolution did not see the light of day in either Commerce or Ways and Means, or the Budget Committee for that matter. Nor has Rep. Ryan’s Patients’ Choice Act (post on the PCA with multiple links), which is a plan to reform health insurance for the under 65 set that he introduced on May 20, 2009 ever been marked up by one of these committees so that it could be scored by the CBO. And Republicans have been claiming to be interested in replacing the ACA, but have taken no actual (hard) steps to do so.

So, there is a bit of a pattern here: lots of noise and no follow through on the health policy details. So, unless you start hearing more of the names Fred Upton (Commerce) and Dave Camp (Ways and Means) and less of Paul Ryan, you will know the health policy provisions contained in this budget are not serious.

House Budget Committee Spox Response on IPAB posts

Conor Sweeney, Communications Director of the House Budget Committee that is chaired by Rep. Paul Ryan emailed me the below message (printed verbatim and with his permission) in response to my post last night on the upcoming IPAB hearings. I don’t believe Mr. Sweeney had a chance to see the second post before sending the email based on the timing of the email and the post, but I believe his message to me addresses most of his concerns about what I have written. I appreciate Mr. Sweeney taking the time to contact me. Below his email message I Provide brief responses to his comments.


Dr. Taylor-

We appreciate your interest in Paul Ryan and his efforts to advance consumer-directed health care reforms. With respect to your concerns:

  • Congressman Paul Ryan believes in providing greater transparency for consumers, not imposing greater control over their lives. The Patients’ Choice Act includes a transparency initiative that empowers beneficiaries to serve as more powerful consumers.  The President’s approach empowers an unconstitutional board to impose price controls, cut provider reimbursements, or make coverage determinations by fiat.
  • The facts about The Patients’ Choice Act’s Health Care Service Commission:
    • No authority to influence Medicare spending;
    • No decision-making authority with respect to provider reimbursements or availability of beneficiary services;
    • Exists solely for the purpose of encouraging transparency and proper metrics with respect to health care services, which will allow consumers to compare on the basis of cost and quality.
  • As Ryan recently argued:“Our plan is to give seniors the power to deny business to inefficient providers. Their plan is to give government the power to deny care to seniors.”
  • For more on The Patients’ Choice Act, please see page 8 of this Section-by-Section document from Senator Coburn’s office:

Many thanks,



Greater Transparency: I very much like the PCA notion that guidelines and the like be put into language that is understandable. They clearly wanted the information created by the Commission and the Quality Forum (two boards created by the PCA) to be useable by consumers as well as insurers. It is unclear how that would all have worked.

Unconstitutional Board: The PCA creates a 5 member board (who must have this be their full time job) that is nominated by the President and confirmed by the Senate. The 5 member board then creates a 15 member board to carry out the details of guidelines, research and the like. The IPAB is a 15 member board that is nominated by the President and confirmed by the Senate (and IPAB must be their full time job). There is a great deal of similarity. The implication of the boards created in both bills/law is that Congress is unable to do much of the hardest work, and they are turning to experts. How can such a board be unconstitutional when in the ACA but fine when proposed in the PCA?

Price Controls, cut provider reimbursements: IPAB would be required to issue recommendations that would reduce Medicare per capita expenditures if Medicare growth rate targets are not met. This will be done by cutting payments to providers given prohibitions in the ACA against “The proposal shall not include any recommendation to ration health care, raise revenues or Medicare beneficiary premiums under section 1818, 1818A, or 1839, increase Medicare beneficiary costsharing (including deductibles, coinsurance, and copayments), or otherwise restrict benefits or modify eligibility criteria.” ( Quoting the law (Pub. L. 111-148, § 3403) and what IPAB cannot do.

The worst penalty/impact: I wrote in the previous post that the PCA provisions had more teeth than does the IPAB, and a commenter made a good point that while the ultimate penalty in the PCA as I read it (banning someone from participating in Medicare and Medicaid) is a huge penalty, the IPAB could be expected to have a smaller impact on many more providers through reimbursement cuts. This is a fair point. Another important point is that the PCA was never subjected to a hearing, and certainly wasn’t marked in committee, so it would have been clarified and fleshed out had it been. However, the cosponsors made clear the top penalty that could be imposed by these boards in the PCA was the banning of providers from Medicare and Medicaid and/or a civil penalty (again, as I read it). This would happen if providers didn’t follow the guidelines put forth by the committee created in the PCA. That is quite a penalty imposed by a board in conjunction with the Sec. of HHS.

Our plan: Here he is referring to Rep. Ryan’s Medicare proposal in his budget. I didn’t post on this, and am not going to get into it here.The blog has had lots on it, mostly written by Austin.

Sen. Coburn document: The document linked is a summary of the Patients’ Choice Act. As always, the best thing is for you to read the relevant sections of the Patients’ Choice Act for yourself, p. 206-215 are the key sections. You can read the relevant sections of the actual bill in 5 minutes.

Rationing: Not sure where to start. The word rationing has been rendered devoid of meaning by our political discourse. Not rationing is unlimited supply. This is impossible now, and always will be impossible. It is a matter of how, not if.  Watching the morning hearing on IPAB reaffirmed for me a bipartisan blind spot: reducing costs over what they would be by default (and on a per capita basis) can only occur by providing less care and/or paying less for that same care. You can call it what you want, I call it math. It will be hard as hell, but we have no choice but to try. Both sides assume the best for their favorite policy, and the worst for the other guys. Rationing is what ‘they’ (the other side wants); ‘We’ (our side) wants to improve quality, save money and increase value. The country has got to grow up and face limits. We have no hope of doing so if our leaders simply bicker with and talk past one another as they did in this hearing.

Can we control costs without choosing between Ryan v. Obama?

Gene Steuerle argues yes, that budget caps placed on total federal spending (Medicare, Medicaid, tax subsidy of private insurance) is the way to go. For one thing, he says we will never completely decide between the various approaches to cost control. Instead, we will maintain a muddled system with many mid-course corrections, likely driven by election victories of the various parties, fueled at least in part by opposition to efforts at health care cost control. And Steuerle notes that for all the heat between the sides and talk of fundamental differences, three basic questions loom over any approach to cost control.

  1. How should budget constraints be applied?
  2. Should automatic budget growth for health care programs (particularly, Medicare) finally be reined in?
  3. Should government health program budgets be limited even if neither side gets its way on question 1?

He notes that question 1 is the focus of most debate (think IPAB v. voucher), and any answer to this question will be politically hard (again, see comments on IPAB and town hall meetings on Ryan budget). This drives both sides to needing budget caps on federal health spending if we are to control health care costs. He says if we wait for political agreement on how to actually implement cost control (the last step, again IPAB v. vouchers for simplicity), we will never control costs, because we will never decide once and for all. So, the answer to question #3 must be yes, if we are to address health care costs. He believes budget caps that provide flexibility to implement different answers to question 1 is the way to go (and he makes a convincing case).

I especially like the reply that Steuerle makes in the comments section of his piece in a reply to Joe Antos (comments in parentheses are mine):

….I asked, but he (Joe Antos) did not answer, what one does if there is no permanent resolution of the health care debate.  Right now Joe is arguing with his partner (the Dems) over how they should raise their kid, but the kid is playing in the street.  To those who say we don’t know what to do, or we can’t do anything unless done my way—often those on the other side of the issue from Joe—I say we do know what to do: bring the kid in off the street.Common ground doesn’t mean agreement on everything.  Removal of open-ended budgets represents the common ground element of both the Obama and Ryan plans. [emphasis mine]

The bigger difference between the Obama v. Ryan approach is that the ACA aims to address costs while expanding insurance coverage, whereas the Ryan budget does not have a strategy to expand insurance coverage. Perhaps budget caps to control federal costs and fighting out the next election (and the next, etc) over the coverage issue and the mechanism of applying the agreed upon caps is the best we can hope for at this time.

Ryan v. ACA Can Help Provide Needed Clarity

There are two major problems with the health care system:

  • Cost. The health system is unsustainable, and health spending by the federal government, namely Medicare is the primary driver of the future budget deficit.
  • Coverage (uninsured). There are 50 some-odd million persons without insurance, and many more who are exposed to spells of no coverage due to the insurance/employment linkage.

The big idea of the Affordable Care Act (ACA) is to cobble together a coverage approach that moves us toward universal coverage (say 95% cover in a decade) while putting forth a variety of policies that attempt to slow the rate of health care cost inflation, both in Medicare and the private system.  It is an imperfect law, that represented what could get 218 votes in the House, 60 in the Senate and be signed by the President. Any replacement, or modification, will have to do the same.

Representative Ryan has put forth a budget, with some key health policy provisions, which is to his credit. It focuses immediate attention on the Medicaid program by fixing the federal expenditure via block granting, and proposes to transition Medicare toward a risk-adjusted defined-contribution voucher, beginning in a decade. His budget does nothing to address (seek to reduce) the number of uninsured persons in this country.  He calls for repeal of the ACA and takes the position that we cannot afford premium support and Medicaid expansions to increase health insurance coverage rates.  He does hold out hope that if costs slow, health insurance will become more affordable, but a sentiment is not a plan.  Len Nichols has written convincingly why seeking to slow costs without insurance expansions is not likely to be a successful cost containment strategy, either technically or politically.  However, a renewed health care reform discussion is an opportunity for much needed clarity. By producing a plan that can continue the health reform discussion, Rep. Ryan deserves credit.

The big question?

Will we seek to move ahead with the ACA which both expands coverage while trying to address costs in all parts of the health system (with the inevitable tweaks and changes to the law down the road), or will we instead to focus our policy attention on reducing the cost to the federal government of Medicaid (immediately) and Medicare (down the road) while doing nothing to expand health insurance coverage?  Our country really needs to decide, accept the consequences of the approach we prefer, and move ahead.

Who knows, maybe if the choice is clearly framed in this manner, a compromise on how to expand coverage  could be reached before the next election.  We have no hope of addressing costs so long as health care reform is a political football. We need a political deal on coverage so that we can move ahead aggressively to address costs. Addressing health care costs is a necessary, but not a sufficient condition to ever having a long term balanced budget.

Update: fixed a few things, and added a bit of clarification.

Both Sides Still Need a Deal

The Republican Party suffered a spectacular political defeat yesterday when they pulled their AHCA legislation from the House floor, after all the words they spilled the past 7 years. Speaker Ryan said the ACA is the law of the land, and President Trump said that Democrats will want a deal to improve the ACA within a year.

On December 16, 2010 I first blogged that “Both Sides Need a Deal” and laid out a set of big ideas that I claimed would emerge in a deal if the two sides negotiated in policy good faith. I even wrote a book that more fully laid out what a health reform deal would look like, and said it was the crux of a sustainable federal budget. Last Sunday, Ross Douthat, maybe sensing the outcome of yesterday, wrote that a catastrophic insurance program loosely based on Singapore would be the best way forward for Republicans. This column reminded Reihan Salam of my pitch from several years before.


Deal’s between Democrats and Republicans seem impossible politically, but the structure of our system of government makes them a feature, and not a bug. At some point we will have to return to that type of equilibrium. And both sides really do need a deal to achieve more of what they want. I want to re-emphasize 3 of the big ideas from my original proposal and add a fourth in the hopes of starting a conversation, perhaps only with myself.

  • Replace the individual mandate with federally-guaranteed, universal catastrophic insurance coverage and sell private “gap” insurance in state-based exchanges, with income based subsidies
  • End the Medicaid program as we know it by transitioning full responsibility for dual eligible Medicaid costs to Medicare, and moving non-elderly and disabled low income persons into subsidized private gap insurance
  • Modify the tax preference of employer paid health insurance, and replace the cadillac tax with this provision
  • Not in my original proposal, but we should provide some help in purchasing health insurance to persons in the individual market, but whose incomes are too high to qualify for tax credits under our current system; it will help the risk pool and high income persons get a subsidy via the tax treatment of Employer coverage

I am a policy guy, and the policy is crucial (I wrote in 2014 what some of the above ideas could look like for one state–North Carolina to try some of this via an ACA waiver). What I have proposed above is a bit more grand, but it seems that a big deal may paradoxically be easier to obtain than a small one, particularly around the issue of Medicaid. Precisely because there is a no “best way” to address health policy, the politics are particularly important if we are to ever develop a sustainable health care system. A quote from my 2012 book in Chapter 7 sums this up for me:

What our nation most needs is a bipartisan health reform strategy that will allow us to address the interconnected problems of the health care system: cost, coverage and quality. There is no perfect health care system and no perfect plan. However, without a deal that allows both political parties to claim some credit as well as to have some responsibility in seeking to slow health care cost inflation, we have very little chance of success.

I will do some follow up posts on the policy aspect of the imperfect ideas above. I am happy to engage in dialogue if anyone is interested.

Health reform deal, circa December 2010

One thing about health policy blogging is that if you do it long enough, your bell bottoms come back into style. Me, two blogs ago on a political deal using the ACA as a start, published December 16, 2010. Reprinted below in full.


While the rhetoric around health reform has been incendiary from day one, in policy terms, a compromise between Democrats and Republicans using the outline of the Affordable Care Act (ACA) has always been available. The two primary problems with the health care system are costs and lack of coverage. The ACA does pretty well on the second, and is a start on the first, but much more is needed. It will be very hard to get a handle on health care costs, and we will likely only succeed in doing this if both parties are on board.

This is what a deal to move ahead could look like.

  • Replace the individual mandate to purchase insurance with guaranteed catastrophic coverage that is universal. I suggest individual caps of $10,000/family $15,000. I would do this via Medicare because it is simple, and could be implemented quickly. Others have suggested new federal initiatives that would provide catastrophic coverage; it is surprising to me that conservatives would want a new federal apparatus to implement this, but I follow the logic of their wanting to focus on catastrophic coverage. I would gladly trade true universal, catastrophic coverage for slowly creeping up on universal coverage with more comprehensive benefits. This allows progressives and conservatives to get what they most want: universal coverage and catastrophic, instead of first dollar coverage, respectively.
  • End the tax exclusion of employer paid insurance. This is easily the most consequential policy that we could undertake to slow cost inflation in the private market. The Deficit Commission suggested this. It has long been a mainstay of Republican health care plans, like Sen. McCain’s, and the Patients’ Choice Act, the most comprehensive Republican bill submitted in the last Congress (but never scored by CBO). The tax on high cost insurance that is in the ACA (delayed by the reconciliation bill until 2018) is a back door way of achieving the same policy goal of slowing cost inflation. It would be better to cap this tax subsidy in a more straightforward manner and to do so sooner rather than later. It will take both sides to take this politically difficult step.
  • Set up insurance markets for coverage underneath the catastrophic cap. Some would stick with the catastrophic level of insurance, others would want more coverage. People should buy this insurance with after tax dollars; employers could arrange such cover but the premiums they paid for workers would be taxable as income. I think you would expect employer involvement in insurance to decrease over time, which I think would be good. We could have income-based premium support. States could be given broad discretion in setting up these markets. There are many details to work out, but the parties should be able to do so if they can agree on the goal of helping people shop for insurance.
  • Medical Malpractice reform. Our current malpractice system does almost nothing well. I always thought the route to the deal went through malpractice reform. The Republicans could have gotten quite a lot on this after Scott Brown’s victory last January, and they missed an opportunity to advance a long term interest of theirs given that the ACA passed. However, they thought they could kill it, and preferred that to moving ahead on this issue. Politics aside, there are good policy reasons to have malpractice reform, especially if we can use that opportunity to develop a comprehensive quality improvement approach that is hard to develop in the midst of an adversarial malpractice system. I think the cost savings of malpractice reform are real but overstated, but there are many reasons to move ahead in this area.
  • Transition Medicaid. Medicaid is now essentially two programs: Acute Care Medicaid, which covers mostly pregnant women and children, and with the ACA adults up to 133% of poverty. Long Term Care Medicaid, which pays for long term care services (nursing homes) for elderly and disabled persons. The acute care portion of Medicaid could be transitioned into premium support to allow persons to buy private coverage underneath the catastrophic cap. This would mainstream these folks. States could decide what extra help and services such low income people might need; some states might prefer to keep Medicaid as the provider of underneath cover. The long term care portion of Medicaid would remain unchanged as these persons are the amongst the most vulnerable members of society.
  • Medicare purchasing. The Independent Payment Advisory Board (IPAB) set up by the ACA could play an important role is addressing health care cost inflation if it implemented, and particularly if it is expanded as suggested by the Deficit Commission. Most interestingly, the first suggestion of such a Board during 2009 was made by Republicans: The Patients’ Choice Act (PCA) was introduced on May 20, 2009, around one month before the House of Representatives passed any of their reform bills. Republicans criticizing the IPAB have conveniently forgotten that the PCA proposed a similar commission that would apply cost effectiveness research and use this to make coverage decisions. Co-sponors of the PCA include Rep. Paul Ryan and Sen. Tom Coburn, leading conservatives in the Congress (and my senior Senator, Richard Burr). Of course, Rep. Ryan is the incoming chair of the budget committee, a key health care committee. We have got to be able to ask hard questions about what we pay for, when and how in the Medicare program. The existence of the IPAB in the ACA is an example of a Republican-initiated idea being folded into the final bill. Again, we will only be able to do the hardest things if both parties work together.

The Democratic party invested much political capital and time to pass the ACA. The Republicans have talked about many of the ideas above over the years, but it is worth remembering that they passed none of this when they controlled both Houses of Congress and the White House from 2002-2006. No federal bill to expand insurance purchase across state lines; no medical malpractice reform; no changing of the tax treatment of employer paid insurance. Now that they control the House of Representatives, I hope they will work to pass some health reform legislation, and thereby continue the health reform discussion that is needed if we are to ever develop a sustainable health care system.

Why did normal order go away?

Later today the House is to vote on HR 325, a bill to suspend the debt limit until mid-May and then the debt limit will automatically be increased by the new debt incurred during the interim.* The idea is to take away the notion of defaulting and then move toward normal order budgeting (Senate and House do their thing, including instructions to committees for things like tax reform, health policy, etc.) and then they bang it out in a conference committee(s). Just a few thoughts:

  • Normal order (House and Senate doing their thing and having conferences) really stopped with the release of the Simpson-Bowles plan in Decmeber, 2010. Recall that if it had gotten 14 of 18 votes that it was to get an  up or down vote in both Houses, so already that wasn’t normal order.You could say POTUS walked away from his own commission (I said it was a mistake in my book, namely because the Fiscal Commission assumed the implementation of the ACA), or you could say that Republicans (and Bernie Sanders) filibustered the initial proposal to create such a commission (aka Conrad-Gregg Commission) within the Congress (no one seems to remember this). My main point is that once you had a big commission and the promise of an up or down vote with certain levels of passage, that was the end of normal order.
  • Then we had the debt limit fight of July/August 2011. No way there was going to be normal order while that typically political stunt event (party out of power laments debt increase, but a few vote for it if needed) was turned into some pledging to default, etc. for leverage. That was resolved by setting up a Super Committee that was supposed to either undo the Sequester with a Grand Bargain, or let the Sequester (that was designed to be mutually hated) move forward. No way there was going to be normal order while Super Committee was meeting; it sucked all the policy oxygen out of the room.
  • Then it was an election year, and the sun-setting of the taxes and the Sequester (together the fiscal cliff) and so there was no hope of normal order given those two things. There was even less hope of normal order when you had the administration moving to implement the ACA and Republicans saying if you elect us (House + Senate + Gov Romney) we will repeal the ACA.

That is how the last two years were ‘not normally ordered.’ Now there is a reasonable chance for a return to normal order and I generally think that is good thing. The area in most need of clarity is health policy, especially with House Republicans saying they will have a budget that will balance in 10 years (last Spring’s took 30). If they go ahead and embrace the higher tax baseline it will make it a bit easier, but they sure won’t be able to have a Medicare policy that says we have all these great things that will start in 10 years. Should be interesting.

In the drive for a sustainable budget, the Democratic party is far more reality based than are the Republicans for two reasons. First, they realize it will take higher taxes to fund any vaguely palatable level of spending as the Baby Boomers move into Medicare, Medicaid and Social Security. Second, they have a health reform plan that is flexible, meaning it allows for mid course corrections, additions, etc. Republicans say they want lower taxes, and still don’t have a coherent health reform approach even for a higher level of taxation, much less for one lower one. Normal order should make this a bit clearer.

*This approach has the effect of allowing the debt limit to increase without anyone ever voting for an explicit amount. This is actually a reasonable way to do this forever. It is better to fight it out via budgeting/appropriation process rather than after the fact.

note: revised Democrat party to Democratic party….didn’t trade in my card. thanks to @afrakt for the pointer, and revised in several others places for clarity.

Keith Hennessey on debt limit and health reform

Keith Hennessey has a long piece noting that a debt limit fight is bad politics and bad economics, that prioritization won’t work and that Republicans should instead fight it out around the sequester and the continuing resolution that is funding the government. It is a reasonable strategy that reduces the chance of economic calamity, while allowing them to make their policy case in the House of Representatives. The weak point of his strategy is stated in a simple sentence:

Propose specific entitlement spending cuts to substitute for the sequester cuts you don’t like (presumably in defense). On this one sit and wait for Democratic nondefense appropriators to panic. You won’t have to wait long. (emphasis mine)

Keith’s analysis of the politics of replacing the defense side of the sequester with specific entitlement cuts is likely correct, but the House Republicans will have to actually write down these entitlement cuts to trigger this effect. By entitlements, he means Social Security, Medicare and Medicaid. Given his past positions in health policy, he might include the tax expenditure on employer paid health insurance, which would be reasonable in my opinion. So, he is suggesting that House Republicans finally commit to a detailed health reform proposal and/or suggest cuts in Social Security (means testing Medicare and/or Social Security could also be proposed).

I completely agree with him that Republicans need to do this. That has been what is most missing from public policy debate since the passage of Obamacare–what Republicans are actually for in health reform. A few program specific thoughts:

  • Obamacare actually caps the heretofore unlimited tax preference of employer paid insurance via the Cadillac tax (in 2018). Republicans could call for a more direct capping of the preference that would serve to point out the subsidy flows to people like me with good jobs. I would be in favor. Of course the risk of altering this tax treatment is making sure there is a stable source of health insurance in case it serves to weaken the employer/insurance link (a good outcome IMO, all else equal). Well, Obamacare has a Medicaid expansion and is setting up exchanges, so the Republicans could embrace that now. Or propose an alternative to expand coverage, or they could just say we do not believe in using public policy to expand coverage. As Keith said in July 2012, unless Republicans clean swept the 2012 election, Obamacare would be here to say. Republicans could just acknowledge that and move to specific alterations they would like and maybe we could have a policy debate.
  • Medicare. Where to start. House 2012 Budget cut Medicare by $716 Billion over 10 years just like Obamacare. Gov. Romney pledged to restore the cuts, and start a premium support program in 10 years, thereby pledging to do nothing for a decade in Medicare. In Nov/Dec as part of fiscal cliff Republicans said we have to cut entitlement spending, but never said where or how. Keith says they should do so now. I agree. Reihan Salam suggests the Domenici-Rivlin approach. I think if you got rolling on an exchange-based-deal-cutting approach it could look something like this.
  • Medicaid. A block granting of Medicaid of the type and magnitude of the House 2012 Budget is a total non-starter; just ask all the Republican Governors, who didn’t have to say anything last Spring because they knew the budget would go nowhere. However, this is where a consequential deal could take place, that could actually improve care and reduce costs. My book calls for federalizing the cost of the dual eligibles to reduce left hand/right hand cost shifting, and moving low income Medicaid beneficiaries into state based exchanges down the road. Now this would be plenty controversial on left and right, but my point is that the care of the duals is a big problem from both a quality and cost problem, and the politically viability of Medicaid long term is in doubt, so we would be better served to move toward subsidized private coverage. Big changes are needed here in my judgement.
  • Social Security. I think it is laughable that Republicans will propose a Social Security cut. Think back to the Sunday before New Years when word bubbled about chained CPI for Social Security being in a deal, Harry Reid said no, and Republican Senators stampeding the cameras in the Capitol to say it wasn’t their idea. Now chained CPI and/or more means testing plus raising the cap to which the OASDI payroll tax applies back to the essence of the 1983 Reagan/O’Neill deal (90th percentile of wages) is inevitable at some point, why not now.

The Democratic party believes taxes has to rise more to have a sustainable budget, and has passed a health reform plan that has a logic that can be modified. It includes a Medicare cost containment strategy (IPAB) that is the part that Republicans seem to hate the most. Yet, elected Republicans have as yet offered no concrete legislative proposal to which they will commit. Thus, they say they don’t want to raise taxes more, and that we must address entitlement spending but don’t say how. We most decidedly do if we were to ever have a budget that balanced anywhere near 18-19% of GDP that they claim to want. The bottom line as I read Keith Hennessey is that Republicans should commit to these details now as part of the sequester and continuing resolution debate and fight it out. I agree, but will be shocked if they do.

update: fixed typo