Nina Owcharenko, Author at �鶹Ů�� Health News

Super Committee Health Goals Need Sound Policy

Nina Owcharenko — Wed, 12 Oct 2011 16:54:25 +0000

Owcharenko

If the goal is producing $1.2 trillion to $1.5 trillion in 10-year savings, the Joint Select Committee on Deficit Reduction . Nothing could be truer than dealing with the health care savings component.

Typically, these negotiations are so focused on reaching the savings target that the policy gets neglected, or worse hijacked in the wrong direction. One only needs to look at the 1997 Balanced Budget Act to see this in action. Yes, a Republican Congress and Democratic administration were able to join hands and claim victory — the federal budget was balanced!

However, alongside this short-lived budget victory were a slew of health care policy changes that undermined conservative, free-market health care solutions. Most notably, one such change established a new health care entitlement program: SCHIP; and another advanced draconian cuts to Medicare providers resulting in a permanent “doc fix” dilemma. Even the so-called conservative “wins” that resulted — Medicare+Choice and Medical Savings Accounts — were hamstrung by regulation and designed to fail.

This recent history offers an object lesson to the super committee.

But, again, the policy discussion is already getting cloudy. Ideas about adopting more price controls into Medicare — through importing Medicaid-style drug rebates and allowing the federal government to dictate prescription drug prices via “negotiations” — are examples of bad policies being sold as great savers. There are also rumblings to repeal the tax exclusion for employer-sponsored health insurance as a way to raise revenue; rather than replacing the exclusion with more equitable, individual tax relief. Finally, there is the “more-of-the-same” approach, which attempts to squeeze more savings through provider cuts. These do not constitute entitlement reform and, in fact, cause more harm than good.

To avoid these mistakes, the joint committee must focus on savings and structural policy reforms. The Heritage Foundation’s plan offers a comprehensive approach to fix the debt, cut spending and restore prosperity — beginning with repeal of the Affordable Care Act.

The health care law adds to our nation’s fiscal crisis. It expands the failing Medicaid program by adding 17 million to 25 million more Americans on to the hemorrhaging entitlement program. It sets in place a prohibitively costly subsidies scheme that the Congressional Budget Office’s estimates put at $96 billion by 2021. Even worse, the law makes more than $500 billion in Medicare cuts — not to help fill Medicare’s funding gaps, but to pay for the new entitlements from the law.

Even without the health law, government health care entitlements are fueling the country’s fiscal woes. Medicare faces a flood of more than 77 million baby boomers joining the program over the next 20 years. The Medicare trustees’ annual report continues to warn of the program’s unsustainable and unfunded obligations. Meanwhile, Medicaid is draining state budgets, taking more resources away from other important programs such as education and transportation. The federal-state partnership creates perverse incentives to leverage the open-ended federal funding scheme, while at the same time limiting states’ flexibility to manage their programs. CBO estimated Medicare and Medicaid combined already consumed 5.5 percent of the nation’s 2010 gross domestic product.

Finally, the tax treatment of health insurance is in desperate need of structural change. The tax code provides unlimited tax relief to those who obtain health insurance through their workplace, but there is no comparable relief for those without employer-based coverage. But any tax revenue should be used toward extending a more equitably distribution to taxpayers so they can buy their own health coverage, no matter their work status.

The Heritage plan addresses these issues by converting the current open-ended entitlements to a defined contribution system that is accountable to individuals, families and taxpayers. Through a competitive, consumer-based model, health care system can deliver better care at a lower price.

The joint select committee recommendations should be grounded in sound health policies. They should make measurable progress in restructuring the health care system toward a sustainable, consumer-based model — not just meet a fiscal target and call it reform.

Nina Owcharenko is the director of the Center for Health Policy Studies at The Heritage Foundation ().

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Is There Any Hope For Medicaid Reform?

Nina Owcharenko — Wed, 15 Dec 2010 00:30:00 +0000

Recent coverage of the proposals offered by President Obama’s debt commission managed to gloss over a huge issue that is adding to the nation’s deficit – Medicaid. The impact of this federal-state partnership program on the country’s long-term fiscal future is just as real and consequential as Medicare and Social Security. Plus, Medicaid also adds to the financial burdens on states’ budgets.

The problem wasn’t just on the coverage front, but the commission report itself. The final version ignored the massive expansion of the Medicaid program included in the new health care law. At the very least, the commission, which was chaired by former Sen. Alan Simpson, R-Wyo., and Clinton White House Chief of Staff Erskine Bowles, should have acknowledged this costly addition and suggested repealing the Medicaid expansion, as it did with the CLASS Act, which is a new government long-term care entitlement program.

Beyond repealing the new health care law entirely, the panel should have pushed for structural reforms in Medicaid. Unfortunately, the final report took a pass on offering any concrete, long-term recommendations. Instead, the commission proposed states use waivers to ask the secretary of the Dept. of Health and Human Services for permission to experiment and try alternative reform methods. A waiver process can be productive if Secretary Kathleen Sebelius approves aggressive, innovative reforms, such as the Rhode Island Global Consumer Choice Compact Medicaid Waiver. However, a waiver does not ensure structural, long-term reform. Additionally, it leaves too much power in the hands of a politically appointed federal bureaucracy to control the final outcome of state proposals.

It’s not that Medicaid reform was off the table. An early Bowles-Simpson draft offered a good start by suggesting that Congress convert the federal share of Medicaid’s long-term care payments into a capped allotment. Former Congressional Budget Office Director Alice Rivlin, now with the Brookings Institution, and Rep. Paul Ryan, R-Wis., took the idea a step further in their , by proposing a conversion of the long-term and acute-care payments into a capped allotment. This approach would give states the flexibility to determine how best to meet the needs of their low-income recipients. A capped allotment is an important policy recommendation. If the goal of the commission is to get America’s fiscal house in order, acknowledging that Medicaid’s open-ended federal entitlement is outdated and unsustainable is a critical first step.

Often, Medicaid is overshadowed by Medicare. But the reality is Medicaid is a larger federal health program than Medicare. In 2010, the Center for Medicare and Medicaid Services estimated 60 million people received coverage through Medicaid and the state-run Children’s Health Insurance Program, whereas Medicare had 47 million beneficiaries. Total Medicaid spending — federal and state — is projected to reach $430 billion this year, nearing $900 billion over the next 10 years. Medicaid spending on the federal side alone will surpass $540 billion by 2019. At the state level, Medicaid now exceeds other state spending priorities such as education.

In its current form, Medicaid faces tremendous quality and access problems. Medicaid pays doctors and hospitals on average about 35 to 40 percent less than private insurance. With fewer doctors willing to see Medicaid patients, it is no surprise that Medicaid and CHIP patients visit the emergency room more than people who are privately insured, making it a costly and inefficient way to deliver care. Two recent studies highlight more troubles. concluded that Medicaid patients were less likely to receive “evidence-based therapies and had worse outcomes” than patients with private insurance. , by researchers at the University of Virginia, found Medicaid patients had a higher rate of hospital mortality than even the uninsured.

More than half of the “gains” in coverage under the new health care law will be achieved by expanding access to Medicaid. The new law adds 18 million more people to the Medicaid rolls, without addressing any of the long-term structural challenges. This shortcut to coverage only makes the gloomy scenario worse.

The final report fell short on the Medicaid front. Even the immediate Medicaid savings options were more of the same. Hopefully, alternative ideas that offer a clear path to reform, like the Rivlin-Ryan plan, will take root on Capitol Hill. After all, if the new Congress wants to restore the nation’s fiscal health, it will need to focus on Medicaid’s long-term problems as part of any solution.

Nina Owcharenko is the director of the Heritage Foundation‘s Center for Health Policy Studies .

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Myths of the Public Plan

Nina Owcharenko — Thu, 30 Jul 2009 00:00:00 +0000

It’s a critical week in Congress on the health care reform front, and members are ramping up the rhetoric for one of the sticking points — a government-run health insurance plan that would “compete” with private insurers.

“I believe [a public health plan is] the only way we’ll drive down costs,” Sen. Kirsten Gillibrand, D-N.Y., recently told the Buffalo News. Like other Democratic members and the Obama administration, Gillibrand insists a new public health plan modeled after Medicare, which is facing insolvency and piling up trillions in long-term debt, would bring in savings that private insurers can’t achieve. The House Tri-Committee and Senate Health, Education, Labor and Pensions Committee bills both create a new public plan modeled on Medicare.

Public plan proponents claim the addition of a new government plan will drive lower costs and improve quality and innovation, using the Medicare program as an example. According to public plan proponents:

Compared with private insurers, Medicare has slower cost growth;
Medicare’s administrative costs are lower than those for private insurance;
Medicare has superior bargaining power to reduce health costs without harming patient access to care;
A public plan would be more innovative because private plans always follow the government’s lead.

But Dr. Robert Book, a health care economist at the Heritage Foundation, recently combed through the Medicare data and found that the facts tell a different story:

Total health care costs per patient are growing faster for those on Medicare compared with those who have private coverage. We don’t see it immediately because Medicare is paying a rapidly shrinking share of its beneficiaries’ total costs, with an increasing share coming from beneficiaries’ out-of-pocket payments and supplementary and other private insurance. An apples-to-apples comparison of total health care costs between Medicare and privately insured patients shows that per-patient care is increasing at a faster rate for those on Medicare.

Medicare’s per patient administrative costs are substantially higher than those for private insurers. The illusion of the lower Medicare administrative costs comes from expressing those costs as a percentage of total costs, including patient care. But most of the program’s administrative costs are accounted for in activities that aren’t directly related to the level of patient care. And it’s not a straight comparison in any event, because Medicare doesn’t offer the same services that private insurers do, such as disease management and on-call nurse consultation — services that are included in the private insurers’ administrative costs.

Medicare has no “bargaining power.” While Medicare can pay doctors and hospitals less than private plans, it’s only because the federal government dictates or “fixes” the prices. There is no bargaining involved, if that word has any meaning at all, and it hasn’t really reduced the actual cost of providing care. In fact, lobbyists for doctors’ groups have convinced Congress for the past seven years to block scheduled reductions that Medicare pays for physician services. In six of those years, Congress actually replaced the reduction with a payment rate increase. The Medicare program itself doesn’t have much power in lowering prices: its prices are politically driven and Washington’s Beltway politics could raise prices instead of lowering them.

Historically, public health plans have followed the health care delivery innovations that come out of the private sector. As private health organizations and insurers introduce improved quality measures and customer service perks (not to mention smarter ways to do disease management and preventive care), Medicare follows suit.

Even if you disregard Book’s arguments, there are other drawbacks to Congress’ creating and micromanaging another Medicare-like program. One is the unfunded future promises Medicare (read: taxpayers) is obligated to pay out — more than $36 trillion right now.

Plus, a public health plan creates the conditions for a “Freddie Doc” entity that would take the same bad steps we’ve seen from the “public plan” mortgage companies Fannie Mae and Freddie Mac. These quasi-government companies were created to “keep private lenders honest.” Instead they were driven by congressional meddling, special-interest lobbying and bureaucratic processes that threw the entire financial system into chaos.

We don’t need that to happen even more in the nation’s health industry, which makes up one-sixth of our economy. That’s not what voters thought they were getting last November. Congress needs to scrap the public option and focus on the health reform proposals that enjoy broad bipartisan support — like changing the unfair tax treatment of employer-sponsored health insurance so that families and consumers can buy affordable insurance and have real options in the marketplace.

Nina Owcharenko is the Deputy Director of the Center for Health Policy Studies at

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