October 9, 2009
"But what we will do is, we'll have the [health care] negotiations televised on C-SPAN, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies."
- Senator Barack Obama, Town Hall Meeting in Chester, Virginia, July 21, 2008
Even as Democrats campaigned on a platform of change and transparency, recent back-room dealings between health care industries, the Administration, and Finance Committee Chairman Max Baucus would raise Medicare premiums for seniors:
- Both the Administration and Democrats in Congress have proposed the idea of creating a board of federal bureaucrats to recommend additional changes to, and generate savings from, the Medicare program. In particular, Sen. Jay Rockefeller (D-WV) has advocated such a commission as a way to de-politicize the process of adjusting Medicare payments.
- While Chairman Baucus' mark included such a commission, it exempted "providers scheduled to receive a reduction to their inflationary payment updates" from additional reductions by the Commission. In practical terms, this language exempted hospitals-who reached their own independent "agreement" to provide $155 billion in savings toward health "reform"-from having to contribute additional savings.
- Unfortunately, neither Sen. Rockefeller nor the Congressional Budget Office (CBO) understood the hospitals' exemption from additional cuts proposed by the Medicare Commission at the time the legislation was first unveiled. Because hospital payments comprise a large portion of total Medicare spending, exempting hospitals from the Commission's purview effectively lowered the $23 billion in savings CBO originally assumed from the provision by at least half.
- As a result of this lower score-and in his desire to preserve his "agreement" with the hospital sector-Chairman Baucus found a better target to achieve savings: seniors themselves. An amendment to the Chairman's mark authorized the Medicare Commission to propose "reductions in federal premium subsidies" to Medicare Advantage and prescription drug plans-even though Medicare Advantage plans would already face a $123 billion cut in the underlying Baucus bill.
- When pressed during the markup to explain the consequences of this amendment, Committee staff repeatedly refused to admit that a "reduction in federal premium subsidies" would be tantamount to premium increases for seniors' Medicare Advantage and prescription drug plans. However, CBO Director Doug Elmendorf previously testified that fully half of the benefits currently provided to seniors under Medicare Advantage would disappear due to the existing cuts in the Baucus bill-and the scope of the premium increases and benefit cuts would likely be magnified if the Medicare Commission enacted additional savings.
- Chairman Baucus' actions during the Finance Committee markup do not represent the first time his agreements with the health care industry have been proven to harm seniors. In August, the head of the Pharmaceutical Research and Manufacturers of America (PhRMA) affirmed that drug manufacturers had negotiated a "rock-solid deal" with Chairman Baucus and the Administration. Previous analyses from the Congressional Budget Office have confirmed that portions of the "rock-solid deal" would significantly raise seniors' Medicare prescription drug premiums.
Many may find the irony in an entity established to "de-politicize" the process of Medicare reform being modified in arbitrary-and harmful-ways in order to cement Chairman Baucus' "rock-solid deals" with the health care industry. Moreover, if Democrats are willing to break yet another campaign promise on transparency in order to cut another back-room deal-and raise premiums for seniors in the process-what promises will they keep?
For additional information, contact:
The House Republican Conference Policy Office