Supercommittee Part Deux?

Still facing a stalemate, on Tuesday, October 8, House Republicans discussed plans to bring to the floor HR 3273, legislation sponsored by Reps. Sessions (R-TX), Woodall (R-GA), and Burgess (R-TX) that would establish a short-term bipartisan, bicameral working group to attempt a deal on funding the federal government and addressing the debt limit.  The House Rules Committee approved and reported out the bill on Tuesday.

The proposal for such a working group showcases how broken negotiations are between Congress and the Administration as the country spirals closer to the deadline on the debt ceiling, just one-week away.  Memories of the failed Supercommittee of 2011 are still fresh in the minds of those on the Hill and those who tried to influence the group when the budget negotiations broke down back then.  However, unlike that Supercommittee, the proposed working group would simply work as a short-term negotiating body and have no ultimate authority, as its recommendations would be voted on by Congress through normal process.

President Obama and Congressional Democrats continued to oppose any negotiations – working group or otherwise -  unless and until congressional Republicans agree to reopen the government and no longer threaten defaulting on the debt ceiling.

The Individual Mandate – Third Argument is a Charm

In its landmark decision on the Affordable Care Act (ACA), the Supreme Court upheld the constitutionality of the individual mandate.  As of now, beginning January 1, 2014, virtually all Americans will have to maintain a minimum level of health insurance coverage or will be assessed a penalty.

In its briefs, the government defended the mandate as a valid exercise of Congress’ Commerce Power – their rationale being that everyone will need health care at some point in their lives, and those who lack insurance drive up costs for everyone else.  The Court didn’t buy this argument and found that Congress’ power to regulate commerce doesn’t extend to the power to regulate inactivity (e.g., the failure to maintain health insurance coverage).

Alternatively, the government argued the mandate was a proper under the Necessary and Proper clause of the Constitution, which grants Congress the authority to enact laws to further its other Constitutional authority.  Again, the Court shot down the government’s argument saying this clause doesn’t grant independent powers to Congress – in other words, you can’t use the Necessary and Proper clause as a rationale for something for which you didn’t have authority to do.

Finally, the government argued the mandate was constitutional under Congress’ Taxing Power.  Under the ACA, taxpayers who fail to have health insurance coverage will be assessed a “penalty” assessed by the Internal Revenue Service.  Here, the Court agreed and upheld the mandate under Congress’ power to tax.  Chief Justice Roberts in his majority opinion basically said a tax – whether you call it a penalty or a surcharge – is still a tax.

Now that the mandate has been upheld, all eyes turn to the states – and the feds – as they work to implement the health insurance exchanges.  2014 is a mere 18 months away.

No Matter the Outcome of the Supreme Court’s Review of Health Reform – The Health Care Community Should Consider Five Illustrations of “The New Normal”

Since last November – 365 days from the 2012 election to be exact – at the invitation of various health care providers, I have been going around the country giving a “crystal ball speech” about the future and outcomes of government spending, health reform, and the election.  Whether I speak to an audience in Chicago, San Francisco, New Orleans, or Florham Park, New Jersey, the most frequently asked questions I receive are: “What will the Supreme Court do?” and “Is there any hope that they can get something done and start to agree in Washington?”  The answer I give to the former is my favorite answer to give:  “It depends.”  The answer I offer to the latter is “I hope so – and if I didn’t think so I wouldn’t keep doing what I do.”

In all seriousness, there are four separate but related questions before the Supreme Court and a number of different combinations and permutations that can result from the court’s deliberations and determinations.  Tens of thousands if not millions of people are making their guesses and sometime in June we expect we will know who is correct.  In the meantime, I offer these five examples of the new playing field for those in health care:

1.  We are in a period of fiscal contraction – call it austerity, compression, retraction, or budget tightening – these are not times of Congress taking steps to expand programs or increase funding.  As such, it is important to recognize this fiscal and political reality and modify your expectations, requests, and approaches to policy makers accordingly.

2.  So goes the economy, so goes provider reimbursement.  The nation’s tax base is at an all-time low – meaning the available pie is shrinking – while entitlement spending grows, especially within federal health care programs (Medicare, Medicaid, VA).  Using baseline FY 2010 estimates from the Office of Management and Budget, entitlement spending is approximately 60% of the budget while non-defense discretionary funding is 15% and defense spending is 20% (remaining 5% is interest payments).  It is a basic math issue:  We cannot balance the budget only paring down the smaller, non-entitlement parts of the pie.  So, if your interests are in the entitlement slices, expect those – at some point – to shrink.

3.  Health care has become a “pay-for” for health care.  When I first arrived in Washington more than 20 years ago, most Members of Congress did not want to pit members of the same community against one another or pick among their children – hence the holistic approach to the doubling of the National Institutes of Health (NIH) budget.  Those also were much better economic times.  Now given current circumstances and the fact that health care spending is crowding out other parts of the budget, Congress is looking and finding money from within other areas of health care to pay for things like the “doc fix.” This trend likely will continue … Indefinitely.

4.  Innovation in care delivery is the key to survival.  The days of paying for volume are over.  Patients, insurers, and the government want value and quality and providers need to respond to the marketplace.  Those leading the field in innovative care delivery models and real outcomes based, patient-centered care – that measurably decrease costs – will do well from both private and public payor perspectives.

5.  Don’t necessarily fear the sequestration – some alternatives could be worse.  See items one, two, and three above.  Don’t get me wrong – it’s bad … And depending on where you reside and in which pieces of the pie, it’s really bad … for non-defense discretionary spending the estimates are 10% cuts across-the-board, and for Medicare (the reimbursement side of the equation) cuts are capped at 2%, but for many providers 2% poses a threat to their ability to maintain access to care.  But it could be – and can get – way worse.  Taking a page out of the earlier example of doubling the NIH playbook of collaborative advocacy, the health community is banding together with other communities (e.g., energy, environment, education, transportation) and those in the non-defense discretionary spending slice of the pie to work together to protect funding.

While the crystal ball remains cloudy with respect to the Supreme Court, the future of health care spending generally is pretty clear:  public and private payors will want more for less and somehow, as a nation, we have to get health care costs and spending under control.  The reality of current and long-term fiscal projections is that the intense budgetary pressures on the country will have as much – if not a greater – impact on the future of health care than anything those nine cloaked justices decide in June.

Super Committee 2.0?

As the deadline of February 29 rapidly approaches, House and Senate negotiators continue to remain at an impasse on how to address the looming Medicare physician pay cut. Starting March 1, 2012, physician fees will be cut by 27 percent if an agreement is not reached to avoid the cuts with either a short- or long-term fix.  The bipartisan group of lawmakers, several  of whom also served on the failed Supercommittee last fall, have been considering proposals that would pay for a fix that lasts anywhere from 1 to 10 years.  The disagreement on how to pay for the fix, which the Congressional Budget Office believes would be between $9 billion (one - year fix) and $316 billion (10 - year fix),  does not always fall cleanly  along  partisan lines.  Republican negotiators disagree among themselves on using war savings to cover part of the cost of the doc pay fix.  Democrats have opposed House Republican proposals for significant cuts to hospitals to make up the cost.   MedPAC data citing significantly higher Medicare costs for physician services performed in a hospital outpatient department versus a physician office have painted a bit of bull ’s eye on the hospitals, who are aggressively pushing back.  If war funds are not an option, health providers fear cannibalism as the provider community seeks to protect its own and avoid being part of a list of offsets for a doc pay fix.  Indeed, the same stalemate that affected the Supercommittee and House-Senate discussions that followed at the end of 2011 hareared  its  head again.  This time, the deal - making is further complicated by election-year politics on an issue that affects the future of physician participation in Medicare, and therefore, access to Medicare services.  

Sequestration – Potential Changes Coming?

As discussed in our earlier entry, the failure of the Supercommittee to reach agreement on $1.2 trillion in deficit reduction has triggered automatic, across the board cuts in discretionary spending under a process known as sequestration.  Cuts will be split evenly between defense and non-defense spending, and will go into effect beginning in January 2013 unless Congress takes additional action.

Already, several proposals to amend or eliminate the sequestration cuts have been offered.  These include:

  •  A bill offered by Congressman Ed Towns (D-NY) and six other House Democrats to exempt Medicare entirely from sequestration cuts.  Without the change, Medicare could face a 2% cut, with all cuts coming from payments to providers.
  • House Armed Services Committee Chairman Buck McKeon (R-CA) has said that he will offer legislation to prevent the automatic cuts in defense spending.  Republican Senators Jeff Sessions (AL), John McCain (AZ), and Lindsey Graham (SC) have also announced their intentions to reduce the impact of cuts on defense and shifting more of the burden toward other discretionary spending.
  • House Majority Leader Eric Cantor has been looking to reduce the effect of cuts in the first year as part of an agreement to extend payroll tax cuts and unemployment insurance.  Assistant Democratic Leader Jim Clyburn (D-SC) has expressed an openness to reconsidering the cuts as currently planned.

It is important to note that President Obama has repeatedly declared his intention to veto any change to the sequestration cuts that would reduce their overall impact on deficit reduction.  However, changes could well be enacted as part a compromise to achieve other portions of the President’s agenda as the 2012 elections loom.  How and when the cuts will be enacted – and which sectors will be hit the hardest – will likely be a major point of debate for both sides throughout 2012.

Supercommittee – The Fallout

  • Health Leaders Media asked health industry representatives for their opinions on the Supercommittee’s failure, and found opinions mixed.
  • National Journal anticipates the coming battle to undo or amend the sequestration cuts.  Republicans on the House Armed Services Committee have already released a video denouncing planned defense cuts.
  • Supercommittee member Rep. Jim Clyburn (D-SC) is suggesting that sequestration cuts are not “locked in,” but the White House continues to say that President Obama will veto any efforts to overturn the automatic cuts without matching deficit reduction.
  • Politico takes a look at who will be hardest hit by the sequestration process, and goes behind the scenes of the Supercommittee’s “meltdown.”

The Supercommittee – What People Are Saying

  • The Supercommittee’s November 23rd deadline is just over a week away, but there is little optimism that a deal can be reached in time.  Politico calls committee co-chairman Jeb Hensarling (R-TX) “dour” about the prospects for a deal, and the Washington Post goes so far as to say Hensarling has “embraced the prospect of failure.”
  • The Post also explores the three possible outcomes for the Supercommittee, and provides a helpful FAQ primer on a variety of Supercommittee issues.
  • PBS Newshour examines why the Supercommittee is “stuck in neutral.”
  • The Hill and National Journal each preview how Congress might handle a potential Supercommittee failure.
  • The New York Times has created an interactive page that allows readers to compare the various deficit reduction proposals.

“Super Committee” Members Chosen

The House and Senate leadership have chosen the members of the so-called “Super Committee.” The bipartisan, bicameral 12-member Joint Selection Committee on Deficit is tasked with finding an additional $1.2 trillion in debt savings over a ten year period.

Senate Majority Leader Harry Reid (D-NV) picked the only woman on the committee: Sen. Patty Murray (D-WA), along with Sens. Max Baucus (D-MT) and John Kerry (D-MA). His Republican colleague, Minority Leader Mitch McConnell (R-KY) chose Republican Sens. Jon Kyl (AZ), Pat Toomey (PA) and Rob Portman (OH). The latter two were only recently elected to the Senate in 2010.

Speaker of the House John Boehner (R-OH) chose Representatives more seasoned in the debt debate: Dave Camp (R-MI), Fred Upton (R-MI) and Jeb Hensarling (R-TX). House Minority Leader Nancy Pelosi (D-CA) also picked more senior members of her delegation: James Clyburn (D-SC), Chris Van Hollen (D-MD) and Xavier Becerra (D-CA).

The committee must release its report of proposed cuts by November 23rd; Congress is expected to vote on the cuts by December 23rd.

Congress, President Agree to Debt Ceiling Deal

On July 31st, Congress and the President agreed to a deal on spending cuts, allowing Congress to raise the nation’s legal limit on borrowing by the federal government – referred to as the “debt ceiling.” The deal would raise the ceiling through 2012 and guarantee a total of $3 trillion in spending cuts. The new law provides for almost $400 billion in immediate deficit reduction and establishes ten year caps on non-security spending (a savings of approximately $1 trillion). Additional cuts will be determined by a 12-member bicameral, bipartisan committee called the Joint Selection Committee on Deficit Reduction (“Super Committee”). If the Super Committee does not come to an agreement on the remaining $1.2 – $1.5 trillion cuts by November 2011, an across-the-board would be implemented to make up the difference. These cuts would be 50% defense spending and 50% non- defense spending.

The ten-year cap will affect every agency and program. To read the full text of the legislation, please click here.