One of the most common Republican narratives about the new health care reform law argued that eliminating the subsidy to private insurers participating in Medicare Advantage would force insurers to stop offering coverage, causing 10 million seniors to lose their Medicare benefits. Throughout the debate, Republicans introduced numerous amendments and motions instructing Congress to remove the $136 billion in cuts to the Medicare Advantage program. Sen. John McCain (R-AZ) even urged seniors to rip up their AARP cards to protest the organization’s support for the bill. But yesterday, the Washington Post’s Amy Goldstein has yet another article pointing out that the GOP’s fear were overstated — “Premiums have not jumped substantially, and benefits have not tended to erode”:

Insurers’ premiums for Medicare customers are, on average, rising by a smaller amount for 2011 than for this year and in 2009, according to Kaiser. And widespread reductions in medical benefits have not occurred, federal health officials said.

“What we are seeing is a very strong commitment to the program” by health plans, said Jonathan Blum, director of the CMS’s Center for Medicare. Blum said that insurance executives with whom he has met have told him they expect to enroll more Medicare patients for the coming year – despite recent predictions by the Congressional Budget Office that enrollment would dip.

Outside the Obama administration, many fear that the smooth experience will not continue for long. “It may be a little early,” said David Certner, legislative director for AARP, the influential lobby for Americans 50 and older, which sells coverage to its eligible members under Medicare Advantage. “A lot of these changes . . . don’t kick in until next time around. We’ll see what the impact is.”

A main reason lies in the federal payments. For 2011, the reimbursements to health plans will be frozen at the same level as this year, meaning that the typical plan will be paid 10 percent more than rates to health-care providers in traditional Medicare in the same community – compared with13 percent higher in 2009.

The law’s deeper financial impact on insurers is scheduled to begin taking effect in 2012. That is when the law starts to ratchet down the increases in payments- by different amounts in different parts of the country – over several years. “It’s not going to be possible to keep current benefit levels and premiums where they are today when these massive cuts go into effect,” predicted Robert Zirkelbach, spokesman for America’s Health Insurance Plans, the industry’s main trade group. Congressional budget analysts predict that 3 million fewer people will be in Medicare Advantage by 2019.

It is, in fact, unclear is how insurers will respond to the cuts in 2012 and what effect the government’s decision to expand the system of bonuses has had on present plan participation.

I’ve neglected this story on the blog — Austin Frakt however, has been covering it very well over at the Incidental Economist. Basically, the health care law awards bonuses to Medicare Advantage plans rated four or five stars for quality (approximately 1 in 6 plans). CMS recently unveiled a 3-year expansion of the bonus payments program to include three-star rated plans (approximately three-quarters of the plans in Medicare). The problem is that expanding the bonus program discourages plans from improving quality and establishes the precedent and expectation of rewarding poor plans. That could cost the government much more than the estimated $1.3 billion 3-year expansion and keep plans in the program for all the wrong reasons.

Earlier today, in a vote of 73 to 25, the Senate approved a Food Safety Bill that would “expand the Food and Drug Administration’s authority over farms and food processors,” but ultimately failed to attach an amendment to repeal the 1099 reporting requirement in the Affordable Care Act. Lawmakers and small business lobbyists generally agree that the provision — which improves tax compliance by requiring small businesses to report any purchases over $600 to the IRS, and raises $19 billion to pay for the law — overburdens businesses with paperwork and proposed numerous amendments to repeal it. The question has always been how to pay for the $19 billion in lost revenue and last night, Sens. Mike Johanns (R-NE) and Max Baucus (D-MT) offered two solutions.

Both measures failed to garner the necessary 67 votes to be attached to the underlining legislation. The two amendments had the effect of splitting the vote for repeal, but a grand total of 53 Democrats still voted to eliminate the provision (voting for one bill or the other). Just five — Carper (D-DE), Dodd (D-CT), Durbin (D-IL), Harkin (D-IA) — voted to preserve the measure (against both measures). Sen. Pryor (D-AR) didn’t vote on the Johanns amendment, and then voted Nay on Baucus’ measure:

JOHANNS AMENDMENT: Repealed the 1099 provision and pays for the measure by directing Office of Management and Budget (OMB) to identify $39 billion in unspent and unobligated accounts. Failed 61 to 35. (21 Democratic voted for the measure. Bayh, Bingaman, Cantwell, Conrad, Feingold, Hagan, Klobuchar, Kohl, Lincoln, Manchin, McCaskill, Menendez, Nelson (FL), Nelson (NE), Stabenow, Tester, Udall (CO), Udall (NM), Warner, Webb all voted in favor the measure)

BAUCUS AMENDMENT: Repealed the 1099 provision without paying for it. Failed 44 to 53. (14 Democrats voted against the measure: Bennet (CO), Bingaman, Carper, Conrad, Dodd, Durbin, Feingold, Harkin, Kohl, Lincoln, McCaskill, Nelson (FL), Udall (CO), Udall (NM) voted against the measure.)

The 1099 measures may have failed — as some Democrats objected to delegating the task of finding cuts to an agency within the executive branch — but the high vote count on the Johanns amendment suggests that the measure could pass under normal rules if it is re-introduced in the new Senate. Johanns spokesperson Natalie Krings tells me that the Senator “was pleased to see 21 of his Democrat colleagues support the amendment” and that he “intends to work with Senator Baucus on repealing the measure.” “As long as the offset is not a tax increase, he is all ears,” she added. “We’ll keep pushing and it is our hope that tonight’s show of support for job creators is another step toward scored obvious needed end result – full repeal.” It’s still unclear, however, if the CBO socred the pay-for as a savings.

The underlining bill would “allow the FDA to set new standards for farms, require processors to have hazard-control plans for preventing contamination of foods, and increase inspections of producers.” The FDA will be able to recall food it suspects is tainted, access to internal records at farms and food production facilities and “set safety standards for imported foods, requiring importers to verify that products grown and processed overseas meet safety standards.” A more robust version passed the House in 2009 and “House leaders have indicated that the House would accept the Senate version, avoiding the need to reconcile the bills.”

The Orlando Sentinel is reporting that Florida is poised to join the ranks of states like Minnesota and Alaska in refusing to implement key elements of the Affordable Care Act. The state is already leading the way in challenging the constitutionality of reform in the court room, but Republican gains in both chambers and the election of anti-health governor Rick Scott are empowering conservatives to take an even stronger position against the law:

And perhaps most significantly, legislative leaders are poised to block spending and rules necessary to implement the law. Already, state regulators has refused to impose minimum spending mandates that might generate refunds for consumers – but which health insurers say will hurt their profits. And Gov.-elect Rick Scott has also made clear he doesn’t want the state doing anything to help the law along. [...]

But even before he was officially named speaker, Cannon warned Crist that no state agency should take any steps to comply with the law “without clear and comprehensive guidance from the Legislature.” The Oct. 19 letter demanded an itemized accounting of all state agency activities regarding the federal law.

Specifically, the letter singled out the Office of Insurance Regulation for work it has begun – and which legislative budget-writers approved – to study how Florida’s health-care laws should be amended to conform to the federal reform, and to boost the state’s ability to handle new rate-filing data.

“Not only are Florida insurance officials helping the federal government to write rules on these matters, but [OIR] is jumpstarting these new regulatory functions by developing data systems necessary for enforcement,” Cannon complained.

He added: “We intend to develop a clear and statutorily-defined framework for Florida agencies’ activities in regard to the federal health law. Pending such legislative action, state agencies should examine each anticipated action or function in light of their specific statutory authority.”

Indeed, state attempts to stop implementation are just the most immediate consequences of the Republican victories in the midterms. While the election only strengthened the Republican strong-hold over the legislature in Florida and swept into power one of the most anti-reform governors in the nation, the GOP also won control of 26 statehouse chambers around the country and elected a slate of anti-reform governors. Sam Brownback of Kansas, for instance, has called the reform law ‘an abomination,’ Bill Haslam of Tennessee, said the law is an ‘intolerable expansion’ of federal power and a ‘reminder of the incredible arrogance of Washington,’ and Maine’s incoming governor, Paul LePage who promised to repeal the Affordable Care Act and is now preparing to eliminate Dirigo, the state’s expanded health care program.

Of course, even the most vocal Republican opponents won’t be able to repeal the federal law outright. But they will do their best to slow the pace of implementation, lean on congressional delegations to change the legislation, seek waivers (as both Florida and Maine have already done) and pressure state agencies to stop cooperating with federal requirements. The big question will be if Florida and the other anti-reform states will fall into Gov. Tim Pawlenty’s (R-MN) pattern of accepting ACA dollars while rallying against the law. The Orlando Sentinel notes that the state has already “been awarded $43 million in grants to provide $250 rebates to seniors who fall into the “donut hole” in the Medicare prescription drug program; to help prepare the Office of Insurance Regulation to evaluate out-of-state insurers seeking to sell health coverage in the state; and to plan for creating a health-care marketplace, or “exchange,” and other changes.” It’s worth asking Scott if he’s planning on sending back the money or applying for future grants.

Throughout the health care debate, Republicans characterized Medicaid as a “medical ghetto” and blasted Democrats for proposing to expand the program.” “We’ve heard eloquent statements about how moving 15 million low-income Americans into a program called Medicaid, which is a medical ghetto, is not health care reform,” Sen. Mike Enzi (R-WI) said on the Senate floor in November of 2009. Rep. Virginia Foxx (R-NC) even suggested that people are better off uninsured than insured under Medicaid.

And while Republicans may think they’re too good for Medicaid coverage, a 2005 Kaiser Family Foundation poll found that 74 percent of Americans consider Medicaid very important and most would oppose cuts to the program. In fact, the economic downturn has greatly increased the number of Americans dependent on the Medicaid program, with enrollment increasing by 8.5 percent in fiscal year 2010. But this increased eligibility has also blown a hole is state budgets and is forcing governors and legislators across the country to limit spending on the program. The Clarion Ledger is reporting that Gov. Haley Barbour (R-MS) — a potential presidential contender in 2012 — is “pushing to cut Medicaid payments to hospitals, nursing homes and other providers in a sweeping proposal that critics say could curtail access to health care“:

Barbour built a large part of his 2012 fiscal budget on a proposal to return rates for providers, excluding physicians, to fiscal 2010 levels, a move the Division of Medicaid says could save about $60 million.

Barbour says this and other reforms could free up some $82 million in Medicaid expenses for education, public safety and other state functions. [...]

“We’re going to look at his proposal and we’re going to look real hard for what is good in it, but very few of the governor’s proposals on Medicaid policy have been something that would improve the program,” said House Medicaid Committee Chairman Dirk Dedeaux, D-Perkinston. “Most of the things he proposes are ways to cut the program. In these economic times, that program has a very high demand serving a number of people who have lost their income.” [...]

What Barbour proposes would amount to a 4 percent cut for nursing homes and an 8 percent cut for hospitals and other providers, the governor’s office reports.

Medicaid officials said they, like counterparts at other agencies, were charged with finding ways to trim costs in harsh economic times for the state.

The federal government bolstered the Medicaid budget with stimulus money – the feds putting up about 85 cents for every 15 cents the state contributed. That rate resets next year to roughly a 75-25 split.

Barbour’s actions are certainly no anomaly (and if anything, call for a serious conversation about Medicaid reform and possibly federalizing the Medicaid program). According to the Kaiser Family Foundation, state spending on Medicaid rose an average of 8.8 percent — the biggest increase in eight years and the second biggest jump in two decades. Consequently, at least 20 states have reduced or restricted benefits in 2010, 39 cut or froze reimbursements for doctors and hospitals, 14 states have plans to cut benefits and 37 to restrict fees in 2011.

All of these cuts will have the effect of reducing access to providers — who already complain that they are greatly underpaid by the program — and may cause providers to reduce services and staff. But Barbour’s cuts are particularly noteworthy because they come from a Governor who has become the GOP’s national spokesperson against health reform. He regularly conflates cuts in Medicare with rationing, arguing that the health care law would undermine access for both patients and devastate providers, and has railed against the law’s Medicaid expansion.

But here he is advancing a proposal that would destabilize Mississippi’s health care system and all concerns about limiting patient access to providers are out the window. After all, these cuts are necessary to free-up state dollars “for education, public safety and other state functions.” Never mind that Mississippi has “the highest poverty rate in the nation and some of the sickest people, with the country’s highest rate of heart disease and the second-highest rate of diabetes.”

Barbour only reiterates the sheer hypocrisy of the Republican attacks, for not only is he cutting deep into Medicaid, but he’s also contributing to the very same kind of “medical ghetto” that his party so vehemently opposed expanding.

On Monday, after months of negotiation and deliberation within the National Association of Insurance Commissioners (NAIC), the Department of Health and Human Services (HHS) issued interim-final regulations requiring health insurers to spend 80 to 85 percent of premium dollars on health care services. Insurers that fail to meet the new standards — called the Medical Loss Ratio or MLR — will have to issue rebates to beneficiaries.

The new rules have received mixed reviews from consumer advocates and insurers alike. Many of the nation’s largest insurance companies’ stocks actually “rose on the news Monday,” leading one analyst to speculate that the market was reacting to the end of a period of uncertainty for insurers, and that the regulations ended up “somewhat more positive than expected.” Indeed, the group Consumer Watchdog — an consumer advocates’ organization — argues that while “HHS deserves credit for resisting a lobbyist onslaught demanding more loopholes,” the agency “also left intact some of the industry’s chief goals, including over-broad tax deductions and loose definitions of ‘health quality improvements’ that will artificially boost the health care ratios (also known as medical loss ratios) of all insurers.” The group has identified the following problems:

1. Inclusion of public health marketing campaigns as “health quality improvements.” The NAIC proposal would allow insurance companies to count as health care certain marketing costs—such as anti-tobacco or anti-obesity messages—that are largely intended to improve a corporate image.

2. Excessive tax deductions. The proposed regulations would allow insurers to deduct almost all federal and state taxes, including income taxes, from their premium revenue before calculating the medical loss ratio.

3. Lack of transparency for administrative costs counted as “health quality improvements,” including: provider accreditation fees, prospective utilization review and telephone hotlines. Each of these activities is generally considered a cost-reduction, claims adjustment or administrative activity.

4. “Mini-med” plans: In a newly developed regulation, HHS announced a major exception to the MLR rules of so-called “mini-med” health insurance plans, which limit employee benefits to as little as a few thousand dollars a year. Such plans, mostly used in the retail and fast food industries, and for part-time employees, will be allowed minimum health care ratios as low as 40% (as opposed to the 85% level of conventional employee insurance). The exception is currently allowed for one year, and must not be allowed to continue beyond a year.

In a release issued on Monday, Sen. Jay Rockefeller (D-WV) expressed concern about the mini-med exemption saying, he was “disappointed that limited benefit ‘mini-med’ plans continue to seek exceptions from these standards,” but that “they should know that their requests will be subject to close scrutiny.” The Senator also announced that he would be holding hearings on the policies on Wednesday, December 1 at 2:30 p.m.

Hopefully, this will be the first of many. Regulators and Congress will have to keep a close eye on how insurers abide by the new standards to ensure that the industry doesn’t inflate its MLR numbers without actually delivering more efficient care.

The Center on Budget and Policy Priorities’ Edward Park offers this very concise explanation of what would happen if states opt outed of the Medicaid program, sent back the federal matching rate, and tried to stretch their remaining contributions. Remember, these states believe that they can transfer individuals between 100% and 133% of the federal poverty line into the exchanges — where beneficiaries at these income levels would potentially qualify for federal subsidies — and actually save money by covering only the remaining population. Park argues that this will prove impossible:

Since states will be unable to shift most of their Medicaid beneficiaries — and very few of the higher-cost people who constitute the bulk of current spending — into the exchanges, they’d have to somehow make up for the loss of these federal funds.

Unless states were willing to as much as triple their current contributions to the cost of health care, they would have to severely curtail their health care spending.. Many would likely end up eliminating publicly funded coverage for large numbers of low-income children, pregnant women, parents, people with disabilities, and seniors. Most of these people could well end up uninsured

For the people who remained eligible for publicly funded coverage, states might scale back benefits. Possible reductions include benefits that are important to people with disabilities and children with special health care needs, such as mental health care and therapy services, which Medicaid covers but private insurance typically doesn’t. States might also increase cost-sharing charges, which means fewer people would receive needed health care.

And although states have already sharply reduced their reimbursement rates for Medicaid providers (such as doctors and hospitals) to help close their budget deficits, they would have to further lower their rates — at the same time that providers would face rising costs for uncompensated care costs as the ranks of the uninsured swell.

And of course while states would be stretching their state contributions, the federal government would have to spend more to cover the Medicaid population (assuming they could qualify for subsidies). The infusion of Medicaid patients could also tilt the composition of the risk pools and further increase premiums.

Texas Gov. Rick Perry (R) has brought Medicaid opt-out to the national stage, but it’s on the very periphery of conservative thought. Republicans with serious presidential ambitions pay lip service to condemning large federal outlays but have yet to endorse or propose anything this drastic. Gov. Tim Pawlenty (R-MN), for instance, a fairly cautious and opportunistic presidential contender is not only not talking about leaving Medicaid, but he recently accept $263 million in federal dollars to bolster the state’s program. Perry, for his part, has yet to propose how Texas would efficiently cover the remaining beneficiaries in the Medicaid program.

A new McClatchy Newspapers-Marist poll released earlier this week only reiterates the argument that the mid-term elections were not a mandate to repeal health care reform — most Americans want to keep or expand expand the Affordable Care Act:

The post-election survey showed that 51 percent of registered voters want to keep the law or change it to do more, while 44 percent want to change it to do less or repeal it altogether.

Driving support for the law: Voters by margins of 2-1 or greater want to keep some of its best-known benefits, such as barring insurers from denying coverage for pre-existing conditions. One thing they don’t like: the mandate that everyone must buy insurance.

This is fairly significant because Republicans keep insisting that they will listen to the American people and act accordingly. I’m not aware of any major poll that shows a majority of Americans want to repeal the law after learning about its specific benefits and consumer protections. And since any real effort to rescind reform will require Republicans to get very specific about what they’re eliminating, it provides Democrats with another opportunity to tout the benefits of the measure. If anything, public support should only increase.

Rep. Gary Ackerman (D-NY) is now pursuing a version of that messaging strategy by tempting Republicans to sign-on to a series of bills repealing only the most popular provisions of Affordable Care Act. This is pure legislative gimmickry but it is also another creative way to expose the ridiculousness of repeal and build on the existing public support for maintaining reform.

Last week, responding to Rep.-elect Andy Harris’ (R-MD) hypocritical demand for government-sponsored benefits, Rep. Joe Crowley (D-NY) began circulating a letter among his Democratic colleagues calling on Harris and other members of Congress who want to repeal the new health care law to forego their own government health care plans. So far just two incoming Republican freshmen — Rep.-elect Mike Kelly (PA) and Rep.-elect Bobby Schilling (IL) — have agreed. But a new Public Policy Polling survey has found that most Americans “think incoming Congressmen who campaigned against the health care bill should put their money where their mouth is and decline government provided health care now that they’re in office”:

Only 33% think they should accept the health care they get for being a member of Congress while 53% think they should decline it and 15% have no opinion.

Democrats are actually the most supportive of anti-health care Congressmen taking their health care, with 40% saying they should accept it to 46% who think they should decline. But Republicans and independents- who put these folks in office in the first place- strongly think they should refuse their government provided health care. GOP voters hold that sentiment by a 58/28 margin and indys do 56/27.

Having campaigned on listening to the American people, the Republicans, well, seem obliged to abide. As Senate Minority Leader Mitch McConnell (R-KY) put it in a post-election speech at the Heritage Foundation — titled “Listening To The People Who Sent Us Here” — “Republicans have a plan for following through on the wishes of the American people…And, above all, it means listening to the people who sent us here. If we do all this, we will finish the job.”

But this particular job — opting out of government-sponsored insurance — still remains unfinished and supporters of reform are pressing the issue. Yesterday, Americans United for Change unveiled a radio ad asking anti- reform Republicans to “walk the walk” on health care and today Crowley revealed that 59 other House Democrats sent a letter to McConnell and Speaker-elect John Boehner (R-OH) “requesting an update on which Republican members and members-elect who have called for a repeal of the Affordable Care Act will decline their own taxpayer-subsidized health care.” Gerald McEntee, president of the American Federation of State County and Municipal Employees (AFSCME) issued a particularly strong statement, saying that members who ran against reform, but enroll in government insurance “deserve to be denounced as hypocrites.”

New members have 60 days (after being sworn-in) to select an insurance plan from the federal health insurance exchange, which will become available on the first day of the following month. Returning members can opt-out of the government-sponsored health insurance coverage until the end of the open-enrollment period, December 13th.

Meanwhile, Rep. Gary Ackerman (D-NY), a reform proponent, has pledged to introduce a series of bills repealing only the most popular provisions of Affordable Care Act. The effort is designed to force the GOP to put their votes where their mouths are. “This will be the big chance for Republicans to do what they’ve vowed to do,” the 13-term member said. “These bills will be their chance to at long last restore liberty and repeal the evil monster they’ve dubbed Obamacare. ”

Sen. Ben Nelson (D-NE), a last minute hold out on the Affordable Care Act, is potentially facing a tough re-election bid in 2012 and may be having second thoughts about his vote in favor of reform. While he has yet to endorse the Republican effort to repeal the measure — he recently told a local radio station that he would “make some changes” but not “throw it all out just because there are some pieces of it, or parts of it, that aren’t working as good as some others are working” — he has tasked the Government Accountability Office (GAO) with exploring alternatives to reforms most unpopular provision: the individual mandate.

Political pressures and the Senator’s reputation for acting as a thorn in the Democrats’ back could soon push him to take a stronger stance on repeal. Therefore, in an effort to prevent Nelson’s 2012 grandstanding against the law, it’s worth highlighting that Nebraska is already benefiting from reform — and Nelson is taking full credit for delivering the benefits. Yesterday, a local ABC station in Omaha, Nebraska reported that “the One World Community Health Center in south Omaha is planning a major expansion thanks to an $8.9 million grant from the Affordable Care Act.” Fortunately, Nelson was on hand to offer some supportive quotes:

Officials said the money will go toward the $15.3 million project to be built on the former Omaha Stockyards property. [...]

The expansion was made possible by the president’s health care reform and by a deciding vote from Nebraska Sen. Ben Nelson. “Whether you’re rich or poor, when people need health care, they need to receive it,” Nelson said.

The senator said he hopes critics will understand his vote when they see results like this in the metro.

“It makes me feel real proud to know people who are going to get care here are going to get quality care in quality facilities,” Nelson said.

The existing space for One World inside the Livestock Exchange Building will also be renovated with the funds.

According to HealthCare.gov, since the enactment of the Affordable Care Act, the Department of Health and Human Services “has made $14.6 million in new grant funding available in Nebraska,” and enrolled 26 employers in the early-retiree program.

It’s worth noting that Sen. John Ensign (R-NV), who supports full repeal, actually sent a letter to Health and Human Services (HHS) Secretary Kathleen Sebelius requesting grant money authorized by the law for the University of Nevada School of Medicine for “Primary Care Residency Expansion.” Nelson, I hope, avoids similar hypocrisy.

In August, Sen. Mike Johanns (R-NE) introduced a measure to repeal the 1099 reporting requirement in the Affordable Care Act — which requires small businesses to report any purchases over $600 to the IRS — and proposed paying for the $19 billion shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. The amendment attracted seven Democratic Senators but did not receive the necessary 60 votes to move forward. Now, as the Senate prepares to re-consider repeal on November 29th, Johanns has introduced a different set of pay-fors that he hopes will attract additional Democratic support:

“My latest effort to repeal this costly mandate should easily win the support of my colleagues,” said Johanns. [...]

Johanns’ amendment directs the Office of Management and Budget (OMB) to identify $39 billion in unspent and unobligated accounts to replace the revenue that might have been generated by the 1099 paperwork mandate. This represents only about five percent of the total funds in unspent and unobligated accounts and gives the Administration discretion to ensure these funds do not affect ongoing and necessary programs.

A spokesperson at Johanns’ office told me that the Senator is only interested in repealing the reporting mandate and is no longer interested in making waves with controversial pay-fors that take away money from the mandate or prevention. Since President Obama, Senate Finance Committee Chairman Max Baucus (D-MT), and House Speaker Nancy Pelosi (D-CA) have all come out in support of stripping the provision, Johanns sees renewed momentum on the issue and hopes to build a coalition around removing the 1099 requirement.

But it’s unclear if this pay-for will be any less controversial. First, if Senators are hesitant to vote for specific cuts because they may target their favorite programs, they would also be hesitant to delegate the task of finding cuts to another agency — out of fear that it would target their favorite programs.

Meanwhile, CAP’s Michel Linden doesn’t think that the pay-for would score as deficit neutral. “Unspent and Unobligated balances are not real money sitting in some account, they are actually ‘budget authority’ – the ability for an agency to draw down funds from the treasury to turn into actual outlays,” he told me. “While canceling unobligated balances might save a little bit, I’m pretty sure the vast majority just goes away if its not used which means that canceling it won’t save any money.”

He makes the following analogy:

A parent says to their teenager, “You can spend up to $100 on school supplies this year.” The child then spends only $80. Now if the parent has promised the child that they get to keep the difference, then canceling that promise would actually save money for the family. But if the parent hasn’t made that promise – if instead the understanding is that the teenager can spend up to $100 but if he or she comes in low, then any change is expected to be returned to Mom and Dad – then “taking back” that other $20 has no real meaning for the family’s bottom line.

The very fact that Johanns feels the only way he can repeal the 1099 is if he farms out the task of identifying pay-fors to a separate agency, however, only reiterates the difficulty of actually going through with the GOP pledge of eliminating the entire law or even going provision by provision.

Baucus — who has introduced his own 1099 repeal bill — has yet to identify any pay-fors. His office has not returned my inquiries into this matter.

This morning, the Department of Health and Human Services (HHS) announced that it will issue interim-final regulations requiring health insurers to spend 80 to 85 percent of premium dollars on delivering health care services, encouraging insurers to deliver care more efficiently and not raise premiums beyond the costs of health care services and quality improvement. Insurers that fail to meet the new standards — called the Medical Loss Ratio or MLR — will have to issue rebates to beneficiaries.

“In 2011, the new rules will protect up to 74.8 million insured Americans, and estimates indicate that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion,” the department says on its website. “Average rebates per person could total $164 in the individual market.” The interim final rule is based almost entirely on the recommendations of the National Association of Insurance Commissioners’ (NAIC) and is considered favorably by consumer advocates.

For instance, while the interim rule rebuffs the call of three powerful Democratic Committee chairmen to allow issuers to subtract only taxes that are specifically related to the Affordable Care Act before calculating their MLRs, it accepts the more consumer-friendly aggregation process that prevents insurers from masking the low MLRs of certain policies and does not consider services like anti-fraud and “utilization review” as “medical expenses.” (For more details click HERE or HERE.)

During a press conference announcing the new standards, administration officials and consumer advocates stressed the flexibility of the new regulations — particularly the one-year exemption for so-called mini-med plans. Employers who offer such plans to low-income, part-time workers like fast food restaurants and retailers have requested waivers from the agency, warning that they would have to stop offering coverage if required to abide by the MLR regulations. HHS officials argued that these rules will prevent that from happening:

SEBELIUS: The mini-meds have a different kind of formula and the decision that HHS in compliance of the rules suggested by the NAIC that we will collect data for the first year on mini-med plans and make a determination on the applicability of the MLR across the board.…And then applying a standard process to the mini-meds along with some substantial consumer notices along the way so they understand what they are not getting at this point is a fully comprehensive insurance plan

JAY ANGOFF: No one is going to lose their coverage, even if that coverage is not the best in some cases. No one is going to lose even that coverage because mini med carriers don’t report their data separately traditionally, we are requiring that data to be reported early and based on that data we will determine what happens in that first year.

Watch it:

Significantly, an across-the-board delay buys HHS a year of respite from any sudden coverage dumps by large employers like McDonald’s, responds to the GOP’s contention that the agency is arbitrarily granting waivers to certain applicants, and reiterates the administration’s message of regulatory flexibility.

During the press conference, NAIC consumer representative and Washington and Lee law professor Timothy Jost stressed that while the rule does not consider anti-fraud measurements as health care costs, it allows insurers to “offset funds that they spend on fraud recovery against money actually recovered,” meaning that if fraud efforts are successful, the insurers, will in fact get credit for it. He also argued that insurers will receive “full credit for money that they spend to improve patient outcomes, to prevent rehospitalizaitons, to encourage wellness and prevention, to prevent patient errors and protect patient safety and on quality related IT claims.” The rule “does provide appropriate treatment for different, smaller, and newer plans,” Jost said at the conference and explained that the Secretary would have the authority to adjust the MLR in certain states.

Washington and Lee law professor Timothy Jost adds one more important point to the federal governments’ initial guidance on how states can establish exchanges under the Affordable Care Act. It expands on this notion that so-called “red” states and “blue” states will likely adopt very different kinds of exchanges that will accomplish very different things:

In perhaps the most noteworthy paragraph of the Guidance, HHS clarifies that both an “active purchaser” (Massachusetts or California) or “open marketplace” (Utah) model are acceptable under the ACA. Many consumer advocates favor an active exchange that would demand value for money from health plans, while insurers favor an “any willing insurer” model. While the Guidance blesses both, it should be noted that, in the prior paragraph, the Guidance notes that the exchange must have “discretion to determine whether health plans offered through the Exchange are ‘in the best interests of qualified individuals and qualified employers” as Section 1311(e)(1) [of the ACA] requires.” A state statute that required an exchange to certify any health plan that met all other explicit statutory requirements could not, therefore, be in compliance with the ACA.

Progressive states want the exchange — likely governed by an independent authority — to act like an active purchaser of insurance: restrict inefficient and poor quality plans from entering and bargain with insurance companies on behalf of consumers. The so-called “open marketplace” model is very different. Here, consumers will compare a wide variety of plans sold by any insurers that want to participate, meaning that they may be overwhelmed by the choice and sold some not very good products.

The government’s guidance is important for two reasons. First, it confirms what Joel Ario, the Director of the Office of Insurance Exchanges at HHS, has been saying publicly for quite some time — states will have a great deal of flexibility in establishing their own exchanges. But — and this is the second point — they won’t, as Jost points out, be able to just invite anyone into the new market place. A certain floor of standards will be established.

It’s also worth reiterating that insurers are very obviously (and publicly) lobbying for the latter structure — touting out a whole series of poll testes phrases about enabling “competition” and promoting “consumer choice.” It will be interesting to see how they respond to this federal guidance.

Earlier this month, several states — led by Texas Governor Rick Perry (R) — floated the idea of resisting the requirements of the health care law by opting out of the Medicaid program. Relying on a Heritage Foundation study, the states argued that they could save money by sending back million of dollars in Medicaid matching funds and designing more efficient alternatives for covering their poorest residents.

Health care wonks and economists questioned the feasibility of the scheme and this morning, during an appearance on C-SPAN’s Washington Journal, Kaiser Health News reporter Marilyn Werber Serafini explained why it would only increase costs for the federal government:

SERAFINI: There is a proposal out there right now coming out of the Heritage Foundation that talks about one possible option for doing this and under this option he says 40 out of the 50 states would actually come out ahead by dropping all that federal matching funding. [...]

The states would take full responsibly for their long term care, their nursing home coverage and also for helping the folks who are on Medicare the senior citizens who still need help paying their premiums and with cost sharing. But the rest of the folks [below 133% of the poverty line] they qualify for subsidies. They buy private insurance through the exchange and therefore you’re essentially giving them full responsibility to the federal government…. If they did drop out of Medicaid, if these folks did qualify for the subsidies and were turned over to the federal government, it would meet a lot more spending by the federal government.

Watch it:

The federal government would have to spend more and so would the Medicaid population. Even if the poorest residents were eligible for subsidies in the exchanges (which as Serafini points out is debatable), they would have to contribute 2% of their incomes to health insurance and would likely be spending a lot more on health care than if they had stayed in the Medicaid program.

States would also have to stretch their contribution to cover individuals with disabilities and long term care services in the face of rising health care costs. Even if they somehow managed to do that, they would likely be confronted with an uptick in uncompensated care and that would and that — along with the fact that the proposal would take billions out of the state economy that goes to support hospitals and other providers — would ensure a revolt from the provider community. Hospitals and doctors would have to swallow the costs of caring for uninsured individuals who will continue to use the emergency room as their primary source of care.

As former Bush HHS Secretary Gov. Tommy Thompson (R-WI) told the New York Times this morning about Wisconsin’s expanded Medicaid program, “The program is very popular, and I don’t want the Republicans to do things that will damage them in the future.”

Conservatives would be undermining state Medicaid programs and increasing federal government expenditures on health care — which, ironically, is exactly what they say they’re trying to reduce.

Yesterday, the Congressional Budget Office released its preliminary analysis of the Ryan-Rivlin Health Proposal, a plan the two members of the President’s Fiscal Commission — Rep. Paul Ryan (R-WI) and former White House Budget Director and Federal Reserve Vice Chair Alice Rivlin — want to present before the committee. The CBO estimates that the proposal would “reduce federal budget deficits over the 2011-2020 period by about $280 billion,” but it would so by gutting the very institutions that spread economic risks across rich, and poor, healthy and sick, able-bodied and disabled, young and old and shifting all of the economic costs and risks onto individuals.

Ryan/Rivlin raises the eligibility age for Medicare to 67 from 2021 to 2032, transfers future beneficiaries into the exchanges in 2021 — where the infusion of older sicker people will increase premiums for everyone in the risk pool — and gives them a voucher that is intended to not keep up with health care costs. The CBO describes the consequences:

Voucher recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law, for two reasons. First, most of the savings for Medicare under the proposal stem from reducing the amounts that the federal government would pay for enrollees on a per capita basis, relative to the projections under current law. Second, future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare [...]

For both Medicare and Medicaid, the budgetary effects would become larger over time because federal payments would tend to grow more slowly under the proposal than projected costs per enrollee under current law. Although the level of expected federal spending and the uncertainty surrounding that spending would decline, enrollees’ spending for health care and the uncertainty surrounding that spending would increase.

The prognosis is even worse for Medicaid beneficiaries, many of whom would likely be forced out into the private market under the proposal’s block-grant approach. Rivlin/Ryan converts the existing matching system into block grants, where states would receive a fixed dollar amount annually that would fall below current growth — hence the savings. Under this arrangement, states would either have to increase their contribution to the program or cap enrollment, cut eligibility, stop offering mandatory benefits, lower provider reimbursements etc. As the CBO put it: “reducing federal payments for Medicaid relative to currently projected amounts would probably require states to provide less extensive coverage, or to pay a larger share of the program’s total costs, than would be the case under current law.

The proposal repeals the CLASS long-term care act to boot, leaving the sickest and poorest Americans who currently benefit from the Medicaid program without any obvious form of affordable coverage.

So consider this proposal dead on arrival, but one can’t help but marvel at its sheer callousness.

Today is the deadline for proponents and critics of the Affordable Care Act to submit their friend-of-the court briefs in the multi-state Florida-led case that’s challenging the constitutionality of the law’s individual mandate and Medicaid expansion. In October, U.S. District Court Judge Roger Vinson dismissed three of the Plaintiff’s claims, but allowed their challenge to the law’s minimum coverage provision and a separate complaint about the law’s Medicaid expansion provision to move forward.

Hearings in the case will begin on December 16th, but a comparison of the different groups that have submitted amicus briefs is telling. While health advocacy groups, disease-specific organizations, and health care providers are standing on the side of reform, the anti-reform column is dominated by politicians and at least two potential GOP presidential contenders (Pawlenty and Thune). In fact, supporters of the multi-state challenge were unable to attract a single health care organization to join in their effort:

Joining Florida in its lawsuit are Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington.

Yesterday, responding to Rep.-elect Andy Harris’ (R-MD) hypocritical demand for government-sponsored benefits, Rep. Joe Crowley (D-NY) began circulating a letter among his Democratic colleagues calling on Harris and other members of Congress who want to repeal the new health care law to forego their own government health care plans. In a letter to House Minority Leader John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY), Crowley writes, “If your conference wants to deny millions of Americans affordable health care, your members should should walk that walk.”

This morning, a caller to C-SPAN’s Washington Journal asked Rep.-elect Mike Kelly (R-PA) — who also opposes the health care law — if he would be willing to give up his government-sponsored health insurance. Kelly said that he would:

KELLY: There is no reason for anybody to get anything different than anybody else. I personally have always paid for my own health care… why should my pension as a public official be any different from anyone else’s pension? Why should my health care, as a public official, be any different than anybody else’s? No, level across the board. [...]

Q: So will you have a Congressional plan?

KELLY: No, I do not need. I got my own plan, I don’t need a congressional plan. I’ve taken care of myself for a long time.

Watch it:

The Congressional health care system — the Federal Employees’ Health Plan (FEHBP) — is very similar to the Exchanges established in the Affordable Care Act. Like federal employees, beginning in 2014, many Americans will be able to choose coverage from a series of private options competing for their business within a new health care market place — the state-based exchange.

Kelly, however, will not have that choice of enrolling in an FEHBP plan by 2014 and could have coverage that is “the same as everyone else’s.” Under a Republican amendment to the Affordable Care Act, “the only health plans that the Federal Government may make available” to Members of Congress and congressional staff” are “health plans that are I) created under this Act (or an amendment made by this Act); or (II) offered through an Exchange established under this Act.”

Today, Sen. Ron Wyden (D-OR), along with Scott Brown (R-MA) introduced the “Empowering States to Innovate Act,” moving up the date for when states can opt out of certain requirements under the Affordable Care Act and pursue more innovative ways of expanding access and reducing costs. If adopted, states that demonstrate that they can cover “at least as many citizens with coverage that is at least as comprehensive and affordable as prescribed under federal law,” will be able to exempt themselves from “the individual mandate, the employer penalty for not providing coverage, the exact standards for a basic health insurance policy and the structure of the health insurance exchange” beginning in 2014, rather than the current 2017 requirement.

“I fought to include state waivers in the new health reform law because I have always believed that federal reform shouldn’t constrain a state’s ability to do better,” Wyden explained in a statement released this morning. “Some of the most innovative approaches to health policy have originated at the local level, where lawmakers have a unique insight into their constituents’ lives and the state waiver simply gives states the bandwidth to pursue those kinds of approaches,” Wyden said.

Wyden, Brown and Sen. Bernie Sanders (I-VT), who co-sponsored the original innovative waivers amendment, believe that their home states of Oregon, Massachusetts, and Vermont are leading the pack in adopting innovative approaches — single-payer Vermont or a single-payer proposal recent introduced in Oregon– but it remains unclear how many other states would be able to meet the requirements of the waiver.

Some health policy wonks don’t think it can be done without a mandate. January Angeles, a health policy analyst at the Center on Policy and Budget Priorities, says that Wyden’s waiver does not exempt states from reforming their health insurance markets — extending guaranteed issue and community rating — and claims that “whether or not he gets this waiver, Oregon still has to implement those market reforms.” “There is no way to implement those market reforms” without a mandate, she insists. “There is just no way to make it work and have the popular elements of reform and make it work.”

States would still have to abide by the insurance market reforms in subtitles A, B, and C of the Affordable Care Act and Wyden’s office responded to the criticism this way: “if a state can’t come up with a solution that meets those reforms and all of the other cost and coverage requirements then it won’t qualify for a waiver.” “Senator Wyden wrote the state waiver provision to be purposefully unspecific so that states would be free to innovate new ideas that none of us may have thought of yet,” Wyden’s communications director Jennifer Hoelzer wrote me in email. “And if they can’t make it work as some are suggesting, then they won’t qualify for the waiver.”

Interestingly, Kaiser Health News reported yesterday that Sen. Ben Nelson (D-NE) “has asked the Government Accountability Office to study alternatives to the controversial mandate requiring most Americans to obtain coverage” and may be looking to come out against the mandate ahead of his re-election bid in 2012. Since Wyden has touted his waiver as an alternative to repeal, I asked Nelson’s office why the Senator had not signed on to the amendment. “He’s not at this time,” was all Jake Thompson — Nelson’s Communications Director — told me.

This morning, HHS released its “Initial Guidance to States on Exchanges,” in which it defines and summarizes the statutory requirements for establishing the new health insurance market places in 2014:

Beginning with an open enrollment period in 2013, Exchanges will help individuals and small employers shop for, select, and enroll in high-quality, affordable private health plans that fit their needs at competitive prices. Exchanges will assist eligible individuals to receive premium tax credits or coverage through other Federal or State health care programs. By providing one-stop shopping, Exchanges will make purchasing health insurance easier and more understandable.

States have a lot of discretion in how the construct their exchanges and the federal government has already issued its first batch of planning grants to help states build their unique market places. More funds will be available next year, once state legislatures across the country pass legislation establishing the exchanges. But the two states that did not apply for the funds in protest of health reform — Minnesota and Alaska — may have a hard time receiving new dollars, the guidance suggests:

Forty-eight States and the District of Columbia were awarded their first Exchange grants under Section 1311 in September 2010. Those grants were for planning purposes and the next round of grants will be for the purpose of establishing an Exchange. The opportunity to apply for grants will be announced in February 2011 and will become available on a rolling basis throughout the next three years. States will have to meet certain milestones in order to be awarded grants in 2011, and the size of State awards may be related to the number of milestones met. States that are not able to meet required milestones by spring 2011 may apply for grants later in the year. Necessary Exchange costs will be fully funded by HHS until 2015. After January 1, 2015, Exchanges must be self funded.

The problem is, Minnesota and Alaska would have to meet certain benchmarks without federal assistance in order to receive new funding. Should they fail to do this and find themselves unable to construct their own exchanges, “now or at a later point in the process,” “HHS will work with the State to establish an Exchange,” the guidance reads.

The federal government may not be exactly taking over, but ironically by resisting planning grants these Govs. Tim Pawlenty (R-MN) and Sean Parnell (R-AK) may be ceding at least some control to the federal government, bringing about the very kind of “government takeover” that they have been protesting by resisting these funds in the first place.

House Minority Leader John Boehner’s (R-OH) passionate opposition to the notion that all Americans should be able to afford health care was apparent long before his orange-faced “Hell No You Can’t!” rant against the Affordable Care Act, so it should come as no surprise that he has signed an amicus brief challenging the ACA.  Anyone who is actually familiar with the Constitution, however, would be quite surprised by the arguments Boehner’s brief makes.  Indeed, the presumptive Speaker-elect appears to have invented an entirely new theory of the Constitution out of thin air in order to claim that the ACA is unconstitutional.

To be sure, there aren’t exactly any good arguments against the constitutionality of health reform.  As conservatives are so fond of pointing out, health care spending makes up about one-sixth of the U.S. economy, and even ultra-conservative Justice Antonin Scalia agrees that Congress has sweeping authority to regulate the economy.  Boehner’s brief nonetheless claims that the law’s minimum coverage provision — the provision requiring almost all Americans to either carry health insurance or pay slightly more in income taxes — exceeds Congress’ power under the Constitution.

As MIT economist Jonathan Gruber explains, this provision is essential to any health reform package that forbids discrimination against persons with preexisting conditions:

Insurance companies are also prohibited from excluding coverage due to preexisting illnesses.  This is a highly popular reform, but it doesn’t work in a vacuum. If insurance companies must charge the same price to people whether they’re sick or healthy many healthy people will view this as a “bad deal” and not buy insurance. This results in higher prices that chase even more people out of the market. The result is a “death spiral” that leads only the sick to purchase insurance at very high prices. Several states tried such community rating reforms—offering health insurance policies within a given territory at the same price to all persons without medical underwriting—in their nongroup markets over the past two decades, and sharp rises in insurance prices ensued along with rapidly shrinking market size.

The fact that the minimum coverage provision is essential to making sure the rest of the bill functions properly has constitutional implications.  A provision of the Constitution known as the Necessary and Proper Clause provides that Congress has the power “[t]o make all laws which shall be necessary and proper for carrying into execution” its power to pass economic regulation.  In Justice Scalia’s words, this means that “where Congress has the authority to enact a regulation of interstate commerce, it possesses every power needed to make that regulation effective.”

Boehner’s brief, however, essentially asks a Florida trial judge to rewrite this Necessary and Proper Clause to place a new an unheard of limit on Congressional authority.  Under Boehner’s reasoning, a law can only be enacted under the Necessary and Proper power if some other law would become “legally ineffective” without it.  Needless to say, Boehner fails to cite a single case supporting this claim.

The reason why Boehner can’t find such a case is because none exists.  There is, however, a Supreme Court case called Sabri v. United States, which completely eviscerates Boehner’s legal claim.  In Sabri, the Supreme Court held that — even though there is nothing in the Constitution expressly authorizing Congress to enact an anti-bribery law — Congress may still invoke its Necessary and Proper power to forbid people from bribing state officials in order to protect federal money that is entrusted to the states.  Under Boehner’s reasoning, Sabri could not have come down the way that it did, since an anti-bribery law is hardly essential to making a grant of money to the states “legally effective.”

Since Boehner is expected to lead the House of Representatives for the next two years, America can only hope that he doesn’t take the same careless attitude towards lawmaking that he does towards the Constitution.

Earlier today, the Bipartisan Policy Center released a new set of recommendations to offer a “comprehensive plan to dramatically reduce America’s deficits and debt and strengthen our economy, enabling the nation to reclaim its future.” The report, titled, “Restoring America’s Future,” is now the third proposal that tries to balance the deficit by purportedly making the kind of difficult decisions that elected officials usually try to avoid. Earlier, the two chairmen of the President’s Fiscal Commission — former Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles — released their draft recommendations for how Congress can achieve “nearly $4 trillion in deficit reduction through 2020″ while reducing “the deficit to 2.2% of GDP by 2015” and Rep. Jan Schakowsky (D-IL) — a member of the committee — issued her own progressive alternative. White House Budget Director and Federal Reserve Vice Chair Alice Rivlin, who helped author the BPC proposal, is also a member of the President’s Fiscal Commission.

What follows is a partial comparison of the health care sections in the three available proposals: the Simpson/Bowles report, Rep. Jan Schakowsky’s (D-IL) progressive proposal, and the Bipartisan Policy Center’s latest report:

By far the biggest disappointment of the BPC proposal is this idea of transitioning Medicare into a “premium support” program. Not only does that undermine the entire concept of social insurance, but it also transfers the entire cost of coverage to the individual. That is, if your costs exceed GDP plus 1%, you are on the hook for paying for the remaining health care expenditures.

Compare that with the more tame Simpson/Bowles approach. First, Simpson/Bowles considers the growth of Medicare, Medicaid, CHIP, exchange subsidies, and employer health exclusion in setting their target. BPC, only looks at Medicare. Simpson/Bowles triggers various policy options if costs increase faster than the GDP+1 target. Under the BPC proposal, the only option is higher premiums. The former requires the President to submit and Congress to consider reforms to lower spending like increasing premiums, overhauling the fee-for-service system, developing premium support for Medicare, adding a robust public option, and/or expanding IPAB.

The BPC’s Medicaid proposal is more interesting. The committee feels that states are gaming the shared financing arrangement between states and the federal government — by finding creative ways to increase their federal matching rate — and proposes an alternative that would allocate a complete component of the Medicaid program to each payer. Under the arrangement, the state, for instance, would fully finance and administer CHIP or long-term care, while the federal government would pay for all disabled beneficiaries in the program. This, BPC believes, would encourage both the state and the federal government to control spending in their respective section and thus lower spending. This idea has been around since the 1990s but it’s unclear that it would save money since each payer would still have to deal with rising costs in their particular section of the Medicaid program.