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Boehner’s Folly Leads To S&P Downgrade of US Debt

I’m no expert, but I don’t think S&P downgrading its rating of US debt will, as such, have any really big practical implications other than becoming the next political football. If you look at S&P’s definition of the AA rating, after all, it says: “An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.” Scared yet? Me neither.

The issue today continues to be what it was a week ago. For years now, if you look at a projection from CBO or OMB it shows a spending curve that steadily accelerates. It accelerates because the government currently pays for health care for old people and for poor people, and because the cost of health care services has been accelerating. Consequently, for a long time now it’s been clear that in the future either the US has to stop paying for old people’s health care, or else raise more revenue in taxes, or else reduce the growth in the price of health care services. And for a long time now it’s been unclear what combination of those strategies will be adopted. But people have generally had confidence that some combination of them would be adopted.

Once upon a time earlier in the Obama administration, I asked a senior official how he thought this would ever get resolved. A deal, everyone agreed, had to be bipartisan. But to be bipartisan, it would have to include tax increases. But Republicans wouldn’t vote for tax increases. He told me that of course that made sense, but at some point pressure from bond markets would be unbearable and Republicans would come to the table. Broadly speaking, that’s the thing that most people generally believed would happen. What we saw with the debt ceiling was a mini-test of that theory, and the theory failed. “No new revenues” wasn’t just a GOP bargaining position, it turned out to be something they were really committed to even in the face of an imminent financial crisis. You can see why that would dent confidence in the long-term fiscal trajectory of the country.

The person who looks bad here, in my view, is John Boehner. President Obama wanted to do a “grand bargain.” The Gang of Six Senators wanted to do a “grand bargain.” And it looked for a moment like Speaker Boehner was going to be part of a grand bargain. But ultimately he decided that he didn’t want to sign a deal that would fracture his caucus, so the grand bargain talks fell apart. And yet the little bargain that did eventually pass the House ultimately couldn’t pass with Republican votes alone. So what did Boehner really achieve? If he was ultimately destined to strike a deal with the White House that needed Democratic votes to pass the House, why not go for the grand bargain? According to Boehner “When you look at this final agreement that we came to with the white House, I got 98 percent of what I wanted. I’m pretty happy.” How happy is he now?

NEWS FLASH

Hatch: Contraception Coverage Is ‘An Affront To The Natural Rights To Life’ | Sen. Orrin Hatch (R-UT) conflates contraception with abortion in this press release denouncing the Obama administration’s decision to require insurers to provide coverage for contraception and other reproductive services without cost sharing. “If adopted by you, the IOM recommended benefits would force individuals to bear costs associated with drugs that violate their religious and philosophical commitments,” he writes, since that’s the only way he can turn a service that most insurers cover and the majority of women rely on into a controversy.

NEWS FLASH

July Heat Records Define The United States | July was so hot “that just by plotting the location of each daily heat record that was broken, a nearly complete image of the contiguous United States is visible,” reports NOAA. “Almost 9,000 daily records were broken or tied last month, including 2,755 highest maximum temperatures and 6,171 highest minimum temperatures (i.e., nighttime records).” “Some cities reached daily high temperatures 19 out of the 31 days in the month.” The data is incomplete, as they include “only include weather stations with real-time electronic reporting, which accounts for about two-thirds of the locations.”

Why Democrats Must Fight Like Hell In The Super Committee

Sarah Kliff writes that “If the Supercommittee does not come up with enough savings, and the trigger cuts go into effect, the Affordable Care Act comes out in relatively decent shape.” She argues that “Medicaid, which will expand up to 133 percent of the Federal Poverty Line in 2014, is shielded from the trigger,” as are the premium subsidies. The provisions that are vulnerable to attack — the cost sharing assistance, exchange grants — would see “a trim and not a wipeout.” “A small cut on the federal level could, for example, throw a wrench in the plans for states looking set up exchanges, particularly in cash-strapped states. So while the cuts aren’t expected to be huge, they could still have an impact,” Kliff concludes.

I think this really understates that impact. Consider this full list of all the potential provisions that could be at risk (Sen. Barrasso’s office informs me that this is the same list they’re working off):

– Cost-sharing Subsidies (Section 1402): Approximately $111 billion from 2014-2021.
– Risk Adjustment (Section 1342): More than $100 billion from 2014-2021.
– Prevention and Public Health Fund (Section 4002): A total of $16.75 billion from 2013-2021.
– Rate Review Grants (Section 1003): Funds from the initial $250 million that remain available in 2014.
– High-Risk Pool Funding (Section 1101): Funds from the initial $5 billion that remain in 2013 and 2014.
– Health Insurance Cooperatives (Section 1322): $3.8 billion.
– Re-insurance for Early Retirees (Section 1102): $5 billion, but likely that the funds will be obligated before 2013.
– Health Insurance Exchange Administrative Grants (Section 1311): Unspecified amounts in FY2013 and FY 2014.
– Community Health Centers Fund (Section 10503(b)(1)): A total of $7.3 billion for FY2013 through 2015.
– Health Center Construction and Renovation (Section 10503 (c)): Funds remaining from the initial $1.5 billion remain available until FY 2015.
– National Health Service Corps (Section 10503 (b)(2)): A total of $900 million in mandatory funding for 2013, 2014, and 2015.
– Maternal, Infant, and Early Childhood Home Visiting Program (Section 2951): A total of $800 million in mandatory spending in 2013 and 2014.
– Personal Responsibility Education Programs (Section 2953): A total of $150 million for 2013 and 2014.
– School Based Health Centers (Section 4101): $50 million in FY 2013.
– Patient Centered Outcomes Research Trust Fund: A total of $1.05 billion between 2013 and 2019.

Certainly this isn’t the very heart of reform — not in the same way that the mandate is, anyway. But all of these pieces work together to improve the effectiveness of the law. So if the federal government is paying insurers less for the extra costs associated with lower patient cost-sharing, then insurers will increase premiums (causing the government to spend more on premium support), or try to avoid lower-income beneficiaries altogether.

Similarly, the money for the National Health Service Corps and the community health centers is necessary to provide the capacity to care for the newly insured. The risk adjustment is critical for ensuring the viability of the market reforms and the exchanges. And on down the list. Before long, you’re compromising on the very goals of reform — expanding access and lowering costs — and as you peel back provision after provision, you’re left with a much smaller, less ambitious, less progressive plan, that isn’t worth the nine or more months you spent working on it! Or, worse yet, pull on too many strings all at once and the whole thing unravels.

But what’s still even more alarming is that if these cuts become reality, they’ll establish a strong precedent for policy makers to use the law as a “pay for” on future legislation. If you’re going to reduce the cost sharing subsidies, why not go after the premiums? And so the trigger is a very painful fallback. Given where we are, lawmakers should fight for the best deal possible in the super committee — assuming the GOP agrees to revenue increases. And, if more health care advocates are elected in 2012, they may have the votes necessary to make changes that would cushion the blow to the law.

Economy

With Economy Stalling, Republicans To Spend August Recess Promoting Ridiculous Constitutional Amendment

Between yesterday’s stock market nose dive and today’s jobs report that shows the labor market is barely treading water, its undeniable that the economy is in a precarious position. A report earlier this week by analysts at JP Morgan showed that federal fiscal policy is actually going to retard growth through the next year, and the Federal Reserve seems unwilling to approve any additional measures to boost job creation.

With that in mind, job creation should be foremost on the minds of Washington policymakers. However, it seems that House Speaker John Boehner (R-OH) has other plans:

In a meeting with his conference on Monday, Speaker John A. Boehner told members that the best thing they could do during the August recess was to sell their constituents on the idea that the amendment — which essentially stipulates that government cannot spend more than it takes in — is necessary and good.

Republican leaders on the Hill have pivoted from railing against Democrats about tax increases to pressing for the amendment, which would require the acquiescence of two-thirds of each chamber of Congress, and three-quarters of state legislatures. They point out that such a measure passed the House in 1995, but then failed in the Senate by a single vote.

Even though the GOP never even held a vote on a balanced budget amendment when it controlled both houses of Congress under President George W. Bush, it has now become obsessed with the BBA, demanding a vote on it as part of the deal to raise the debt ceiling. And evidently, the August recess will be spent trying to drum up the political support to make that vote a success.

As we’ve noted over and over again, a balanced budget amendment would force the government to actively make economic downturns worse, by cutting back on spending precisely when the economy needs it most. In a letter to Congressional leadership, five Nobel Prize-winning economists wrote that “a balanced budget amendment would mandate perverse actions in the face of recessions,” adding that the BBA would prevent federal borrowing to finance investments into infrastructure, education, environmental preservation, and other areas “vital to the nation’s future well-being.”

So instead of thinking of ways to alleviate the suffering of those coping with the current weak economy, Republicans are going to spend the rest of the month trying to sell a policy that will make future downturns even worse.

NEWS FLASH

Saved From Federal Cuts, Medicaid Benefits Now Threatened By States | Even though lawmakers saved Medicaid from across-the-board cuts in the debt ceiling deal, increasing numbers of states are pursuing health care measures that will cut back on their Medicaid spending, thereby threatening benefits for millions of recipients. Utah is pushing to cap its per-person Medicaid expenditures to its general revenue, while Texas is seeking a federal waiver that would limit its Medicaid funding to a block grant. Similar initiatives are stirring debate in legislatures across the nation.

Sarah Bufkin

NEWS FLASH

Pharmacies To The Left Of Obama: Patients Should Have The Right To Sue Over Medicaid Cuts | Four pharmaceutical groups — the National Association of Chain Drug Stores, the National Community Pharmacists Association, the National Alliance of State Pharmacy Associations, and the American Pharmacists Association — have filed an amicus brief in a California lawsuit calling “on the Supreme Court to give patients and healthcare providers such as hospitals the right to challenge states’ Medicaid cuts.” The Obama administration — to the dismay of many consumer advocates — has said it does not believe that beneficiaries should be able to challenge state reductions to the program.

Scott Walker Cuts State Health Services, Then Rejects Health Reform’s Public Health Grants

Wisconsin Governor Scott Walker (R) has rejected more than $9 million in grants from the Affordable Care Act that would have “focused on fighting drug and alcohol abuse; assessing health impacts of public policies; and signing up state residents who qualify for state health programs.” State health commissioners are outraged by the move, pointing out that the state is turning away money “at a time when there is a proliferation of illicit drugs and documentation of binge drinking and drunken driving in the state.” “Wisconsin would put its head in the virtual sand and not go after this funding,” Bevan Baker, commissioner of health for the City of Milwaukee said.

Walker’s administration claims the grants “duplicated existing efforts,” despite making significant cuts to health care programs in the state’s recently-passed state budget. Walker slashed $500 million from Department of Health Services and instituted a $1.6 billion reduction in public school funding.

In fact, some of the budget cuts specifically targeted drug and alcohol prevention programs in schools, while others will allow the health department’s secretary, Dennis Smith, “sole authority to make cuts to whatever programs he likes — or doesn’t like.” Smith hasn’t yet offered a finished proposal, but wouldn’t rule out cuts to addiction services.

Wisconsin is also near the very bottom of states for public health funding, ranking 49th in the nation for state funding of prevention services per capita.

Hannity Blasts Insurance Coverage For Birth Control, Defends Viagra: ‘That Is A Medical Problem!’

Piling on to the conservative apoplexia over the Obama administration’s recent ruling that insurance companies should cover birth control without co-pays, Fox News host Sean Hannity slammed the policy last night for encouraging “screwing around,” but defended coverage of Viagra. Taking a bold stance again reason, Hannity said, “I don’t care about the scientists” who recommended the move and insisted that the birth control is “not a women’s health issue.” Asked how he felt about insurance companies covering male enhancement medication, Hannity strongly defended the practice, saying, “That is a medical problem!” Watch excerpts from the segment:

Hannity may be surprised to know that the overwhelming majority of policies — particularly employer policies and the federal government’s health care — already cover birth control. Meanwhile, at least 27 states already require insurers to cover birth control. More than 99 percent of all women ages 15 to 44 who have ever had sexual intercourse have used at least one contraceptive method. Overall, 62 percent of the 62 million women ages 15 to 44 are currently using a method of contraception.

NEWS FLASH

Democrats To Hit Republicans On Medicare Cuts In Targeted Campaign | “Beginning Monday, the Democratic Congressional Campaign Committee will blanket 44 Congressional districts held by Republicans with radio ads, automatic calls, billboards and advertisements placed on gas station pumps” critical of GOP budget that passed in the House but ultimately failed in the Senate. The campaign comes as the Tea Party and some Republicans prepare to sell the plan during the August town halls.

NEWS FLASH

Biden’s Old Debt Plan A Likely Starting Point For Super Committee | The starting point for the yet-to-be named super committee will likely be the numerous “Medicare and Medicaid cost-saving measures identified in the Vice President Biden-led phase of the debt limit negotiations,” sources are telling Inside Health Policy’s Sahil Kapur. Those include: Medicare means testing and income relating; restricting payments for durable medical equipment, home health and SNFs ($50 billion or more in savings); reforming Medigap such as banning first dollar coverage (upwards of $50 billion in savings), implementing a slew of payment cuts to hospitals; extending Medicaid drug rebates to Medicare Part D dual eligibles (estimated to save $100 billion).

Debt Ceiling’s Trigger Could Cut Assistance To Nutritional Program For Lower Income Women And Children

The trigger in the debt ceiling deal could also affect “a popular nutrition program for low-income women and young children,” Congressional Quarterly’s Ellyn Ferguson is reporting. Lawmakers had initially considered shielding the program known as Special Supplemental Nutrition Program for Women, Infants and Children or (WIC) — which provides assistance to “an estimated 9 million pregnant women, breast-feeding mothers and children under age 5″ — but that provision was not included in the final deal, meaning that it could be vulnerable to sequestration if the 12-memeber Congressional super committee does not agree on a spending plan:

The caps still leave wiggle room to protect some programs while reducing funding for others, said Jim Horney of the Center on Budget and Policy Priorities. “It’s not singled out,” said Horney, the center’s federal fiscal policy vice president. “Appropriators could choose to do full funding of WIC although everything will be under pressure.”

WIC, which is funded at $6.7 billion for fiscal 2011, could be more directly affected by debt ceiling provisions that call for sequestration of appropriated program funds in fiscal 2013. Horney said the debt-ceiling negotiations included discussion of an exemption for WIC similar to one it had under a 1990 budget act (PL 101-508), but it was not included in the final version.

As Pat Garofalo has reported, WIC has been the target of various cost cutting schemes, from a bipartisan agreement to avoid government shutdown in April to the 2012 Agriculture Appropriations bill. The measure cuts WIC by $733 million and, if signed into law, it would effectively kick between 300,000 and 450,000 women and young children out of the program.

Economists estimate that every $1 invested in WIC saves between $1.77 and $3.13 in health care costs in the first 60 days after an infant’s birth by reducing the instance of low-birth-weight babies and improving child immunization rates. In fact, it is estimated that the program has saved more than 200,000 babies from dying at birth.

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Morning CheckUp: August 5, 2011

Trigger cuts could be put off: “[T]he first triggered spending cuts wouldn’t happen until January 2013, after a Presidential and Congressional election. The risk is that the Joint Committee fails to reach agreement and the election happens. With or without a new political configuration in DC, policymakers in both parties might look at the now-looming spending cuts and agree, “We can’t allow a 10% cut in defense, an 8% cut in education and health research spending, and a 2% cut in Medicare to take effect next month. That’s too sharp and severe of a cut. Let’s renegotiate a new 10-year budget deal and change the law.” [Keith Hennessey]

Sen. Casey introduced abortion measures: One bill seeks to codify the Hyde Amendment, which currently exists as an amendment to annual appropriations bills and forbids federal funding of abortion care for women in need, except in cases of pregnancy resulting from rape or incest, and where the life of the pregnant woman is in danger. The other is a conscience clause bill, purporting to “prohibit the discrimination and retaliation against individuals and health care entities that refuse to recommend, refer for, provide coverage for, pay for, provide, perform, assist, or participate in abortions.” [RH Reality Check]

Camp, Upton endorse waiver requests: Reps. Dave Camp and Fred Upton endorsed Michigan’s request to waive a provision of the Affordable Care Act that requires insurance plans to spend 80 percent of their premiums on medical costs. [Sam Baker]

Cigna sees earning spike: “Health insurer Cigna Corp.’s second-quarter earnings rose a better-than-expected 39%, helped by growing membership and a continued trend of light health-care usage that has broadly helped earnings in the managed-care sector this year.” [WSJ]

Modest decline in Part D premiums: In 2012, the average Medicare premium seniors pay for their prescription drugs will actually drop slightly to about $30 from $30.76 paid out on average in 2011. [US News]

Health advocates urge feds to reject Utah’s Medicaid privatization plan: The state wants to move Medicaid patients “into managed care networks that would be paid a fixed amount per patient and would share in any leftovers or absorb any losses.” But if anticipated savings don’t materialize, “Utah proposes to ration care by cutting services. Also, providers would be free to charge patients $40 deductibles and co-payments ranging from $15 for inappropriate use of emergency rooms to $220 for hospital stays — the highest in the nation.” [Salt Lake Tribune]

External appeal: “Seventeen states and the District of Columbia will have to use an HHS-administered process or independent review organization process for external appeals because they don’t have laws that meet HHS’ standards of consumer protections.” [Inside Health Policy]

Providers going digital: “Tens of thousands of healthcare providers have signed up for federal electronic health-record system incentive payment programs that have paid hundreds of millions of dollars this year.” The initiative is authorized by the American Recovery and Reinvestment Act of 2009. [Modern Healthcare]

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