In what is one of the few items of good news for health care reform advocates, HHS Secretary Kathleen Sebelius announced this morning that “despite projections of gloom and doom,” virtually all of the 11 million seniors enrolled in the Medicare Advantage will retain access to the program. On average, seniors will pay 1% or $0.45 cents less in premiums, than they did in 2010, Sebelius said on a conference call with health reporters that the Wonk Room attended:

SEBELIUS: For 2011, Medicare beneficiaries will be able to participate in a more robust Medicare Advantage and prescription drug program. As a result of the Affordable Care Act, they’ll benefit from stronger oversight and management by out Centers for Medicare and Medicaid Services. Despite last year’s projections of gloom and doom… virtually all Medicare beneficiaries will be able to chose among Medicare Advantage plans…Average premiums are expected to be lower in 2011 than in 2010, 1% lower. [...]

Under the new authority provided by the Affordable Care Act, CMS negotiated with plans to improve benefits and to make sure seniors costs were low. For example, all Medicare Advantage plans will offer an annual out of pocket limit on cost sharing….The health plans participating in Medicare expect enrollment to actually grow in 2011… Medicare Advantage enrollment is expected to grow by about 5%.

Indeed, throughout the reform process, Republicans repeatedly warned seniors that health reform’s cuts to the Medicare Advantage program would chase plans out of the market, leaving seniors without a choice of private coverage. The GOP introduced numerous amendments and motions instructing Congress to remove the $136 billion in cuts to the Medicare Advantage program and Sen. John McCain (R-AZ) famously urged senior citizens to rip up their AARP cards in protest of the organization’s support for the the legislation.

But CMS projects that 99.7% of seniors will continue to have access to a Medicare Advantage plan and that only a small number of fee-for-service plans will leave the market. CMS Administrator Don Berwick attributed their departure to a 2008 bipartisan bill that required issuers to establish provider networks. Their departure will leave some 2,3000 beneficiaries in Colorado and Utah without a Medicare Advantage option.

The government also estimates that as a result of CMS negotiation, “plans improved their benefits by $13 per member per month (5 percent) on average,” resulting in savings of “about $155 per member per year for the 966,000 beneficiaries enrolled in these plans.”

Last month, CMS announced that most seniors will pay about the same for prescription premiums in 2011, while those with the highest costs will pay less — further defying GOP predictions.

Just days after HHS Secretary Kathleen Sebelius warned insurers against using the early benefits in the health care law to justify unreasonable premiums increases, Sens. Max Baucus (D-MT) and Jay Rockefeller (D-WV) have written to the CEOs of WellPoint, UnitedHealth Group, Aetna, Health Care Services Corp., and CIGNA, saying insurers are “mistaken” if they believe they can continue to blame double digit premium increases on reform.” “This level of misinformation is not acceptable,” the two write, pointing out that the early benefits should not increase costs by more than 2 percent on average:

And if an insurer thinks it can continue to impose double-digit premium increases, while providing fewer health benefits and enjoying record surpluses, it is again mistaken. There have been too many reports of insurance companies imposing insurance premiums increases at will with little oversight or public accountability. We are committed to ensuring that premium increases are fair and justified. [...]

We have and will continue to strongly encourage states and HHS to use their existing authority as well as the authority created under the Affordable Care Act to its fullest to ensure that premium increases across the country are justified and communications are honest. We will continue to work toward ensuring that the federal and state governments have the necessary resources and authority to review potentially unjustified premium increases and to hold insurance companies accountable.

Baucus and Rockefeller pledge that they “are committed to ensuring that consumers are treated fairly and will closely examine any potentially misleading communications to consumers,” but there is actually little the federal government can do — outside of publicly shaming insurers or passing a federal rate review law — to hold insurers accountable.

As Sebelius explained today, “it’s a real catch-22. The law assumes that states will regulate rates, that that’s the best marketplace. This is really a state-based bill…only if they abdicate that responsibility or say that they don’t want to participate do we have kind of the back-up responsibility.”

For ways the federal government can pressure states to hold down unreasonable rates, click here.

HHS Secretary Kathleen Sebelius questioned the GOP’s promise to repeal the health care law, arguing that the party has no alternative for coving the 50 million Americans who went uninsured in 2009 or the ability to make up for the deficit reductions achieved by the law. Speaking this morning at a National Journal event to commemorate the six months since President Obama signed the reform bill, Sebelius also predicted that repealing the law will become less popular, as “millions of Americans” “will be receiving direct benefits from the passage of the law”:

SEBELIUS: By January there will be millions of Americans who will be receiving direct benefits from the passage of the law…I think the question is, and go back to what? Leaving 50+ millions Americans with no health care coverage, with rates continue to dramatically increase year-in and year-out with no safety net system. With no focus on the future. And with frankly an increase in the deficit that according to the Congressional Budget Office the implementation of this bill will reduce the deficit by $100 billion in the first 10 years and by close to a trillion in the second 10 years. [...]

What is the alternative? …There was never really an alternative put forward…but no strategy about what to do about the now 50 million Americans that are uninsured. No real strategies about cost control and containment. No strategies about how to go after fraud. All of the ideas that were put on the table were essentially incorporated. So I think there has got to be a realism about this debate.

Watch it:

To be fair, the GOP did offer and vote on a reform alternative that would have covered just 3 million people and actually lead to an increase in the number of uninsured. But Sebelius touches on an important reality. While the GOP may find some ways to defund certain parts of the health care law, they won’t be able to repeal it outright: they won’t have the votes, the offsets to pay for the deficit savings, or the public support. Consider this: according to the latest CBS News/NYT poll, 40% of Americans say they support repealing the health care law. But when told that repeal would allow insurance companies to exclude people with pre-existing conditions, support fell to just 19%.

As the benefits set in, reform will grow less popular and the GOP will have to stand up to its base. After all, it’s one thing to speak exclusively to conservative activists in a midst of a political campaign, but once the GOP is in charge, they will have to govern for the entire country. And telling millions of Americans that they will be taking away the law’s consumer protections and pre-existing conditions exclusions is not a good way to retain power. As Collin Powell put it yesterday, once you’re in power, “You can’t just say ‘no’ to everything. You can’t just sit around beating up the President.”

Of course, that’s not to say that the law won’t need to be amended or improved. At today’s event Sebelius predicted that the law will likely evolve, just like Medicare did after 1965. “Will the bill need fixing along the way? You bet,” she said. “You know, Medicare today looks little like it did when my dad in 1965 was a member of Congress and voted for Medicare. … It doesn’t work exactly like it did in 1965. It’s changed and developed along the way and I think that’s the framework possibility that we have.”

Speaking this morning at the National Journal’s Empowering Conversations series, HHS Secretary Kathleen Sebelius — who last week warned insurers against using the early benefits in the health care law to substantially increase premium rates — pointed to two actuarial estimates which found that the early benefits could increase costs gradually by “1 to 2 percent.” Still, Sebelius conceded that insurance premiums will continue to increase. “Well, I think the rate increases are likely to be somewhat substantial,” Sebelius admitted, agreeing that the poor economy will continue to force healthier individuals to leave the risk pool and increase costs for everyone else:

SEBELIUS: The cost trends and their practice is fairly substantial and it has little to do with the passage of the Act. It has to do with their market place. And frankly there is some justification in saying that one of the issues that has hit companies in the economy — again particularly in the individual market where people are out purchasing on their own — is that healthy folks drop their coverage when the economic squeeze occurs. If you are sicker of have a sicker family member you don’t have that luxury, so you’re keeping it. So their own risk experience is becoming more expensive. So what we have to do is get healthier people back into the marketplace.

Watch it:

Sebelius did argue that insurers often overstate their premium requests. “I was in the state legislature in Kansas for eight years. And year after year after, when legislatures would consider some sort of a mandated benefit, companies would testify to dramatic rate increases as a result,” she explained. “Year after year after year, that turned out to be absolutely factually incorrect. It was never justifiable and frankly in most cases they didn’t do it at all.”

Sebelius also explained that the burden of the rate review will fall to the states, where the jurisdiction of state insurance commissioners “varies dramatically.” “It’s a real catch 22,” she said. “The law assumes that states will regulate rates, that that’s the best marketplace. This is really a state-based bill…only if they abdicate that responsibility or say that they don’t want to participate do we have kind of the back-up responsibility.”

The Department of Health and Human Services is also preparing medical-loss ratio (MLR) regulations that would require insurers to spend 80 to 85% of premium dollars on health care costs. Sebelius said she hoped to define “health care spending” in the next month and implement the remainder of the regulation by the end of the year. The regulation — which requires insurers that don’t meet the ratio to issue rebates for the difference — is fully implemented by 2012.

Earlier this month, after health insurers across the country announced that the early health care benefits were forcing them to increase premiums by up to 9 percentage points, Health and Human Services Secretary Kathleen Sebelius wrote a letter to the industry arguing that “any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal” and pointed to actuary estimates which found that the early consumer protections would result in marginal increases. “I want AHIP’s members to be put on notice: the Administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections,” Sebelius said.

This morning, speaking at the Values Voters Summit in Washington, D.C., Newt Gingrich likened Sebelius’ letter to “Soviet tyranny” and said that a Republican-controlled House should ask for her resignation and defund her office in the Department of Health and Human Services:

GINGRICH: When Secretary Sebelius said the other day she would punish insurance companies that told the truth about the cost of Obamacare, she was behaving exactly in the spirit of the Soviet tyranny. And if she’s going to represent left-wing thought police about Obamacare, she should be forced to resign by the new Congress.

This idea that we the people have to tolerate some bureaucrat being paid with our taxes to dictate free speech to us should end in January by the Republican Congress zeroing out her office and explaining that they would be glad to pay for it when someone is there who recognizes the rights of the American people.

Watch it:

But telling Americans that extending dependent coverage to 26 year olds and ending annual limits will increase premiums by 9 percentage is just not true — and insurers know it. While there may be some justification in raising rates in response to rising health care inflation, substantiating an increase that comes in the context of record profits and a long history of issuers fudging the numbers to extract maximum increases is difficult. In fact, it was just four months ago that independent analysts in California discovered that WellPoint “overstated future medical costs” to justify its 39% premium increases in the individual health market and committed numerous other methodological errors.

Gingrich, however, is willing to put full trust in the insurance industry’s accounting practices, to the point where any review of those methods — the very same kind of review that discovered past errors — is tantamount to “Soviet” tactics.

Since the last two attempts to fix the 1099 provision in the health law failed, Democrats are planning to introduce several measures that would repeal the entire reporting requirement — despite the broad agreement that sole proprietors are not paying their fair share of taxes. The crux of the argument is how to offset the estimated $17 billion that the extra reporting was estimated to have brought it.

Democrats have introduced several options:

- SEN. MARK BEGICH’s (D-AK) AMENDMENT: Repeal entire reporting requirement and makes up for the revenue (approximately $17 billion) by using unspent stimulus funds. But as Pat Garofalo explains, there are about $280 billion in stimulus spending that haven’t been paid out. “But much of the money has already been allocated, including $65 billion in funding for tax breaks, which are intentionally going out the door a little bit at a time.” Therefore, “canceling unspent stimulus funds would mean increasing taxes on the middle class.”

- HOUSE DEMS: Measures would repeal the reporting requirement and make up for the shortfall by “changing the inheritance tax (which is likely to get some GOP support) or a tax on carried interest (which is likely to be opposed by nearly all Republicans and some moderate Dems).” Garofalo is actually really excited about that latter offset.

- GOP RECALL PETITION: Rep. Dan Lungren (R-CA) is circulating a discharge petition to force a vote on his amendment to repeal the 1099 provision. The petition has 93 signatures.

POLITICO’s Pule suggests that these early difficulties in identifying adequate offsets bode poorly for the GOP’s repeal effort. If they want to repeal the entire health care law, Republicans would have to make up for the billions of dollars in deficit reductions; agreeing on set of uniform pay fors will prove challenging. In fact, beyond the deficit problem, repealing the health care law will also create problems in the Medicare program and continue the upward trajectory of health care spending (the health care law begins to bend the health care cost surve beginning in 2015). Expect all of this to cause major headaches for conservatives as their base holds them to their repeal pledge and watch as they turn to defunding the measure instead.

Today’s new 2009 census numbers quantify the consequences of a downturn economy and eroding health care system. The cycle goes something like this: job loss leads to loss of employer-based coverage leads to enrollment in a public plan, an individual policy, or uninsurance. The public health infrastructure isn’t funded well enough to catch all those who need insurance and the existing individual health care market is too expensive and unregulated to offer insurance to anyone who actually needs it. Consequently, millions join the ranks of the uninsured.

In 2009, “the number of people without health insurance coverage rose from 46.3 million in 2008 to 50.7 million in 2009, while the percentage increased from 15.4 percent to 16.7 percent over the same period.” And as a growing number lost coverage, they turned to existing public programs:

- First year that total number of people with insurance decreased: The number of people with health insurance decreased from 255.1 million in 2008 to 253.6 million in 2009.

- Public coverage up, private coverage down: Between 2008 and 2009, the number of people covered by private health insurance decreased from 201.0 million to 194.5 million, while the number covered by government health insurance climbed from 87.4 million to 93.2 million.

- Record numbers turn to public coverage: The percentage of people covered by private insurance (63.9 percent) is the lowest since that 1987, as is the percentage of people covered by employment-based insurance (55.8 percent). Percentage of people covered by public insurance is at its highest — 30.6 percent, 15.7 percent in Medicaid.

Look:

Despite the popular perception, health care reform will actually shore up the private insurance market. The lates CMS report estimates that “enrollment in private health insurance plans through the Affordable Care Act’s exchanges is projected to increase from an initial 15.8 million enrollees in 2014 to 30.6 million by 2019,” and approximately 15 to 16 million will find coverage through Medicaid.

Currently, public programs are open mostly to children under 18, seniors over 65, the poor or disabled. And those are groups with the steadiest access to health care, despite the economic instability. The uninsured rate rose for everyone else. Those under 65 saw their uninsurance rate increase in 2009 to 18.8% from 17.3% in 2008. The uninsured rate in 2009 for those aged 65 and older, however, hovered around hovered at around 1.8%.

It’s also worth reiterating the critical role public health plays in patching up the cracks of our health care system: these public health insurance programs provide much needed coverage for 93 million Americans. They pick-up where private insurers leave off, making insurance more affordable for low-income Americans and insuring a disproportionate percent of individuals with disabilities or severe health problems. They’re absolutely critical in our public/private hybrid health care system — could one even imagine what these numbers would look like without them?

Since First Lady Michelle Obama unveiled her ‘Let’s Move!‘ program to fight obesity, conservatives have portrayed the effort as a government assault of personal freedoms and liberties. After the administration released a report on obesity in May, Matt Drudge ran a headline saying, “White House seeks controls on food marketing” and on his Fox News show, Sean Hannity asked: “Does every American family need a dietitian appointed by the government to tell them that this food is going to make you fat and this food is not?”

Yesterday, Glenn Beck joined the act, criticizing Michelle Obama for encouraging restaurants to “offer healthier versions of the foods that we all love.” He also joked that fat people should die:

BECK: When I heard this I thought, get your damn hands off my fries, lady. If I want to be a fat fat fatty and shovel French Fries all day long, that is my choice. But oh oh, not so fast anymore. Because now we have the new fact, whether you like it or not, we have government health care now…You know those fat people sitting on their couches? And I mean really fat. I don’t mean like me. I mean the people who’s skin grows into the couch…I say let them die. I say punish the person who’s been brining them the milk shakes that allowed them to eat and not get up off the couch. Am I too harsh?

Watch it:

Beck was being facetious, but obesity is, in fact, a killer. It “is estimated to cause 112,000 deaths per year in the United States, and one third of all children born in the year 2000 are expected to develop diabetes during their lifetime.” Each year, obese adults incur “an estimated $1,429 more in medical expenses than their normal-weight peers,” and overall, the nation spent up to $147 billion on obesity-related costs in 2008.” A recent CBO analysis concluded that obesity related illnesses contribute significantly to national health care spending.

Far from forbidding certain foods or banning French Fries, the administration seeks to tackle the obesity epidemic through a mix of private and public incentives. It seeks to encourage the government to work with the private sector to create a healthy start on life for children, empower parents with the ability to make healthier food choices, upgrade the nutritional quality of school lunches, eliminate so-called “food deserts” in urban and rural America, and motivate children to become more physically active in their schools and communities. The recent health care law is also far from dictatory. It improves nutrition labeling in fast food restaurants by requiring all chain restaurants “to provide clear labeling of the calorie counts by March 2011,” promotes breastfeeding, gives grants to community based obesity intervention programs and promotes primary care and coordination efforts that emphasize prevention.

Former Governor Mike Huckabee, who himself has struggled with obesity, has warned conservatives against mischaracterizing the administration’s efforts. During a discussion in February about Obama’s campaign to fight childhood obesity, Huckabee explained that the initiative is not a “nanny-state solution” or a “leftist position” and warned that conservatives would engage in reactionary attacks against the program. Speaking of Obama, he concluded, “She does not believe that it is a government solution and that government should dictate what size cheeseburger you eat.” (H/T: MMFA)

Over the last several months, I’ve reported that governors, states, and even corporations that are challenging the new health care law are eagerly applying for and accepting the law’s federal grants. Many states are busily implementing the measure despite the resistance of their elected leaders, creating a kind of schizophrenic environment in which the politicians speak out against reform but state health departments are busily working with Washington D.C. to ensure that the law meets state needs and requirements.

Now, Amanda Terkel is reporting that even Gov. Tim Pawlenty (R-MN) — who has recently issued an executive order to stop implementation — is quietly allowing more than $10 million to flow into the state:

The Huffington Post has learned that the state Department of Health is considering 10 federal grants worth more than $10 million in total and the governor’s office is allowing all but two of those grants to go forward, highlighting the fact that Pawlenty is more than willing to take advantage of federal money when it fits his agenda. [...]

In other words, Pawlenty’s executive order isn’t really keeping the Affordable Care Act out of Minnesota; millions of dollars from the federal law can still flow into the state. The Huffington Post spoke with John Stieger, spokesman for the Minnesota Department of Health, who identified 10 existing grants worth more than $10 million that come from the federal health care law. He said that Pawlenty’s office had authorized all but two of them to go forward: the Personal Responsibility Education Program grant that provides funding for comprehensive sex education and the Health Insurance Exchange.

Indeed, this sounds like a consistant pattern across many so-called anti-reform states. When I spoke to one health care advocate in Utah — another state that is suing the federal government while meeting with HHS to ensure that the law meets its needs — she speculated that even the repeal and replace advocates realize that “this is how they have to do reform and it is important to get started and try out some of these ideas.” “I wonder if they’re not thinking well, the only way to prove reforms are wrong, is to give them a good college try,” she said. In Pawlenty’s case however, it’s probably an acknowledgment of the limitations of his public rhetoric. Despite his principled and “presidential” stances, this is a concession that the state will benefit from reforms.

Earlier this morning, the Senate voted down Sen. Mike Johanns (R-NE) so-called 1099 amendment which would have repealed a tax reporting requirement for small businesses, but made up for the revenue shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. Sen. Bill Nelson’s (D-FL) alternative proposal to require only larger businesses to report their transactions with vendors also failed to garner the necessary 60 votes.

It’s unfortunate — but all too predictable — that both parties couldn’t find agreement despite growing consensus surrounding the key issues in the 1099 debate. For instance, both the Bush and Obama Treasury Departments agreed that sole proprietors of businesses drastically underreport their taxable incomes and as a result underpay taxes. Both administrations recommended strengthening the reporting requirement to remedy this problem and now members from both parties believe that the health care law went too far and burdened small businesses with unnecessary paperwork.

Bu that’s where the consensus ends. The Johanns amendment completely eliminated the reporting requirement and paid for the change by weakening the individual health insurance mandate and taking $11 million from the Preventive Health Fund. When I asked Johanns office why the Senator was taking money out of prevention, they sent me a note saying that the he believed that the fund could be used as a slush fund. Here is how Johanns described it today on Washington Journal: “in all fairness, money from that Fund has already been diverted by the Obama Administration into other areas, and I believe it will be a slush fund for that,” he said. Needless to say, administration sources disputed that characterization.

After the Johanns amendment failed, Republicans rejected Nelson’s proposal because it required additional tax reporting — the kind of reporting supported by the Bush administration’s own Treasury Department. “Is that too much to ask in order that we get people to pay their income tax that they are owed that are not getting out of it to the tune of $17 billion?” Nelson asked on the floor. “In tightening up the law, we’re going to get people to pay their income tax, but we’re going to do it in a way that is not harassing any business but particularly small business because we’re going to exempt them if they are 25 employees or less.”

Ultimately, Senators will propose more fixes and the final amendment will hopefully improve tax compliance while minimizing the burden to small businesses. The sticking points are the offsets and as soon as the GOP abandons their politically motivated provisions, the 1099 requirements will likely be modified.

This morning, a federal court in Pensacola, Florida will consider the government’s motion to dismiss the 20-state challenge to the national health care reform law. Last night, Florida Attorney General appeared on Fox News’ Greta Van Susteren to talk up his suit and predicted that the states will have standing to challenge the law — a legal term meaning that they have actually been injured in some way by the law being challenged. You can watch McCollum’s appearance here and read Florida’s arguments here, but most experts have serious questions about the state’s standing and the broader challenge. Their arguments boil down to this:

1) No standing: States don’t have the standing to challenge the individual mandate because they will never have to pay a penalty or take out insurance. The two individual plaintiffs that have been added to the Florida case are also irrelevant because they demonstrate no current injury. The provision does not take effect for another four years and any har is merely speculative. What’s more, the plaintiff’s insurance status could change between now and 2014 — ensuring that they don’t have to pay a penalty for not purchasing coverage.

2) Can’t get around the Anti-Injunction Act: The Anti-Injunction Act, forbids courts from “restraining the assessment or collection of any [federal] tax.” Since the plaintiffs themselves allege that the penalty under the mandate is an “unconstitutional tax,” they recognize that they fall within the scope of the Act.

3) Insurance = commerce: Congress can regulate commerce: Congress has determined that the individual mandate is an essential part of this larger regulation of economic activity, and that its absence would undercut Federal regulation of the health insurance market. Even the failure to buy a product constitutes commerce because individuals who do not carry insurance are participants in the health care market and end up receiving treatments from traditional providers for which they either do not pay or pay very little. Congress found that the cost of providing uncompensated care for the uninsured was $43 billion in 2008.

4) Falls under ‘Necessary and Proper’ clause: The Constitution gives Congress the power “[t]o make all laws which shall be necessary and proper for carrying into execution” its power to regulate interstate commerce. As Justice Scalia explains, 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.” The minimum coverage provision is constitutional under this Scalia test, even if it were not valid as part of Congress’s power to regulate commerce. This is because the minimum coverage provision is essential to ensuring that the entire ACA works effectively.

5) Congress has the authority to collect taxes: Congress also has the authority to “lay and collect taxes” under the Constitution, and this power to tax includes upholding the individual. “The provision works by raising an additional income tax off of most individuals who do not carry health insurance—taxpayers who refuse insurance must pay more in taxes, while those who do carry insurance are exempt from this new tax.”

Of course, McCollum has filed his lawsuit in one of the more conservative courts in the state and so it’s difficult to know how the court will rule. If the case does move forward, McCollum’s likely successor, Republican Attorney General Pam Bondi has promised to continue with the challenge. Democratic challenger Dan Gelber disputed the wisdom of that position.

“There are four million people without health care in our state… everybody agrees this was not the most perfect bill that’s ever passed. But I am not going to take the resources of this office that are so desperately needed to solve some of the pressing security issues of our state and dedicate them to what I think ultimately really was a politically motivated lawsuit that was spawned out of a primary battle and that, ultimately, I don’t think has a whole lot of merit when it gets to the Supreme Court, which I think it will,” he told Van Susteren. “But I do think if you don’t like the bill, Miss Bondi should run for the Congress, where she can, as a legislator, fix it in the next legislative session,” he said. “You shouldn’t go after it in what I think is going to be ultimately a very frivolous lawsuit.”

[/update]

Today, the Senate is expected to take up a measure that would repeal a part of the health care law that requires small businesses to report payments of more than $600 to corporations and payments for goods and property (as well as for services). Now most folks I’ve spoken to agree that while vendors are notorious underreporters of income — the IRS estimates that sole proprietors pay taxes on less than half of their income or underreport their income by some 57% — this current provision is just too burdensome. Just ask the White House: “We are committed to reducing the gap between taxes legally owed and taxes paid,” Treasury Secretary Tim Geithner and Health and Human Services Secretary Kathleen Sebelius wrote to Majority Leader Harry Reid and Minority Leader Mitch McConnell today. “However, the administration believes that the burden created on businesses by the new information reporting requirement on purchases of goods that exceed $600, as included in Section 6041 of the Internal Revenue Code as modified by Section 9006 of the Affordable Care Act, is too great.”

And to that end Sen. Bill Nelson (D-FL) has proposed a compromise that would “exempt businesses with fewer than 25 employees” from the requirement and “significantly increase (from $600 to $5,000) the threshold for payments that must be reported.” “The amendment would also give the Treasury the regulatory flexibility to further limit the requirement both before and after its 2012 implementation.”

In other words, Nelson’s solution addresses the paperwork concern while simultaneously trying to close the tax hole. The original measure raised $17.1 billion over ten years and to offset some of that cost, Nelson would reduce companies for oil companies. Sen. Mike Johanns (R-NE), meanwhile, has proposed an alternative would completely repeal the reporting requirement and make up the revenue shortfall by defunding public health and exempting more people from the individual health insurance mandate. Harold Pollack explains:

Should we promote public health by providing extra funds for HIV prevention, cancer screening, flu vaccination, and the like?

Or should we zero out these funds in order to repeal a small health reform provision that clamps down on rampant tax evasion? That’s the choice Congress is likely to face next week. Some prominent Republicans want it to choose the latter, although you likely won’t hear about it—at least, not in those terms….To repeat: Tighter tax requirements on small business prevent some firms from committing tax evasion, and it imposes some costs and bother on law-abiding firms which now have to fill out some more paperwork and presumably update their Quicken software. Senator Johanns believes that it’s so vitally important to loosen these requirements that he would make up the lost revenue by slashing federal funding for critical public health efforts—efforts that are already taking some tough hits because of the state and local budget crisis.

Invention in preventive services is something both Republicans and Democrats have rallied behind — it’s something the GOP tried to take credit fro on the floor of the Senate. What’s going on here is an effort to establish a precedent for repealing portions of the health care law, not to address the paperwork complaint. They’re seizing on an unpopular provision to weaken the health care law and sell that accomplishment in the midterm — both to their base and business supporters. Tellingly, Johanns’ amendment does not address the problem of underreporting income; it strips the 1099 provision and allows vendors to underpay their taxes, and shift that burden to all of us.

Michelle Mello, the author of two studies which found that malpractice costs make up a small percentage of national health care expenditures and that malpractice reform does not significantly decrease physicians’ malpractice anxiety, appeared on C-SPAN’s Washington Journal this morning to discuss her findings and answer viewer questions. Mello argued that even though tort reform is not the silver bullet for lowering health spending, it may help increase the number of physicians and improve the quality of health care.

Importantly, Mello also said that the nation’s poor unemployment and disability systems may be pushing a growing number of individuals to look “toward tort litigation to get those expenses covered”:

MELLO: There is more of a culture of accountability here in U.S. than in other countries, and there is certainly higher level of litigation across all sectors, not just the medical malpractice arena. What makes it, I think, even more complicated with respect to medical malpractice is that we historically have done a lousy job of providing other kinds of social insurance that might meet patients’ needs in the aftermath of a medical injury. Most of the other countries that litigation is low, have made other provisions for taking care of these folks. Whether it’s through a disability insurance scheme, a comprehensive health insurance system that covers everybody without them having to pay. Or an accident injury compensation fund that’s administered by the government or private entities to which people can apply for compensation. So I think there are two factors going on here. One is cultural and the other is, do we drive people to the liability system by failing to provide fo their needs in other ways?

Watch a compilation of her appearance:

The liability system is also sometimes used to weed out poor physicians, Mello explained. “We’re not particularly aggressive using our state medical boards and other disciplinary problems to go over these quality problems. We tend to rely on lawsuits as a means of highlighting those practicing substandard care,” she said, explaining that since only a small number of patients ever file a claim, substandard physicians are often left intact.

Indeed, even though just 2% of malpractice events are ever brought as claims, malpractice litigation is much more common in the United States than in other countries. According to a Health Affairs study from 2005, “the United States had 50 percent more malpractice claims filed per 1,000 population filed than the United Kingdom and Australia, and 350 percent more than Canada.” U.S. malpractice payments, however, were on average lower “than those in Canada and the United Kingdom. In 2001 the average payment in the United States was $265,103, which was higher than in Australia but 14 percent below Canada and 36 percent below the United Kingdom.”

The Congressional Research Service (CRS) has compiled the states’ estimates of the costs of complying with the provisions in the health care law and found that the numbers vary drastically depending on the generosity of the existing programs, state decisions about implementation, and the the number of uninsured who sign up for coverage. The federal government has yet to issue regulations surrounding the state exchanges and states can only estimate how many applicants will actually enroll in the expanded Medicaid programs. Below are some of the early projections:

California: low billions of dollars, Florida: $1.2 billion by 2019; Indiana: $3.6 billion; Kansas $621 million; Maryland: Savings of $829 million; Michigan: $200 million; North Dakota: $1.1 billion; Texas: $27 billion;

Ultimately, I’d argue that reform is still a pretty good deal for the states: they will be able to cover a large number of residents at little direct cost. The law provides states with a lot of extra cash, insures more residents and — consequently — allows states to reduce payments they make to support uncompensated care costs. Significantly, the federal government picks up a large part of the tab for these reform. States will receive grants to establish their exchanges and have full federal funding to expand Medicaid for the first two years (with a decreasing contribution thereafter). The federal government also fully finances the payment rate increase for Medicaid providers for two years and provides states with a series of grants from rate review to reinsurance. CBO estimates that states will have to spend some $20 billion (just 4% of the total cost) to implement the coverage provisions for Medicaid and CHIP between 2010 and 2019 and the Kaiser Commission on Medicaid and the Uninsured reached a similar conclusion.

It’s also worth pointing out that states will have a good deal of flexibility in how they implement reform. As the report notes, “a state may opt to have HHS establish its exchange,” can set-up separate exchanges for individuals and small businesses, or establish just one exchange for both. Individual states also may decide to allow large businesses in the exchange.”

In 2010, Sen. Chuck Grassley (R-IA), like the rest of the Republican Party opposes the individual health insurance mandate. He believes that the provision violates the 10th amendment of the Constitution and argues that only states have the authority to require their citizens to purchase coverage.

But this wasn’t always the case. In 1993, Grassley proposed an alternative to President Bill Clinton’s health care initiative that required every American to purchase health insurance coverage. He endorsed the mandate in 2007 when he co-sponsored the Wyden-Bennet health care plan and even backed the idea as recently as 2009.

Today, when Grassley’s Democratic challenger Roxanne Conlin confronted the Senator with his record, Grassley explained that his thinking on the mandate changed in April or May of 2009:

Grassley responded: ”My name was on a bill in 1993, but there’s a lot about the constitution you learn over the period of the next 15 years and I’m not a lawyer, but I do read the constitution. I do read some of the laws and I came to the conclusion that it’s unconstitutional, just like the attorney generals of about 22 states.” [...]

After the program, Grassley told reporters it was in April or May of last year that he changed his mind about requiring Americans to buy health insurance just like drivers are required to buy insurance on their vehicles. ”And then you have people raise the question, ‘Well, where is it in the constitution that you have to buy anything?’” Grassley said.

Grassley is confusing his dates, because he expressed support for the policy as recently as August 2009. Asked “how does this bipartisan group that you`re a member of get to more health insurance coverage if you don`t mandate that employers provide coverage,” Grassley replied “through an individual mandate and that`s individual responsibility and even Republicans believe in individual responsibility.” Here he is expressing that very belief in June of 2009 on Fox News Sunday:

Now, Grassley’s explanation mirrors the thinking of fellow Republican Orrin Hatch, who after years of supporting the policy also confessed that constitutional study (and apparently Obama’s election) changed his mind.

This morning, ABC News’ Jake Tapper asked President Obama about a recent CMS report which found that health care spending will increase slightly faster than projected — at an annual rate of 6.3 percent, rather than 6.1 percent. Obama began by saying that “bending the cost curve on health care is hard to do,” and admitted that the administration expected that annual spending would increase as the newly uninsured enter the health care system:

TAPPER: CMS study from February predicted a 6.1% increase and now post health care, 6.3%, so it seems to have bent it up.

OBAMA: As I said Jake.I haven’t read the entire study, maybe you have. But, you know, if what the reports are true, what they’re saying is that as a consequence of us getting 30 million additional people health care at the margins that will increase our costs, we knew that. We didn’t think that we were going to cover 30 million people for free. But that the long-term trend in terms of how much the average family is going to be paying for health insurance is going to be improved as a consequence of health care. And so our goal on health care is, if we can get instead of health care costs going up 6% a year, it’s going up at the level of inflation and maybe just slightly above inflation, we’ve made huge progress.

Watch it:

Ezra Klein tweeted that Obama should bring charts to his pressers, and I agree. Because if you actually look at the graph in the CMS report, you’ll see that while the cost curve does go up during the period of coverage expansion, once the cost savings and efficiencies kick in, the cost curve actually goes down.

Beginning in 2014, as 30 million+ individuals begin receiving health care coverage and visiting doctors, health care expenditures will naturally increase. Costs will continue to grow higher than current law until around 2015, at which point the Medicare savings, the excise tax on so-called Cadillac health plans, and the Medicare payment board will cause costs to “decelerate.” As you can tell from the graph, between 2017 and 2019 the red line is below the blue line — the annual growth rate is decreased under reform for that period.

Look:

The graph suggests that if Congress maintains the efficiencies in the bill, the so-called cost curve will continue to decrease and more can be done to bring it down lower and faster. For more ideas on that, check out this RAND Corporation study on options for lowering health spending.

When I debated him last year, Rep. Mike Burgess (R-TX) — the chairman of the Congressional Healthcare Caucus — insisted that tort reform presented one of the best solutions to lowering health care costs. But now, in light of a new study which finds that malpractice adds just 2.4% to health spending, Burgess may be softening his rhetoric — and if that’s any indication of where the party is as a whole, it may suggest that the GOP is willing to reconsider its favorite cost prescription.

Healthwatch’s Mike Lillis has the story:

Rep. Michael Burgess (R-Texas) argued that the cost of malpractice to the healthcare system is “a huge sum of money,” but also conceded that limiting malpractice claims won’t translate into instant healthcare savings.

“Defensive medicine is a learned methodology, and one that cannot be unlearned quickly, and I believe this contributes significantly to the reason why costs do not decrease quickly and steeply immediately after medical liability reforms are passed,” he said in an e-mail. “Our nation’s healthcare system is very complex, and I have never suggested that medical liability reform is a silver bullet.”

The authors of the new Health Affairs study point out that “physician and insurer groups like to collapse all conversations about cost growth in health care to malpractice reform, while their opponents trivialize the role of defensive medicine.” Burgess is both a physician and a Republican. He’s from a state that has capped non-economic damages but has seen no corresponding decrease in health spending. When I debated him, he (like the whole of the GOP) insisted that caps should be a big part of the solution. These statements seems to be far more reflective of the literature.

The health care law does try to address malpractice costs. It “includes some pilot programs to test alternative systems for settling malpractice cases” and while those projects have been authorized but not yet funded, HHS has distributed $20 million in development grants and planning grants “to states and health care systems” developing ways to reduce malpractice costs. My sense is that it’s easy for politicians to argue that the government can or should do more on this side of reform and it probably should. But providers also have a responsibility to begin adopting innovative solutions (i.e. Sorry Works programs) without waiting for lawmakers to act. The hospitals that received the HHS grants are leading the way in testing successful alternative models and if the GOP is really moving away from its caps-centric focus, it’s the kind of programs Republicans and Democrats can both champion.

Health and Human Services Secretary Kathleen Sebelius has written a letter to AHIP President and CEO Karen Ignagni chastising the insurance lobby for blaming the recent insurance premium increases on the early benefits in the health care law — provisions that “were fully supported by AHIP and its member companies,” the letter points out.

Noting that “any potential premium impact from the new consumer protections and increased quality provisions under the Affordable Care Act will be minimal,” Sebelius also warns AHIP that the federal government will not sit idly by as insurers blame the health care law for the premium increases:

Moreover, I want AHIP’s members to be put on notice: the Administration, in partnership with states, will not tolerate unjustified rate hikes in the name of consumer protections.

Already my Department has provided 46 states with resources to strengthen the review and transparency of proposed premiums. Later this fall, we will issue a regulation that will require state or federal review of all potentially unreasonable rate increases filed by health insurers, with the justification for increases posted publicly for consumers and employers. We will also keep track of insurers with a record of unjustified rate increases: those plans may be excluded from health insurance Exchanges in 2014. Simply stated, we will not stad idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.

Indeed, the rate review grants should help sates review unreasonable increases, but there is very little the federal government can actually do to reign in unreasonable rates; that burden falls to the states. And, given the influence of insurers on some state commissioners and the weak state regulatory structure — 23 states do not review and approve premium changes in the individual market and 5 of those 23 have no rate regulations at all — it’s clear that the federal government needs to find new ways to entice the states to strengthen their rate review processes.

Absent passing some kind of federal rate review legislation, HHS can attach thicker and longer strings to the next round of rate review grants. For instance, it can require that states adopt a strict prior review process that would give regulators the authority to deny “unreasonable” increases. That would encourage states to pass additional legislation (no easy task) but given the amount of interest in the first round of rate review dollars, those kind of conditions could at least spark legislative activity in the right direction. Obviously the feds could target the next round of rate review grants “to states that appear the most promising in terms of greater rate review, oversight, and enforcement,” Edwin Park, co-director of health policy at the Center on Budget and Policy Priorities told me in an email. “This would include not only states with an existing robust process but those states needing the most help but also the most willing to institute strong rate reviews.”

Park says that the federal government can also make it easier to conduct reviews by purchasing systems, establishing common procedures, and help states find actuaries to review insurance rates.

Finally, the federal government can work very closely with the states to ensure that insurers with unreasonable increases between now and 2014 are actually excluded from the exchanges and states can of course keep inefficient and costly issuers out of the exchanges.

This morning, AHIP President and CEO Karen Ignagni appeared on Fox News to defend the notion that the health care law is substantially contributing to skyrocketing premiums. Insisting, quite correctly, that premium growth follows health care costs, Ignagni stressed that the law’s early benefits are similarly raising rates:

IGNAGNI: Health care premiums follow underlying costs. Costs are going up because providers are charging more, number one…two, people buying coverage individually in a bad economy have decided for their economic reasons they sometimes is no longer afford it, that means the cost to people in the pool goes up because it’s the people who have the highest cost who stay in. And then third, we’re adding new benefits, starting September 23rd, under the legislation, and new benefits follow cost. [...]

Our members are working very, very hard to try to do things as affordably as possible but for people who have coverage now, many of them are going to see increased coverage requirements, new benefits, new requirements, and that will require additional costs. Our members are trying to do this as affordably as possible.

Watch it:

One question Hemmer should have asked is just how much these “new benefits” cost. Because according to the folks at the Urban Institute the so-called September 23rd provisions could lead to increases of no more than 3% — and that’s the very highest estimates. Why then are insurers attributing 9% spikes to the health care law? And, if they’re doing everything they can to keep rates affordable, why are they so opposed to a bill that would allow the federal government to review their annual increases?

The duality of Ignagni’s argument is also striking. During this segment and throughout the health care reform debate, insurers insisted that they support market reforms — some of these are the September 23rd provisions you’re hearing about, getting rid of lifetime limits, eliminating recessions, and discrimination against kids with pre-existing conditions. So long as the law required everyone to purchase private health insurance coverage, they were on board. The mandate we got may not be as robust as insurers would have liked, but any kind of requirement would have taken several years to implement. Knowing all this, insurers talked up their support for market reforms to publicly present themselves as favorable towards regulation and change. Now, they’re using those very same provisions to exaggerate their premium requests.

Interestingly, following the passage of reform, insurers promised to cooperate with the implementation process. “Health care reform is not over. This is the only the end of the beginning,” Mike Tuffin, executive VP of AHIP said in June. “Whether we like it or not, the bill was passed. Now we must be reliable and effective implementation partners. We need to stay engaged. ”

Despite the GOP’s doomsday predictions about the health care law dramatically increasing health care costs, a new report from the Center for Medicare & Medicaid Services (CMS) predicts health spending will grow only “slightly faster than projected under prior law – at an annual rate of 6.3 percent, rather than 6.1 percent” — a fairly small price to pay for providing insurance coverage to 32.5 million more Americans. By 2019, health spending will “increase as a share of the economy by only 0.3 percentage points, to 19.6 percent of GDP,” the government found. Here is what it looks like:

To expand coverage to millions of Americans without significantly altering spending growth trends requires efficiences, and the law delivers. Beginning in 2014, as 30 million+ individuals begin receiving health care coverage and visiting doctors, health care expenditures will naturally increase. Costs will continue to grow higher than current law until around 2015, at which point the law’s efficiencies kick in — Medicare savings, the excise tax on so-called Cadillac health plans, the Medicare payment board — and costs begin to “decelerate.” As you can tell from the graph, between 2017 and 2019 the red line is below the blue line — the annual growth rate is decreased under reform for that period.

Moreover, the actuaries predict that as a result of these savings, Medicare spending will decline $86.4 billion from previous projections due to reforms. “Specifically, average annual Medicare spending growth is anticipated to be 1.4 percentage points slower for 2012–19 than we projected in February 2010. By 2019, it is projected to grow 7.7 percent—0.9 percentage point more slowly than we projected in February 2010,” the report concludes.

Now, reform bends the cost curve for national health spending, but what this means for private health insurance premiums is more complex. As Merrill Goozner points out, “the private insurance market will absorb most of the increase, and most of that will fall on individuals.” The actuaries are projecting a “9 percent increase in out-of-pocket expenses in 2018 and 2019″ as employers switch plans to avoid the Cadillac tax.

On the whole, however, this represents a fairly striking achievement and places the country on track to further lowering health care spending in the out-years. Much will depend on Congress’ commitment to maintaining the law’s cost savings and efficiencies — which the CMS may actually be under estimating — after all, they’re the only ways we can afford this kind of coverage expansion.