Highlights From The Senate Finance Committe Hearing With Peter Orszag

Today, the Senate Finance Committee held a hearing about President Obama’s Fiscal Year 2010 Health Care Proposals with OMB director Peter Orszag. Below are some highlights.

Orszag on why capitalism and Medicare Advantage overpayments are incomparable:

In a rather heated exchange with Sen. Chuck Grassley (R-IA), Orszag defended the Obama administration’s proposal to eliminate the subsidies provided to insurers participating in the Medicare Advantage. “Capitalism is not founded on excessively high subsidies,” he said.

ORSZAG: I know many people believe that capitalism is founded on private markets, and it is. But I very firmly believe that capitalism is not founded on excessively high subsidies to private firms. That is what this system delivers right now. For every Medicare beneficiary in Medicare advantage, the federal government pays a thousand dollar more than covering the same beneficiary under fee-for-service.


Orszag’s approach may have come off as smug or arrogant, but he’s probably right on the substance. It’s unclear why Medicare would pay about 13 to 17 percent more for beneficiaries enrolled in MA Plans, if they’re not providing better quality care (and just pocketing the subsidy.)


And as Orszag points out, for every dollar the federal government provides to Medicare Advantage in additional benefits, it spends $1.30 in costs. “We’re all paying a $1.30 in order to deliver a dollar to a subset 20% of Medicare beneficiaries. I don’t think that’s competition, I think that’s an unwarranted subsidy,” he said.

Orszag on the unintended consequences of the health care crisis:

Many progressives have made the argument that the economic crisis demands health care reform. Chairman Max Baucus (D-MT) asked Orszag about the cost of doing nothing. Orszag checked off the usual talking points but then explained why college students should advocate for health care reform:

ORSZAG: Lots of families are experiencing higher tuition at public universities. Research clearly connects rising tuitions to rising costs of health care in state government budgets, which then means they don’t have room to support public education to the degree they did in the past.


What’s the goal of comparative effectiveness research:

Sen John Kyl (R-AZ) parroted the tired Republican myth that comparative effectiveness research would ration care and limit physician’s freedom.


And while some have argued that the government could — at some point down the road — use the effectiveness data to establish reimbursement rates (why, after all, should we pay for ineffective treatments?), Orszag suggested that the government could lower health care costs by using the data to incentivize best practices.

ORSZAG: At the extreme, if something is shown not to be effective, it could simply not be covered. But there also are a lot of less extreme ways of guiding medical practice. For example, simply paying more for the things that work than the things that don’t. Creating penalties if you have high re-admission rates for example. And so it doesn’t need to be a simple on-off switch.


The larger point is that we need much more information on what works and what doesn’t. At this point, most physicians receive their effectiveness information from representatives of the pharmaceutical industry; this research is an effort to provide doctors with unbiased information to ensure that they provide the best quality care to their patients.

Administration wants to have a plan that is deficit neutral in 5 to 10 years:

Orszag hailed the power of compound interest. If we lower health care spending by just 1% every year, we would reduced health care spending by 20% of the GDP in 50 years:

ORSZAG: We believe that health care reform should be deficit neutral even over the medium term [5 to 10 years]…savings will build over time. One of the frustrations is, there has not been enough research done to quantify the things we are talking about…if we can reduce the rate of health care spending growth by 1% a year…the power of compound interest is so strong that after 50 years we would reduce health care spending as share of the economy by 20 percent of GDP. Huge amount.


Will illegal immigrants be covered under Obama’s proposal?

So this is a common Republican tactic: in trying to obstruct universal health care reform, argue that millions of illegal immigrants would become eligible for free health insurance coverage. This is what Sen. John Ensign (R-NV) tried here and Orszag predicts that “there will be important protections against covering unauthorized immigrants as part of any legislation”:

ORSZAG: The President’s campaign plan does not cover unauthorized immigrants…I would imagine that there will be important protections against covering unauthorized immigrants as part of any legislation.


Ensign is really trying to sidetrack a conversation about health care into a debate about immigration. In reality, illegal immigrants obtaining health care coverage isn’t nearly the problem Republicans try to make it out to be.


As the Kaiser Family Foundation points out, while “non-citizens are much more likely to be uninsured than citizens” because of limited access to employer based health care coverage and restrictions for public coverage, citizens still make up “the bulk of the uninsured.”

The majority (76%-80%) of the growth in the number of uninsured from 2000 to 2006 occurred among citizens, not legal and undocumented non-citizens. Moreover, because non-citizens are much less likely than citizens to have a usual source of care, they have significantly lower per capita health care expenditures than citizens and also “generally restricted from enrolling in Medicaid and SCHIP.”

Orszag promises that everything is on the table:

At the end of the hearing, Baucus, who was recently quoted as saying that single-payer is off the table, asked Orszag if every proposal would be considered by the administration. Orszag said yes:

ORSZAG: Everything is on the table.

BAUCUS: It’s a very big table, and stacked pretty high.


This probably won’t really mean much for single payer reform. During the health care conference, Obama spoke directly to the single payer community — or liberal bleeding hearts, as he called them — and warned them that we can’t solve this problem without tackling costs. We “have to balance heart and head,” he said.