Obama’s Letter to Congressional Leaders: We’re Almost There

Today, President Obama sent a letter to Congressional leaders, offering to incorporate more Republican ideas in health care legislation.

Don’t panic: Of the four ideas, two are excellent, one was almost certain to happen anyway, and one simply funds pilot projects in the states to explore alternatives to resolving medical malpractice disputes.   This provision does not call for capping malpractice awards—the president has made it clear that he opposes caps. 

Moreover, President Obama makes it very clear that he is not going to “strip down” his bill. He is insisting  on comprehensive reform.

More importantly, Nancy Pelosi appears very close to having the House votes to pass reform. The New America Foundation’s Joanne Kenen reports

“A bunch of enterprising AP reporters surveyed the 39 House Democrats who voted "no" on the original House health care bill — and found nine willing to state on the record that they would consider a "yes" vote on a final package based on the Senate bill and a set of House-friendly changes backed by President Obama. (Of course, there are also "yes" votes that could turn to "no," either because of abortion or re-election thunder clouds back home).

“House Speaker Nancy Pelosi and the Democratic leadership need to sew up 216 votes (it's usually 218 but recent vacancies on both sides reduce the count). She has exactly 216 now – although that counts Bart Stupak as a yes,  which is unlikely given the Michigan Democrat's stance on the Senate bill abortion language. So 215 is more realistic — before we count any changed votes in either direction.”

I believe that Pelosi will get the needed votes—and that health care reform will pass. Pelosi is a politician’s daughter, and when it comes to counting and assembling votes, she has done an outstanding job. If only more of our legislators were as competent.

Meanwhile, President Obama’s letter to the leadership (see excerpt below) should help her. I doubt the letter will lead any Republican to vote for the bill, but it may make it easier for moderate Democrats to unite behind the legislation.

Speaker of the Majority Leader
House of Representatives United States Senate
Washington, D.C. 20515 Washington, D.C. 20510
The Honorable John Boehner The Honorable Mitch McConnell
Republican Leader Republican Leader
House of Representatives United States Senate
Washington, D.C. 20515 Washington, D.C. 20510

Dear Speaker Pelosi, Senator Reid, Senator McConnell, and Representative Boehner:

 . . . No matter how we move forward, there are at least four policy priorities identified by Republican Members at the meeting that I am exploring. I said throughout this process that I’d continue to draw on the best ideas from both parties, and I’m open to these proposals in that spirit: 

1.   Although the proposal I released last week included a comprehensive set of initiatives to combat fraud, waste, and abuse, Senator Coburn had an interesting suggestion that we engage medical professionals to conduct random undercover investigations of health care providers that receive reimbursements from Medicare, Medicaid, and other Federal programs.

[This is a very good idea. Medicare does need to invest more in investigating fraud, and the idea of making it a “sting” operation run by medical professionals is appealing.–mm]

2.    My proposal also included a provision from the Senate health reform bill that authorizes funding to states for demonstrations of alternatives to resolving medical malpractice disputes, including health courts. Last Thursday, we discussed the provision in the bills cosponsored by Senators Coburn and Burr and Representatives Ryan and Nunes (S. 1099) that provides a similar program of grants to states for demonstration projects. Senator Enzi offered a similar proposal in a health insurance reform bill he sponsored in the last Congress. As we discussed, my Administration is already moving forward in funding demonstration projects through the Department of Health and Human Services, and Secretary Sebelius will be awarding $23 million for these grants in the near future. However, in order to advance our shared interest in incentivizing states to explore what works in this arena, I am open to including an appropriation of $50 million in my proposal for additional grants. Currently there is only an authorization, which does not guarantee that the grants will be funded.

[We do need to find alternatives to resolving malpractice disputes, and there are some good ideas out there. If pilot projects are funded, the states should be able to find alternatives that work. This will not satisfy Republicans who want tort reform, but it should reassure many physicians that President Obama recognizes the problem.–mm]

3.    At the meeting, Senator Grassley raised a concern, shared by many Democrats, that Medicaid reimbursements to doctors are inadequate in many states, and that if Medicaid is expanded to cover more people, we should consider increasing doctor reimbursement. I’m open to exploring ways to address this issue in a fiscally responsible manner.

[Bravo! As I have written in the past, there is no reason why providers who care for the poor should be paid less than doctors and hospitals who treat the elderly. The president is not guaranteeing that he will do this. Funding will be needed. And “in a fiscally responsible manner” makes it clear that he will not let this program add to the deficit. But that investigation of Medicare and Medicaid fraud should yield savings. Providers who submit fraudulent claims may become more cautious. In other words, just knowing that the government is launching a sting operation could serve as a deterrent. mm]

4.    Senator Barrasso raised a suggestion that we expand Health Savings Accounts (HSAs). I know many Republicans believe that HSAs, when used in conjunction with high-deductible health plans, are a good vehicle to encourage more cost-consciousness in consumers’ use of health care services. I believe that high-deductible health plans could be offered in the exchange under my proposal, and I’m open to including language to ensure that is clear. This could help to encourage more people to take advantage of HSAs.

[My reading of the legislation says that it already lets insurers sell high-deductible plans with HSAs in the Exchange. So I don’t think this represents a change in the legislation. I object to high-deductible plans because research shows that people who buy them are often low-income people who cannot afford to use them. (They buy them because the premiums are lower). And HSAs serve primarily as a tax shelter for the very wealthy. But I was already resigned to the fact that they would be part of reform.—mm]

The president continues: “There are provisions that were added to the legislation that shouldn’t have been. That’s why my proposal does not include the Medicare Advantage provision, mentioned by Senator McCain at the meeting, which provided transitional extra benefits for Florida and other states. My proposal eliminates those payments, gradually reducing Medicare Advantage payments across the country relative to fee-for service Medicare in an equitable fashion (page 8). My proposal rewards high-quality and high-performing plans.

In addition, my proposal eliminates the Nebraska FMAP provision, replacing it with additional federal financing to all states for the expansion of Medicaid. [This should reassure voters who have been unhappy about “special deals” in the legislation.mm]                                 

Obama Refuses to Back Down On Key Points

The letter continues:

Admittedly, there are areas on which Republicans and Democrats don’t agree. While we all believe that reform must be built around our existing private health insurance system, I believe that we must hold the insurance industry to clear rules, so they can’t arbitrarily raise rates or reduce or eliminate coverage. That must be a part of any serious reform to make it work for the many Americans who have insurance coverage today, as well as those who don’t.

I also believe that piecemeal reform is not the best way to effectively reduce premiums, end the exclusion of peop
le with pre-existing conditions or offer Americans the security of knowing that they will never lose coverage, even if they lose or change jobs.

My ideas have been informed by discussions with Republicans and Democrats, doctors and nurses, health care experts, and everyday Americans – not just last Thursday, but over the course of a yearlong dialogue. Both parties agree that the health care status quo is unsustainable. And both should agree that it’s just not an option to walk away from the millions of American families and business owners counting on reform.
After decades of trying, we’re closer than we’ve ever been to making health insurance reform a reality. I look forward to working with you to complete what would be a truly historic achievement.


President Barack Obama

18 thoughts on “Obama’s Letter to Congressional Leaders: We’re Almost There

  1. The House must be getting close. As a small business owner I get emails from the U.S. chamber of commerce and the email that I got just before the Healthbeat was one threatening Nuclear war on health reform. This must be a truly evil organization.

  2. Ms. Chana Joffe-Walt and Mr. David Kestenbaum
    All Things Considered
    National Public Radio
    Dear Ms. Joffe-Walt and Mr. Kestenbaum:
    Your excellent February 26, 2010, report on the history of how government officials chose the different methods that Medicare has used over the years to determine doctors’ pay is frightening because…
    … in your report, Joe Califano, a chief architect of Medicare, admits that the first method of determining doctors’ pay was chosen for political reasons, namely, to buy doctors’ support for Medicare.
    … you report that Mr. Califano, LBJ, and Congress were genuinely surprised by the rapid cost increases sparked by this first method.
    … you reveal that much of the treatment that Medicare paid for was previously provided free by physicians; that is, Medicare crowded out a sizable chunk of private-sector philanthropy.
    … you tell how attempts to change this first method of paying doctors were deeply influenced by skilled lobbyists working on behalf of doctors.
    … in describing the development of the method currently used for determining doctors’ pay, you (perhaps without realizing it) reveal that this current method is the product of a comically childish labor-theory-of-value analysis – the same sort of analysis that is at the foundation of Marxian economics.
    … your report ends with the admission that, because the current method isn’t working so well, Uncle Sam – 45 years after Medicare was launched – is still searching for a sound method for determining physicians’ pay.
    Given this history, what reason is there to suppose that Obamacare is a good idea?
    Donald J. Boudreaux
    Professor of Economics
    George Mason University
    Fairfax, VA 22030

  3. John H, Doc 99
    John H– You’re right. The Chamber of Commerce is not an elightened organization. And when people like this howl at the moon, you know that reformers are winning.
    Doc 99–
    I’ve written about how and why LBJ decided to let Medicare pay doctors “usualy and customary rates” (which is what doctors wanted)–and I quote Califano on this.
    (See my book–Money-Driven Medicine –available for a few dollars, used, on Amazon- I don’t make money on these sales.
    Responding to your comment: First, LBJ simply agreed to follow the private sector status quo and do what Blue Cross was already doing. Blue Cross was paying docs according to “usual and customary rates” where they practiced and LBJ agreed that Medicare would do the same.
    Secondly, LBJ,knew that the number of doctors in the U.S. was expanding, and that with enactment of Medicare the number of doctors in the marketplace would explode (which it did, particularly in the case of specialists. )
    Like many people, he assumed that, in the health care market, as in other markets, as the number of suppliers (doctors) increased, competition would bring prices down.
    He didn’t realize that health care markes do not follow the laws of supply and demand; market competition does not lower prices or lift quality. In the two decades after the passage of Meciare, doctros’ fees
    (In 1965, that wasn’t yet clear. Today,many laymen (non-economists) still don’t understand this.)
    So what LBJ did was totally rational and not in any way corrupt. He wasn’t making a “deal” with lobbyists, he was acknowledging doctors would not take Medicare unless it followed the Blue Cross pricing.)
    Yes, prior to Medicare and Medicaid doctors did provide charity care– to poor people. But most doctors provided charity care only to poor White people.
    Secondly, if you have read any histories of health care, you would know that as docs provided charity care, most doubled and tripled the fees that they charged wealthier patients in order to cover this charity care.
    Doctors did not make that much money back then. They tended to be “well off” but not “rich” and really couldn’t afford to eat the costs of charity care. (They were not wealthy philantrophists).
    So wealthier people paid for white poor patients, at whatever (somewhat arbitrary) rates doctors decided. By contrast, under Medicare and Medicaid wealthier patients would pay for poor patients under a progressive tax system–as a percentage of their income.
    And, with the passage of Medicare and Medicaid many more black patients began to get care.
    I recognize that you are (or the letter-writer is) a professor of economics. Butt I wonder how much healthcare economists you have read– Kenneth Arrow?
    Uwe Reinhardt? Do you regularly read Health Affairs? Other journals abouthealth care economics?
    I’m afraid that your implied theory of how healthcare markets work is, in your phrase, “childishly simple.”
    If you have ever read the Medicare Payment Advisory Commission (MecPac) reports of the past few years (which, if you were a health care economist, you would have)) you would knowt that,in fat, we have figured out how to pay doctors– based on benefit to the patient, rewarding value over volume.
    The Bush administration wasn’t willinging to do this. On this issue, Bush’s Medicare director Mark McClellan, has complained that the administration was only interested in privatizing Medicare–not in reforming Medicare. .
    But now things have changed. The reform legislatiion makes it clear that the Obama administration has set out to raise the quality of Medicare while lowering the costs– and it will follow MedPac’s blueprint on how to do this. .

  4. Darn right, they’ve changed, and not any too soon. I’m thinking/hoping that when a reform package finally gets passed there might follow an avalanche of executive decisions not requiring Congressional approval that will really get the ball moving. I think opponents already know and fear this probability, and that fear is a greater motivator than anything actually in the legislation.
    Hospitals and other providers have learned to game the Medicare/Medicaid system. I worked five years in a health care system with five hospitals. Only after I left did I learn they operated what was termed an “Indigent Clinic,” a place where sick people received either free or deeply discounted medical care with physicians taking turns at volunteering their services.
    When I learned of this place my first response was “That must be where the Medicaid patients are sent.”
    The reply from a long-term employee was, “No, those patients are seen at the Emergency Room and go to the main hospital. Our patients come from the Department of Family and Children’s Services, the county office.”
    Ping! The penny dropped as I realized that the so-called Free Clinic was taking care of a special group of people — probably home owners or others with too many assets or income to qualify for Medicaid but too poor to afford insurance. The hospital rolls out the carpet for Medicaid and Medicare beneficiaries. But these other people, good local folks, — some working, others retired — are quietly getting served at a “free clinic” which is so low-profile that I worked for the hospital within walking distance for five years and never knew of its existence.
    I came to the conclusion that many so-called “not-for-profit” institutions are in a symbiotic incestuous relationship with for-profit providers and have become part of a very wasteful scheme aimed at maximizing the harvest of available tax dollars, local, state and federal.
    Never underestimate the resourcefulness of the private sector when tax money is on the table. Last I heard over fifty percent of all medical bills are paid, one way or another, with tax dollars. And people are mystified why their bills and premiums continue to rise.

  5. John Ballard–
    I, too, think that the executive branch will be able to do many things once Congress passes health reform.
    In particular, I think we will see the Centers for Medicare and Medicaid (CMS)
    move forward, leading the way in terms of changing what we pay for , and how we pay for it– rewarding services and products that actually benefit patients while lowering fees for tests and treatments that put patients at risk without benefit.
    As I have said in the past, private insurers have told Medicare that if Medicare provides political cover, private insurers will be happen to follow its lead in cutting costs.

  6. Maggie,
    I did not write the letter. A “Childishly Simple” Professor of Economics did. Perhaps you’d care to write him to show him the error of his ways.

  7. I think that the current discussions about healthcare are shortsighted. They do not look to the future.
    Healthcare initiatives to date have focussed on providing healthcare to the needy. This is good. But what about addressing the prevention of ill health. Poor personal health practices is responsible for creating the need to address healthcare at this time.
    It is said that it is better to teach a starving man how to fish than it is to give him fish to eat.
    Much has been written about the obesity epidemic. Obesity, of course, leads to ill health and exacerbates the need to address healthcare.
    Why is noone talking about educating children in the subjects of fitness and nutrition in schools? Doing so would contribute to improved health in future generations and therefore diminishing pressure on the healthcare system in the future.
    In the meantime, a way needs to be found to educate the current generation in these matters . Information similar to that which is contained in the articles about
    Fat Burning Exercise and Fat Burning Diet needs to be taught to the general population.
    This website may contain useful information as well

  8. Doc 99–
    As a former academic, I know that some academics are “childishly simple”
    This includes professors of English lit as well as economists.
    As in all jobs, there is a bell curve . . .

  9. Maggie, On your response to DOC99 (who posted the letter from economist Donald Boudreaux). You are curiously lacking in specifics on the solution to perverse physician payment incentives in fee-for-service Medicare. Is this solution the Resource-Based Relative Value System (RBRVS) introduced by CMS in 1992. Yes, this system was not the original “usual and customary”, nor did the letter claim that it was! The author refers to “this current method is the product of a comically childish labor-theory-of-value analysis – the same sort of analysis that is at the foundation of Marxian economics”. Clearly, Dr. Boudreaux is specifically referring to RBRVS, which is a simplistic pricing of resource inputs now enshrined in Medicare physician payment system to our great cost. Political pressures prevent more than a surface tweaking of this system in the annual adjustments. The result is that the system dramatically underpays primary care physicians – and the tiny revenue neutral shift towards primary care recommended by MedPac is too slight to remedy the incentives to select relatively well-remunerated specialties over primary care (I know you know this). So isn’t it a bit disingenuous to claim that Medicare has “figured out how to pay doctors based on benefit to the patient and value over volume”? Anyone who has read your book knows that you recognize the strong and perverse incentives of the RBRVS method, which remains on a fee-for-service basis. Given that you are either misunderstanding or misstating Dr. Boudreaux’s point, it is hardly fair to refer airily to Medpac and Drs. Arrow and Reinhardt, and to imply that his analysis is incompetent.

  10. Cordelia–
    It wasn’t clear he was writing about RBRVS.
    I’ve written about RBRVS in previous posts.
    The problem with them is, first, that the adjustments are made by a committee that meets behind closed doors and is primarily made up of specialists. Typically, they upgrade specailists fees, but not primary care fees.
    AS I have explained in the past, the other problem is that the pricing is based on how much it costs the doctor–in terms of time, amount of training needed, physical effort, mental effort etc–to perform the service.
    Nowhere is the benefit to the patient taken into account.
    If you read the Senate legislation, you’ll find proposals to pay for value to the patient via “value-based payment adjustments,”
    “bundling,” partial capitation for Accountable Care Organizations (ACOs) and additional payments for docs who meet the requirements for “medical homes.”
    I’ve written about these alternatives to fee-for-service before so didn’t go into detail in my comment.
    The legislation makes it clear that Medicare should move away from fee-for-service (MedPAC also emphasizes this in its reports.)
    Finally, this year Medicare is raising fees to primary care docs by 4% and for nurse pratctioners by 3 % while cutting fees to cardiologists by 6% to 8%. (mainly by cutting fees for certain tests.)
    This is part of a 4-year program of cuts and hikes that will be redistributing health care dollars from specialists performing certain services to primary care docs.
    Over the 4 years, oncologists will see fees cut by 6%. (I wrote about this in part 2 of my “Glass-Half Empty Half-Full post on December 20, with a link to a Bloomberg story explaining all of this.
    Meanwhile, this year’s 4% hike for primary care docs is the first of what I expect will be a series of increases over the next four years.
    Those compounded increases, coupled with the rewards for medical homes, bonuses for good outcomes when payments are “bundled,” rewards for acccountable care organizations (which include primary care docs) should mean a significant increase in income for primary care physicians.
    In addition, the legislation greatly expands scholarship and loan forgiveness programs for med students who choose primary care–this means that many will leave med school with little or no debt.
    Private insurers have told MedPAC that if Medicare leads the way, they will follow reimbursement reforms.
    I’m sorry if my reply seemed “airy” or lacking in detail Cordelia, but I don’t have the time to repeat all of the detail in previous posts when responding to comments.
    I realize that not all readers have time to read all posts, so I try to cross-reference when I can.

  11. Maggie,
    I appreciate your answering my post. The basic point of this whole discussion is that Medicare has been paying physicians on a distortionary FFS basis ever since it was first introduced, and is paralyzingly slow in responding to change in markets. RBRVS was an attempt to move in the right direction – and certainly very well-intentioned – but does it really speak well of Medicare that the relative underpayment of primary care was allowed to remain in place for 18 years – creating severe shortages throughout the country – before anyone mustered the political will to even begin to address this issue? Medicare has a lot of trouble making changes to payment systems when they are not working well because every change is subject to political pressure by vested interests. Because the problems involved in setting up payment systems are so complex – and because markets work poorly – any system of payment is going to require a LOT of incremental change in practice. I don’t see how this happens under Medicare. Surely this year’s tortured process is evidence of that! I honestly wish I could understand your point of view – because you are clearly both knowledgeable and very smart. I don’t think you are an economist, though (am I wrong?)
    It was clear to me that Dr.Boudreaux was talking about RBRVS (and certainly not “usual and customary”) because RBRVS is consistent with Marx’s labor theory of value. Usual and customary assumes markets outside of Medicare will work in setting competitive market prices. But you need to have some critical share of the market paid for under conditions that are consistent with competitive markets (not the case before Medicare, Medicaid – and certainly much less so afterwards!)
    Obviously, you can’t include specifics of everything you refer to, but in this case, your point depended on specifics. I don’t know Dr. Boudreaux, but I did not think he deserved the tone of contempt with which his comment was taken.

  12. Cordelia–
    Calling a a theory “child-like” (as Boudreaux did) is contemptuous, and set the tone for my reply.
    A very intelligent eocnomist at Harvard (Hsiao –spelling??) came up with the rules, based on doctors’ labor, for evaluating how much they should be paid.
    He is not a Marxist. And he is not childish. He came up with this rubric after he and his team interviewed thousands of doctors about what it took for them to provide various services (in terms of mental effort, physical effort, time, years of training needed to learn the technique,etc.
    I think that he made a major mistake in looking only at physicans’ input and not looking at the value (to patients) of the output.
    But I would never call his work childish.
    I don’t have a Ph.D. in economics. But I spent 12 years as senior editor at Barrons’a and wrote a book about financial markets that Warren Buffett recommended in Berkshire Hathaway’s annual report.
    Paul Krugman (who won a Nobel prize as an economist) wrote a vert positive review of my book in the NYT book review
    So I can hold my own in a converstaion with an economist.
    After responding to your comment today, I noticed an article in the newest New England Journal of Medicine that goes into more detail about how Medicare can and will lead the way in cutting costs–whether or not the reform legislation passes.
    Your skepticism reminded me that many intelligent people don’t know about Medicare’s plans for cutting costs–or how the legislation lays out a blueprint for Medicare to do that.
    So I decided to write about the NEJM article (I should be posting it tomorrow.)
    Thanks for reminding me that this is a subject that the media hasn’t covered very well, and inspiring me to post on this NEJM article. I think (hope) you’ll find it eye-opening.

  13. I think Cordelia makes some good points about how difficult it is for Medicare to effect change in the way it does business, at least in part, because of the strong influence of politics. For example, the MedPAC reports, which are full of good and useful information as you have often written, are left to gather dust because its recommendations, for the most part, can’t get through the political process, especially if they adversely affect the financial interests of powerful providers. The successful pilot project related to competitive bidding for durable medical equipment wasn’t implemented because of opposition from suppliers of such equipment. It took Medicare fully 41 years from the inception of the program in 1965 until 2006 before seniors were offered a prescription drug plan which commercial insurers had offered for decades. For all their faults, commercial insurers can innovate and experiment much more easily and quickly than CMS can. Even though the insurers would much prefer to have CMS lead on some of the tougher choices that will need to be made to bend the cost curve, they may have to move ahead on their own out of sheer necessity.

  14. Folks:
    With the just-passed 21% reductions in physician reimbursements for Medicare, I wonder if that can be considered a “cutting-edge” innovation?
    If insurers follow the lead in the private market, what may be the consequences?
    Don Levit

  15. Don — the 21% cut wasn’t passed. And it won’t be passed. Obama never even put those savings in the budget.
    The cut was supposed to go into effect March 1. Democrats planned to cancel it, but Republicans made it impossible for them to address the issue.
    So the Senate voted to postpone the cut until April 1, giving them time to cancel it.
    The AMA keeps talking about the cut as if it might happen–as a scare tactic.
    But everyone in Washington knows that it will never happen.
    A 21percent across the board cut is too crude. No one wants to cut primary care fees.
    Medicare has already announced it is cutting cardiologists fees by 6% this year, and raising primary care by 4%. (Careiologists tried going to court to protest the cut, but failed.)
    Medicare will be cutting fees for some specialists over the next four years (they have announced some of these cuts)
    while simultaneously raising fees for primary care.

  16. Barry–
    Under the legislation, Medicare reforms will not have to go through Congress.
    Becuase they are “pilot projects” not “demonstration projects” the Secretary of HHS can implement any pilot project that is successful nationwide–without going through Congress.
    I’m posting about this either today or Monday.

  17. Maggie — In your upcoming post, I think it would be helpful to explain the difference between a pilot project and a demonstration project.

  18. … you report that Mr. Califano, LBJ, and Congress were genuinely surprised by the rapid cost increases sparked by this first method.