A Blue View

GOP Fiscal Hypocrisy On Taxes

In today's NY Times, Bruce Bartlett, an economist who has held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul, defended  Republicans opposed to extending the payroll tax cut that helps working people.

Here's Bartlett's second argument against extending the payroll tax cut:

The payroll tax cut helps many workers who have no need for it and will only pocket the tax savings.

How many people who agree with this line of reasoning will still agree when it is applied to extending the Bush tax cuts do you think?

The Bush tax cuts help many wealthy people who have no need for it and will only pocket the tax savings.

Close to zero I bet.

How The Recession Affected Rich And Poor

Jonathan Chait:

Michael Linden and Heather Boushey break down how the recession has hit different income groups:

The remedy, of course, is to cut tax rates for the highest-earning 2%.

Calling The GOP's "Pledge" To Reduce The Deficit A "Political Document" Just Acknowledges It's A Lie

I hope every deficit hawk Tea Partier reads this Davide Leonhart column ... if you know  any, pass it on:

In their Pledge to America, Congressional Republicans have used the old trick of promising specific tax cuts and vague spending cuts. It’s the politically easy approach, and it is likely to be as bad for the budget as when George W. Bush tried it.

The sad thing is, a truly conservative approach to the deficit does exist. You can find strands of it among Republican governors, some of the party’s current Congressional candidates and the ranking Republican on the House Budget Committee, Paul Ryan.

The brief version might sound something like this: The federal government has outgrown its ability to pay for itself. Our economic future and even our national security depend on solving the problem. Yet President Obama has expanded health insurance, increased education spending and escalated a war of choice. Elect us, and fiscal responsibility won’t have to wait in line.

The detailed plan would start in the same place that Republican campaign rhetoric does, with rooting out waste and bloat. Some tasks, like mail delivery and air traffic control, could be privatized. The federal work force could be reduced, and pay for federal workers could be cut. Federal aid to states could be cut, too.

But then comes the crucial difference.

Actual fiscal conservatives acknowledge that these steps do not come anywhere close to solving the long-term deficit. By 2035, the deficit (even without counting interest payments on the federal debt) is on course to reach $1.9 trillion, according to the Congressional Budget Office. If you reduced domestic discretionary spending to its share of the economy under Ronald Reagan and then eviscerated it an additional 20 percent, you would shrink the deficit by all of $100 billion.

The bulk of the deficit problem instead comes from three popular programs, Medicare, Social Security and the military, and they happen to be the ones the Republican pledge exempts from cuts. But it’s impossible to fix the deficit without making cuts to these programs or raising taxes. To suggest otherwise is to claim that 10 minus 1 equals 5.

“We as Republicans need to realize that you can’t just cut off the welfare queen and balance the budget,” says Rand Paul, a Senate candidate in Kentucky, who has some extreme views on other issues but is evidently pro-arithmetic. “The only way you’ll ever get close to balancing the budget is if you look at the entire budget.”

When they’re not talking for quotation, some Republicans will explain that the pledge is, of course, a political document: although it may not spell out specific budget cuts, the party is willing to make them. But I think this view misreads recent history.

Republicans controlled the White House and Congress for much of 2001 to 2006, and they turned a big surplus into a big deficit. In the last two years, they have opposed several Obama administration plans for reducing the deficit, including cuts to Medicare, weapons programs and farm subsidies, as well as tax increases on the affluent. Given this history, my colleague Ross Douthat concluded that the pledge “might create a larger deficit than the Obama alternative.”

In short, the pledge imagines a world without tough choices, where we can have low taxes, big government and a balanced budget. And therein lies the path to ever larger deficits.

•

The essential question for any would-be budget balancer is how large the federal government should be.

For most of the last century, the government has been getting bigger. Its spending equaled about 2 percent of gross domestic product in 1900, 14 percent just after World War II and, after ballooning to almost 25 percent during the financial crisis, will fall to 23 percent in the next few years.

There is a good argument that the government should grow as societies become richer. Once people can afford the basics, they want services that the private sector often does not provide, like a strong military, good schools, generous medical care and a comfortable retirement, as Matt Miller, a McKinsey & Company consultant and former Clinton administration official, has pointed out.

To me, this pattern argues for making tax increases a big part of the deficit solution. Maybe taxes would eventually rise to 23 percent of G.D.P., rather than 19 percent, as under current policy. Spending could then be cut from the 26 percent it is scheduled to reach in 2035, yet still be high enough to afford the investments that lead to prosperity. After all, the Internet, the highway system and the biotechnology sector all began as government programs.

Conservatives counter that governments just as often allocate resources badly, and there is something to this. It’s the small-government case that Mr. Paul, Mr. Ryan and governors like Mitch Daniels of Indiana and Chris Christie of New Jersey are making.

Mr. Paul emphasizes wasteful military spending that lines the pockets of military contractors rather than protecting the country. A bipartisan task force of military experts has identified cuts that would eventually equal almost 1 percent of G.D.P.

On Social Security, Marco Rubio, the Republican Senate candidate in Florida, has suggested raising the eligibility age. Two other Republican Senate candidates, Sharron Angle of Nevada and Joe Miller of Alaska, have gone further, suggesting a phaseout of Social Security. In the long run, changes to Social Security could save even more money than military cuts.

But the biggest cause of looming deficits is Medicare. Mr. Daniels, a possible 2012 presidential candidate, recently told Newsweek that he favored Medicare cuts. Mr. Ryan has been willing to get specific. For everyone now under 55, he wants to turn Medicare into a voucher program that’s much less generous than the program is scheduled to be.

Mr. Ryan’s budget blueprint offers an especially pointed contrast with the pledge. The Ryan plan calls for holding taxes at around 19 percent of G.D.P. and suggests specific cuts to bring spending in line. The pledge calls for even lower taxes — while offering almost no detail on spending cuts.

Which seems more credible?

Unfortunately, elected Republicans have often backed away from their own fiscally conservative ideas when pushed. Mr. Ryan says he supports the pledge. Ms. Angle has reversed herself on Social Security. Mr. Daniels has said tax increases should be an option, but that will be a tough position to keep in a presidential campaign.

And I get it. Voters don’t like having their taxes raised or their benefits cut. I don’t like it, either.

But, remember, when politicians tell you that they are opposed to tax increases, Medicare cuts, Social Security cuts and military cuts, they’re really saying that they are in favor of crippling deficits.

The GOP's Hypocrisy

Ezra Klein:  

"America is more than a country," begins the GOP's 'Pledge to America.' America, it turns out, is an "idea," an "inspiration," and a "belief." And the GOP wants to govern it.

Their policy agenda is detailed and specific -- a decision they will almost certainly come to regret. Because when you get past the adjectives and soaring language, the talk of inalienable rights and constitutional guarantees, you're left with a set of hard promises that will increase the deficit by trillions of dollars, take health-care insurance away from tens of millions of people, create a level of policy uncertainty businesses have never previously known, and suck demand out of an economy that's already got too little of it.

You're also left with a difficult question: What, exactly, does the Republican Party believe? The document speaks constantly and eloquently of the dangers of debt -- but offers a raft of proposals that would sharply increase it. It says, in one paragraph, that the Republican Party will commit itself to "greater liberty" and then, in the next, that it will protect "traditional marriage." It says that "small business must have certainty that the rules won't change every few months" and then promises to change all the rules that the Obama administration has passed in recent months. It is a document with a clear theory of what has gone wrong -- debt, policy uncertainty, and too much government -- and a solid promise to make most of it worse.

Take the deficit. Perhaps the two most consequential policies in the proposal are the full extension of the Bush tax cuts and the full repeal of the health-care law. The first would increase the deficit by more than $4 trillion over the next 10 years, and many trillions of dollars more after that. The second would increase the deficit by more than $100 billion over the next 10 years, and many trillions of dollars more after that. Nothing in the document comes close to paying for these two proposals, and the authors know it: The document never says that the policy proposals it offers will ultimately reduces the deficit.

Then there's the question of policy uncertainty. The health-care law, which is now in the early stages of implementation, would be repealed. In its place, Republicans would write a new health-care bill. They offer some guidance as to what it would look like, but as every business knows, the congressional and regulatory processes are both long and uncertain. That's joined by three sentences on shrinking and reforming Fannie Mae and Freddie Mac -- the policy's anticipated effects on the housing market, where the two mortgage giants are backing nine out of every 10 new loans, are not mentioned -- and a promise to force a separate congressional vote on every regulation with more than $100 million in economic impact, which would force businesses to figure out a new, dual-track regulatory process.

The agenda is least confused on the subject of reducing government. Though it says little about specific cuts it would make, the pledge includes a cap on non-security discretionary funding, the aforementioned congressional review process for big-ticket regulations, a hiring freeze on federal employees, and weekly votes on spending cuts. None of these policies is spelled out in any detail, but nor are they contradicted by other elements of the plan. If you believe, as the Republicans say they do, in the benefits of reducing the number of public jobs and the amount of public spending in an economy that has too few jobs and too little spending, then this makes some sense. Otherwise, it doesn't. And as Republicans have been hammering Democrats over recent jobs reports where public payrolls fall and private payrolls rise, it's not even clear that they believe this.

Of course, you could say that about most of the plan. It is hard to believe in both deficit reduction and policies that would add trillions to the deficit. It's also hard to warn of the dangers posed by regulatory uncertainty and then propose changing all the rules.

At the end of the day, America may be an idea -- but it is also a country. And it needs to be governed. This proposal avoids the hard choices of governance. It says what it thinks will be popular and then proposes what it thinks will be popular -- even when the two conflict. That, I fear, is a bad idea.

Jon Stewart On The GOP & Their Shakedown Charge

Starting at about 2:30 minutes in ...

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Day 62 - The Strife Aquatic
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Belt Tightening Finally Comes To The Pentagon

It took the Great Recession and a Democratic President but it seems the Defense Dept. might actually start cutting back on the annual growth of its budget. The NY Times:

Defense Secretary Robert M. Gates has ordered the military and the Pentagon’s civilian bureaucracy to find tens of billions of dollars in annual savings to pay for war-fighting operations, senior officials said Thursday.

His goal is $7 billion in spending cuts and efficiencies for 2012, growing to $37 billion annually by 2016.

Every modern defense secretary has declared war on Pentagon waste and redundancy. And there have been notable, but relatively narrow successes, in closing and consolidating military bases or in canceling a handful of weapons systems.

But if Mr. Gates’s sweeping plan is fully enacted, none of the armed services or Pentagon civilian agencies and directorates would be immune from the pain of annual cost-cutting, which would become institutionalized across the Defense Department.

The spending guidelines were delivered orally to senior military officers and civilian officials before Mr. Gates’s departure this week for an Asian security conference in Singapore, and the official signed guidance will be issued over coming days.

The goal is to force all of the Defense Department agencies and organizations, and all of the armed services, to save enough money in their management, personnel policies and logistics to guarantee 3 percent real growth each year, beyond inflation, in the accounts that pay for combat operations.

Current budget plans project growth of only 1 percent in the Pentagon budget, after inflation, over the next five years.

“Given the nation’s fiscal situation, there is an urgency to doing this, rather than shifting more of the nation’s resources toward national defense,” William J. Lynn III, the deputy defense secretary, said in an interview.

Mr. Gates’s spending orders offer a considerable incentive to the armed services. Each dollar in spending cuts found by a military department would be reinvested in the combat force of that branch, and not siphoned away for other purposes.

Senior officials acknowledge that powerful constituencies are expected to line up in opposition to cuts of favorite programs — with criticism anticipated from the defense industry, Congress, military headquarters, Pentagon personnel and retirees.

“We will need to address the reasons things are in the budget in order to be able to reduce overhead,” Mr. Lynn said. “We are going to have to be engaged in dialogue with industry, with Congress, with other agencies, with the White House and inside the Pentagon — all the stakeholders.”

The new directives are aimed at three distinct areas of spending.

Compare The Financial Overhaul Bills & See Who Won Or Lost

The Senate on Thursday approved a far-reaching financial regulatory bill, 59 to 39. Democratic Congressional leaders and the Obama administration must now reconcile it with the House bill that was passed in December. Read the news article.

View a graphic that compares the bills. 

See which companies/industries are the winners and which the losers.

Senate Passes Financial Overhaul Giving "Obama his second major legislative victory of the year"

Wash Post:

The Senate approved far-reaching new financial rules on Thursday aimed at preventing the risky behavior and regulatory failures that brought the economy to the brink of collapse two years ago and cost millions of Americans their jobs and savings.

The final vote, just after 8:30 p.m., was 59 to 39. Four Republicans voted in favor of the bill, and two Democrats opposed it.

"When this bill becomes law, the joy ride on Wall Street will come to a screeching halt," Majority Leader Harry M. Reid (D-Nev.) said after the vote.

The 1,500-page measure, shepherded through the Senate by Christopher J. Dodd (D-Conn.), chairman of the banking committee, seeks to reshape both Washington and Wall Street.

In providing for the most profound remaking of financial regulations since the Great Depression, the legislation would create a new consumer-protection watchdog housed at the Federal Reserve to prevent abuse in mortgage, auto and credit card lending. It also would give the government power to wind down large failing financial firms and set up a council of federal overseers to police the financial landscape for risks to the global economy. Moreover, the legislation would establish oversight of the vast market in financial instruments known as derivatives, impose new restrictions on credit rating agencies and give shareholders a say in corporate affairs.

Passage of the measure marks a milestone in President Obama's efforts to tackle the financial abuse and excess that contributed to the crisis and prevent another meltdown.

The vote gives Obama his second major legislative victory of the year, following the March passage of his landmark health-care bill. "Our goal is not to punish the banks," he said in the White House Rose Garden hours before the final vote, "but to protect the larger economy and the American people from the kind of upheavals that we've seen in the past few years."

The bill now appears headed to a House-Senate conference committee, where a handful of lawmakers will work to resolve differences between the two chambers. House Financial Services Chairman Barney Frank (D-Mass.) said he aims to wrap up that task in short order.

"I think the president will sign this bill before the Fourth of July," he said.

Thursday's vote hinged in large part on Democrats' ability to win over key Republicans.

Leaders successfully courted GOP Sens. Olympia J. Snowe and Susan Collins, both of Maine, in part by including in the final bill provisions that each wanted. Sen. Charles E. Grassley (R-Iowa) also backed the bill. Equally critical was the last-minute push to win over Scott Brown (R), the Senate's newest member.

Brown's vote was secured partly through the help of Frank, his Massachusetts colleague. In an interview, Frank said Brown called him Wednesday evening as Frank was working out on the elliptical machine in the House gym. Brown wanted assurances that Frank would fight in conference to preserve provisions in the House bill that protect large and solvent Massachusetts institutions, such as State Street and Fidelity, from "unnecessary intrusion" by government regulators. Over the next 24 hours, Frank sent Senate leaders two letters stating his position, and Brown indicated that "on that basis, he could vote for cloture," Frank said.

Democratic Sens. Maria Cantwell (Wash.) and Russell Feingold (Wis.) voted against the legislation because they said parts of it did not go far enough.

Consumer advocates who pressed for tough regulations said that the bill falls short in places but that they are delighted it passed.

"No bill that deals with big issues is ever perfect, but the Senate's Wall Street reform package will go a long way toward preventing the kinds of abusive practices that brought our economy to its knees," Elizabeth Warren, head of the Congressional Oversight Panel and an advocate of the new consumer watchdog, said in a statement.

But financial and business groups called the bill flawed. <Continue reading.>

Welcome To Arizona (cartoon)

 

Reduced Income, Not Increased Spending, Is Driving Up Government Debt

Ezra Klein:

The financial crisis and the resulting recession have coincided with a rapid run-up in American -- and global -- government debt. A lot of people, understandably enough, assume that this is the product of government spending. The stimulus was expensive, and the bank rescues seemed expensive, and we just passed a health-care reform plan, and that must be why the deficit blew up.

The IMF, in a new report (pdf), explains that that's not the case. "Of the almost 39 percentage points of GDP increase in the debt ratio, about two-thirds is explained by revenue weakness and the fall in GDP during 2008-09," they write. Check out the graph atop this post: New spending isn't nearly as large a contributor to the increase in debt as reduced revenue is.

The mechanism here is simple enough. As Paul Krugman explains it, "the financial crisis has made us permanently poorer, which among other things reduces revenue." Recessions reduce income, reducing income reduces taxable income, and that in turn reduces the revenue that normally keeps governments out of debt.

This isn't just an interesting explanatory point, though. It's a reminder that the most important thing we can do to reduce the deficit in the long run is to do whatever it takes to get economic growth back up to speed. The more willing we are to accept permanently higher unemployment and permanently lower growth, the harder it's going to be to get our debt under control.

Oil Spill Blame Game (cartoons)

Health Reform Battle Shifts From Congress To Rule Writing, Regulatory Agencies

NY Times:

Health insurance companies are lobbying federal and state officials in an effort to ward off strict regulation of premiums and profits under the new health care law.

The effort is, in some ways, a continuation of the battle over health care that consumed Congress last year.

Insurance lobbyists are trying to shape regulations that will define “unreasonable” premium increases and require them to pay rebates to consumers if the companies do not spend enough on patient care.

For their part, consumer groups say they worry that their legislative victories could be undone or undercut by the rules being written by the federal government and the states.

The health care overhaul provides a classic example of how the impact of a law depends on regulations needed to interpret it. The rules deal with relatively technical questions but go to the heart of the law, pushed through Congress by President Obama and Democratic leaders with no Republican support.

More than 40 provisions of the law require or permit agencies to issue rules. Lobbyists are focusing on two whose stated purpose is to ensure that consumers “get value for their dollars.”

One bars insurers from carrying out an “unreasonable premium increase” unless they first submit justifications to federal and state officials. Congress did not say what is unreasonable, leaving that to rule writers.

Another provision, effective Jan. 1, requires that a minimum percentage of premium dollars be spent on true medical costs related to patient care — not retained by insurers as profit or used to cover administrative expenses. Insurers must refund money to consumers if they do not meet the standards, known as minimum loss ratios.

Michael W. Fedyna, vice president and chief actuary of Aetna, underlined the importance of this issue, saying no other aspect of the law would be so “influential in shaping the future of the health care marketplace in the United States.”

The definition of medical loss ratio will “determine the willingness of health plans to enter new markets and remain in existing markets,” he said.

Senator John D. Rockefeller IV, Democrat of West Virginia, said the definition would be just as important for consumers and small businesses.

“The health insurance industry has shifted its focus from opposing health care reform to influencing how the new law will be implemented,” he said.

The law requires insurers to spend a minimum percentage of premiums on health care services and “activities that improve health care quality” for patients.

Insurers are eager to classify as many expenses as possible in these categories, so they can meet the new test and avoid paying rebates to policyholders.

Obama Previews His & His Party's MidTerm Election Message: I Made Hard, Successful Decisions While The GOP Sulked

Jonathan Chait:

President Obama has been very careful to avoid anything that might smack of a "Mission Accomplished" moment on the economy. In Buffalo yesterday he really let loose:

“We can say beyond a shadow of the doubt today we are headed in the right direction,’’ Mr. Obama told a crowd of about 250 people during a swing through this economically depressed city. “All those tough steps we took –- they’re working, despite all the naysayers who were predicting failure a year ago’’

And here he is at a fundraiser that night, putting a finer point on things:

[W]e got our mops and our brooms out, we’re cleaning stuff out, and [Republicans are] sitting there saying, ‘Hold the broom better.’ (Laughter.)  ‘That's not how you mop.’ (Laughter.) Don’t tell me how to mop. Pick up a mop! … But that wasn’t their strategy; it was not their strategy from day one. And I’m not making this up. This is public record. They’ve said in interviews: We made a political decision. We stood nothing to gain from cooperating. We knew things were going to be bad. And we figured, if we didn't do anything and if it didn’t work out so well, maybe the other side would take the blame. They’ve done their best to gum up the works; to make things look broken; to say no to every single thing. … So after they drove the car into the ditch, made it as difficult as possible for us to pull it back, now they want the keys back.  (Laughter.) No! (Laughter and applause.)  You can’t drive!

I think we can see his main political theme for 2010 and 2012 taking shape here: Republicans screwed the country up, Obama got to work fixing it, Republicans took an ultra-partisan stance on every issue, and if you give them power they'll screw things up again. It's quite simple, and has the added virtue of being true.

If the economy recovers to the point where Americans start to enjoy higher living standards, he's going to have a powerful argument against Republicans, who predicted doom and disaster. Of course, if the economy double-dips, he's screwed no matter what. Might as well position himself to get as much of the potential upside as possible. At some point there's little to gain in hedging your bets.

Business Lobbyists Join GOP Suit Against Health Care Law

NY Times:

With the aim of depoliticizing a largely Republican assault, the leading lobbying group for small businesses has joined officials from 20 states in their legal challenge to the new health care law.

An amended complaint filed Friday in Federal District Court in Pensacola, Fla., lists the lobbying group, the National Federation of Independent Business, as a plaintiff in the lawsuit that was originally filed in March by attorneys general from 13 states.

Attorneys general or governors from seven other states formally joined the lawsuit on Friday. Among the state plaintiffs, only Attorney General James D. Caldwell of Louisiana is not a Republican.

Two individuals also joined the litigation. One is the uninsured owner of an automobile repair shop in Panama City, Fla. The other is a man from Washington State who prefers to pay his medical bills out of pocket rather than being compelled to obtain insurance, as will be the case starting in 2014.

The additions of the business association and individual plaintiffs, according to lawyers involved, were intended to shift any public perception that the lawsuit was primarily a political device. But the new plaintiffs also may help the states fight an anticipated challenge by the federal government to their standing, or legal authority, to bring the lawsuit.

The Florida lawsuit is among at least a dozen filed against the Democratic health care law since President Obama signed it on March 23. Virginia’s attorney general has filed a separate case in Richmond, and other lawsuits have been mounted by physicians’ groups and conservative legal centers.

The cases typically focus on the provision that will require most individuals to obtain commercial or government health insurance, a mandate with few precedents in American policy or jurisprudence.

The lawsuits argue that the insurance requirement, by penalizing people for not purchasing a product, represents an unconstitutional extension of Congress’s power to regulate interstate commerce.

The federal government has responded in court filings that an individual decision to not purchase insurance is, in effect, a decision about how to pay for future medical care. Taken in the aggregate, those decisions substantially affect interstate commerce by shifting the cost of covering the uninsured to policy-holders, health care providers and taxpayers, government lawyers maintain.

In papers submitted this week in a Michigan case, the Justice Department vigorously attacked the plaintiffs’ legal standing to challenge an insurance mandate that does not take effect until 2014, and thus has yet to cause any harm. In the Florida case, the federal government’s response — in the form of a motion to dismiss the lawsuit — is not due until June 16. Oral arguments are scheduled for September.

Although the health care law provides substantial tax credits to small businesses that provide insurance to employees, the National Federation of Independent Business wound up opposing the legislation because of what it viewed as unacceptable mandates and costs for its members.

Weekly Radio Address: Wall Street Reform & Main Street

WhiteHouse.gov:

The President explains how Wall Street Reform will not only end bailouts and bring accountability for big banks, but empower consumers, shareholders and community banks.

Remember Those Outrageous Anthem Health Insurance Increases?

Kate Pickert:

The final leg in the health reform debate marathon may seem like a distant memory. The media has been focused on financial reform, immigration reform and most recently, the oil spill in the Gulf of Mexico and the man who tried to bomb Times Square.

But some recent health care news provides good reason to look back on what pushed health care over the finish line. Remember those astounding proposed Anthem Blue Cross rate hikes in California? The ones that shocked consumers in the individual insurance market who were told their monthly premiums were set to skyrocket as much as 39%? Back in February, the Obama Administration blasted the hikes in public, while inside the White House, the hikes were celebrated as a timely and convenient illustration of why more regulation of the health insurance industry was needed.

The blasting worked, at least temporarily. Under pressure from Health and Human Services Secretary Kathleen Sebelius, Anthem agreed to delay the rate increases while independent actuaries reviewed their calculations. (Also, health reform passed.)

As I wrote at the time, Anthem's justification for raising rates so dramatically made some sense. The company said rising health care costs and a less healthy pool of purchasers forced it to charge substantially more for policies. I also said at the time that rate hikes of some magnitude would probably happen anyway eventually. Of course, the White House was not interested in these caveats, which would have been clutter to its public relations campaign to emphasize the dire need for reform.

Well, earlier this week the California department of insurance released the report from those independent actuaries. The 145-page document is here, but here's my one-paragraph summary:

Anthem used some bad math to calculate its rates, which the company is calling “miscalculations.” Since the new federal regulations are mostly years away, the only major state regulation that applies to Anthem's rates now concerns its “medical loss ratio.” This is the percentage of premiums that are spent on medical care and in California, it must be 70% in the individual market. The actuaries – who spent a total of 500 hours analyzing Anthem's books – said the company didn't need to hike its rates as high as it claimed in order to keep its MLR above 70%. But after correcting the math, the actuaries said major – if somewhat lower - rate hikes were still necessary. While Anthem originally said it needed to raise rates in the individual California market an average of 25%, the actuaries said it only need to hike rates an average of 15%.

It's impossible to know at this point whether Anthem intentionally fudged its original math, but keep in mind, this a company whose sole business is measuring risk and setting premiums. They should be better mathematicians.

Saving The Economy & Wall St. Is Turning Out To Be FAR Less Expensive Than Feared

Wall St Journal:

The U.S. government's rescue of wobbly companies and financial markets is starting to look far less expensive or long-lasting than once feared.

As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates. Treasury Department officials say the tab is likely to reach $89 billion, which includes the Troubled Asset Relief Program, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve moves such as buying mortgage-backed securities and propping up the commercial-paper market.

Treasury officials are increasingly optimistic that even American International Group Inc. could be on its own within a year, with officials discussing ways to extricate the government from its 80% stake in the insurer, according to people familiar with the situation. AIG is on track to repay its loan to the Fed through asset sales that will raise $51 billion.

The discussions come as the Treasury is planning to sell its $32 billion stake in Citigroup Inc. and General Motors Corp. moves toward repaying its $6.7 billion government investment and embarking on an initial public offering this summer. Both companies could be free of government strings sometime this year.

Just a year ago, the Congressional Budget Office and Office of Management and Budget estimated that the overall bailout would cost more than $250 billion. Last month, though, Treasury Secretary Timothy Geithner said the rescues will amount to "less than 1%" of gross domestic product. The $89 billion projection is less than the cost of the savings-and-loan crisis in the 1980s and early 1990s, which totaled as much as 3.2% of GDP.

The Treasury's estimate is dependent on many factors, including the health of the economy and the housing market. Still, the smaller-than-expected price tag reflects the quick stabilization of financial markets, which helped companies to return their taxpayer-funded money—often at a profit—and allowed the government to spend less on some aid programs than originally projected. The government also is earning dividends, interest payments and other rescue-related income, ranging from about 5% annually on $1.5 trillion in Fannie Mae and Freddie Mac debt to $4 billion from the sale of warrants it got to buy shares in TARP recipients.

But the direct costs of the bailout are dwarfed by the broader political and economic impact, many experts say. It likely will take many years for the U.S. to recover from the economic misery, ballooning U.S. debt, lost tax revenue and political tumult fueled by the financial crisis.

"If you look at the cost of a financial crisis ... the bailout costs are often a small part of it," said Kenneth Rogoff, an economics professor at Harvard University and co-author of a 2009 book about financial crises.

Health Reform Q&A

Prescriptions has an informative Question & Answer where they answer the following:

Q. Won’t all these changes increase my health care premiums?

Q. Will young, healthy adults who don’t have insurance be helped by the reforms?

Q. How does this bill affect health savings accounts?

Q. How will the law affect children with pre-existing conditions?

Q. How much mental health coverage will this provide? Will i be able to get coverage for a therapist or psychiatrist?

Q. How is the new federal pool different from what is already offered by state high-risk pools or Medicaid?

Q. What exactly is a health insurance exchange? I have read much on this new law, but have not seen this concept explained beyond the abstract. Is it a company? A non-profit group? A state or federal government agency? Who sets it up, runs it and oversees it? Does if require membership? Does anybody really know?

Q. I am about to retire in August. Presently, many Social Security recipients purchase supplemental insurance plans. Will that now change or remain the same?

Q. Will Medicare recipients receive any immediate benefits?

Q. I understand that the bill includes major provisions that limit the transition of drugs such as Lipitor to generic status. Is this true? Are the drugs listed by company, name or type?

The Right's Specious Claim That ‘ObamaCare’ Is Destroying Wealth

Uwe Reinhardt, a Princeton economics professor:

A coalition of 300 large American corporations is lobbying Congress to rescind a tax provision in the recently passed health reform bill. This provision forces companies to book sizable write-offs in the current quarter.

In its lead editorial of March 27-28, The Wall Street Journal decried the provision as “The ObamaCare Writedowns,” writing that

ObamaCare passed Congress in its final form on Thursday night, and the returns are already rolling in. Yesterday AT&T announced that it will be forced to make a $1 billion writedown due solely to the health bill, in what has become a wave of corporate losses. This wholesale destruction of wealth and capital came with more than ample warning.

What might have prompted the Obama administration and its allies in Congress to embark on this alleged “wholesale destruction of wealth?” Is it, in fact, a wholesale destruction of wealth?

To understand this issue, it may be well to illustrate it with a familiar analogy: a household expenditure that is deductible from taxable income under current law. For example, consider interest payments on mortgage loans made by homeowners who itemize their tax deductions.

Suppose that last year a homeowner made all his monthly payments on the second year of a 20-year, fixed-rate mortgage loan, which had an A.P.R. (“Annual Percentage Rate”) of 5 percent per year.

Using a standard amortization table for such a mortgage, we find that a homeowner with this mortgage could deduct $14,338 in mortgage-interest payments for 2009 from his taxes.

Now suppose that for some reason, the government had decided to grant homeowners a 30 percent subsidy on that interest expenditure. Consequently, this homeowner gets a check for $4,301 from the government.

What amount should that homeowner then be allowed to deduct from taxable income for 2009 – the gross interest payment of $14,338, or the net interest payment $10,037?

If the former, the homeowner in effect could tax-deduct an expenditure that was actually made for him by the government. Would that be reasonable? Many people would say no.

The answer to this question bears directly on the current brouhaha over the “ObamaCare Writedowns.”

In previous decades, many American companies offered their workers retiree-health plans that promised to cover sundry medical expenses not covered by Medicare, prescription drugs prominently among them. Economists are convinced that, at the time they were made, these promises were substitutes for the cash take-home pay of workers.

Under a  Financial Accounting Standards Board statement (FASB ASC 715), business firms since 1993 have had to estimate, at the end of any fiscal year, the total projected cost of all future retiree health benefits promised to employees already on board or already retired at that time. Companies must then add that total to the liabilities on their balance sheets.

To maintain the famous accounting identity

NET WORTH = ASSETS – LIABILITIES

firms also recorded a corresponding reduction in the firm’s reported net worth. That reduction in the firm’s book net worth, however, is not a destruction of wealth. It merely makes visible the net worth that management has already given away to workers in the form of promised future retiree health care ...

Enter now the Medicare Modernization Act of 2003, which since 2006 has provided Medicare beneficiaries with substantial federal subsidies for prescription drugs.

A Peek At What's To Come Nationally As MA Rejects Health Insurer Rate Hikes

As Obamacare, particularly the exchanges, are modeled on Romneycare, this Boston Globe report on the Commonwealth's push back against medical cost increases has import for everyone:

Making good on Governor Deval Patrick’s promise to reject health insurance rate increases deemed excessive, the state Division of Insurance yesterday denied 235 of 274 increases proposed by insurers for plans covering individuals and small businesses.

The rulings, following a review process set in motion by emergency regulations Patrick filed in February, mark the first time the state has used its authority to turn down health premium increases. The action immediately sent ripples through the state health care industry.

Insurers said it would usher in an era of price controls, and vowed to appeal to the state or through the courts — a process that could drag on for months.

“We share the concern about rising health costs, but we don’t think government price controls will solve the problem,’’ said Jay McQuaide, vice president at Blue Cross and Blue Shield of Massachusetts, the state’s largest health insurer.

But small businesses applauded the rejection of higher premiums, saying they can’t continue to endure rapidly escalating insurance bills, especially after the long economic downturn.

“Costs will double in four years if it keeps going on the same trend,’’ said Dennis Franson, whose two-person investment firm in Woburn was facing an 18 percent rate increase. “That’s unsustainable.’’

Insurance Commissioner Joseph G. Murphy found that most of the base rates proposed by state health plans were “unreasonable relative to the benefits provided,’’ according to a statement issued by the agency.

The rates were to have taken effect yesterday for thousands of businesses and individuals in the so-called small group market. That group, created by the state’s 2006 universal health care law, combines businesses employing up to 50 people with sole proprietors and self-employed people who previously bought insurance on their own or were uninsured.

Insurers proposed base rate increases averaging 8 percent to 32 percent for hundreds of separate products, offering different mixes of benefit designs, copays, and deductibles. On top of overall base rates, insurers often add extra costs for each business, adjusting for such things as geography, industry, and the size and age of a workforce. That can drive rates up significantly.

For now, premium rates established last year remain in effect. Because insurers send out bills four to six weeks in advance of the date policies take effect, companies or individuals that already made the new, higher payments will receive a refund or a credit from insurers ...

The Insurance Division, in letters to carriers, outlined reasons for the rate rejections. Among them were rate proposals that are significantly above the medical consumer price index — a consumer health care spending measure estimated at 4.8 percent — and proposals that failed to explain how insurers set different reimbursement rates.

Several proposals, including those from for-profit, out-of-state insurers such as Aetna, ConnectiCare, and United HealthCare, were approved after the companies worked with Insurance Division staffers on ways to reduce costs. Some of those approved called for increases above 4.8 percent, but insurers offered data justifying the increases, according to the state.

Insurers whose rates were rejected — most of which posted operating losses for 2009 due to job cuts at companies they sell plans to — received yesterday’s decision with anger.

“We’re very disappointed,’’ said McQuaide at Blue Cross-Blue Shield. “The rates we filed reflect expected medical costs of members buying our products. And we were surprised the disapprovals had no actuarial opinions, suggesting this was an arbitrary decision.’’

Lora Pellegrini, president of the Massachusetts Association of Health Plans, said her group was weighing all administrative and legal options with its members, which include nonprofits such as Harvard Pilgrim Health Care, Tufts Health Plan, and Fallon Community Health Plan.

“If we’re not going to be allowed to have our prices cover our costs, that will be a problem for the whole industry,’’ she said.

But Jon B. Hurst, president of the Retailers Association of Massachusetts, which represents 3,100 retailers and restaurants, said the rejections were justified.

“It’s welcome news on Main Street,’’ Hurst said. “They’re not hiring, and they’re seeing double-digit health premium increases every year. The real message is that a line in the sand has been drawn. And big health care in the state has got to get out of its alternative universe.’’

Insurers have up to 15 days to request appeal hearings at the Insurance Division, Murphy said in an interview. Such public hearings would be complex, lasting from a few days to a week. They would examine rate increases proposed for various products, and hearing officers would have 30 days to make their rulings. If the appeals are rebuffed, insurers can go to Superior Court.

Carriers also have the option of filing new rate requests with more modest increases, which would require a 30-day review.

As of now, however, the old rates remain in effect, and insurers must honor the plans they sold.

Several health care industry officials said that as a result of the state’s stance, insurers will probably take a tougher position with hospitals and other health care providers when current contracts expire, in an effort to limit reimbursements.

In Attempt To Move Climate Change Legislation Forward, Obama Splits The Difference

From the Wash Post, "President Obama's decision to approve new oil and gas drilling off America's coasts for the first time in decades reflects a high-stakes calculation by the White House: Splitting the difference on the most contentious energy issues could help secure a bipartisan climate deal this year."

President Obama's decision, announced Wednesday, to approve new oil and gas drilling off U.S. coasts for the first time in decades reflects a high-stakes calculation by the White House: Splitting the difference on the most contentious energy issues could help secure a bipartisan climate deal this year.

In what could represent the biggest expansion of offshore energy exploration in half a century, Obama announced that he will open the door to drilling off Virginia's coast, in other parts of the mid- and south Atlantic, in the eastern Gulf of Mexico, and in waters off Alaska. At the same time, he declared off-limits the waters off the West Coast and in Alaska's Bristol Bay, canceled four scheduled lease sales in Alaska and called for more study before allowing new lease sales in the Chukchi and Beaufort seas.

What Interior Secretary Ken Salazar called "a new direction" in energy policy amounted to an offshore political gerrymander in which the administration barred drilling near states where it remains unpopular -- California and New Jersey -- and allowed it in places where it has significant support, such as Virginia and parts of Alaska and the Southeast.

Some conservative critics questioned whether the policy will have any real impact on energy production, while liberals decried the risks to the environment. But the White House's key audience -- undecided senators who will determine whether a climate bill succeeds on Capitol Hill this year -- suggested that the move had helped revive the legislation's prospects.

A string of senators, including Alaska's Mark Begich (D) and Lisa Murkowski (R), Louisiana's Mary Landrieu (D), New Hampshire's Judd Gregg (R), and Virginia Democrats Mark Warner and James Webb, praised the strategy. They have urged the administration to use a climate bill to help boost domestic energy production, through expansion of oil and gas drilling and nuclear power, and Begich and Gregg said Wednesday's announcement made them more optimistic about a deal on the bill than they have been in months.

Noting that Obama has also offered recent support for more nuclear production, Gregg said such moves show that the administration is "genuinely trying to approach the energy production issue in a multifaceted way and a realistic way, rather than listening to people on their left."

Landrieu concurred, saying that Obama is "sending as clear a signal as possible that he is willing to compromise in a way that will bring forth a great energy and climate bill, and he wants Republicans to be a part of it."

But coastal lawmakers such as Democratic Sens. Benjamin L. Cardin and Barbara A. Mikulski of Maryland joined environmentalists in blasting the change as unnecessary, and said it could jeopardize fisheries and tourist attractions.

New Dem Theme For November: "On health-care reform, on student loans and (soon) on financial regulations, Democrats fought off the moneyed interests in defense of the little guy"

Dana Millbank:

... it was a chance for the president, just back from the political dead, to test some themes for this fall's midterm campaigns.

"This day affirms our ability to overcome the challenges of our politics and meet the challenges of our time," Obama, in triumphant mode, told the NoVa audience. "When I took office, one of the questions we needed to answer was whether it was still possible to make government responsive to the needs of everyday people . . . or whether the special interests and their lobbyists would continue to hold sway." Obama, on the basis of "two major victories in one week," felt confident enough to claim success.

The president's celebration may be premature. A USA Today/Gallup poll out Tuesday found that nearly two-thirds of Americans think the health-care law costs too much and expands the government's role too much. Although other polls have shown a jump in Obama's popularity, Gallup found that Obama's disapproval rating climbed to 50 percent for the first time.

But there is no doubt that the conventional wisdom in the capital has done a 180 in recent days. Had Obama failed on health-care reform, the end of his presidency would have been proclaimed. Instead, he has been restored as ruler of all he surveys, and he's acting as such.

Over the weekend, he dashed off to Afghanistan for an unscheduled visit; on his return, he lectured Hamid Karzai, suggesting on the "Today" show that the Afghan president heed "the fierce urgency of now" -- a Martin Luther King Jr. phrase adopted by Obama's presidential campaign. At home, Obama has taken on an increasingly confident tone, telling those who would repeal the health-care law to "go for it," the way George W. Bush said of Iraqi insurgents: "Bring 'em on."

Obama's approval rating at NoVa on Tuesday was undoubtedly higher than it was in the Gallup poll. In the front row was his new ally Dennis Kucinich (Ohio), a far-left congressman who was posing for pictures with admirers. About two dozen lawmakers, including Sen. Al Franken (D-Minn.) and Rep. Charlie Rangel (D-N.Y.), filled the first two rows. The students, nearly equaled in number by congressional staffers and interest group activists, gave House Speaker Nancy Pelosi (D-Calif.) a thunderous ovation when she took the stage. The crowd even applauded the man who came out to make sure the teleprompter was working ...

The president spared few words for the health-care component of the bill, devoting more than 10 times as much to an add-on provision: the student loan change that is supposed to save billions by cutting out banks as the middlemen.

Obama portrayed the change as the culmination of an epic struggle, "for almost two decades" and against an "army" of lobbyists. "I didn't stand with the banks and the financial industries in this fight," he said, auditioning the populist message that he and Democrats hope to take to voters in November. "Neither did any of the members of Congress who are here today. We stood with you."

What emerged on Tuesday was a single, coherent theme: on health-care reform, on student loans and (soon) on financial regulations, Democrats fought off the moneyed interests in defense of the little guy.

"From the moment I was sworn into office, I've spoken about the urgent need for us to lay a new foundation for our economy and for our future," Obama said. Now, "we can rightly say the foundation on which America's future will be built is stronger than it was one year ago."

The Fight To Shape U.S. Health Care Enters New "Blunt It" Phase

The Wall St Journal reports the fight is, far from being over, just beginning:

The U.S. Chamber of Commerce is planning a broad effort to blunt the health overhaul by trying to shape its regulatory language and spending heavily to unseat vulnerable Democrats who voted for it.

The campaign is the latest example of the escalating tensions between proponents of the health overhaul and big businesses, which have become more specific in their criticisms of the new law ...

In a letter to board members Monday, chamber president and chief executive Thomas J. Donohue said the business lobby will seek changes to regulations to "minimize the potentially harmful impacts of this bill on our members and the country." If regulators "exceed legislative mandates or try for end-runs around the lawful rule-making process," he wrote, the chamber "will take legal action."

Mr. Donohue also said the group planned to spend $50 million this summer and fall to ensure that voters in pivotal House and Senate races know where lawmakers stand on health and other big issues. The chamber spent $36.4 million in the 2008 election.

At the heart of the effort will be a team of chamber staff that will "participate in the years-long process of writing the thousands of pages of federal regulations that will implement the many provisions of this legislation," Mr. Donohue wrote.

While the chamber can't actually write those provisions, it can lobby for certain language and technical corrections.

Other major lobbies are readying similar efforts. Although the legislation contains more than 2,000 pages of provisions, many details are left to the secretary of the U.S. Department of Health and Human Services to define, and will require more specific regulatory language.

America's Health Insurance Plans, the insurance industry's main lobbying group, has formed a task force to coordinate its implementation efforts and plans to give its input as officials draw up the regulations.

The American Medical Association, which represents doctors, hopes to shape provisions including a new panel to impose Medicare payment cuts, as well as increased research comparing the effectiveness of medical treatments, according to a spokeswoman for the group.

Major groups that supported the bill also plan to spend heavily on the 2010 elections. The AFL-CIO labor organization plans to surpass the $53 million it spent during the 2008 elections in this year's fall races.

Meanwhile, Families USA, a liberal advocacy group, has teamed with insurers to launch an educational campaign that will help people sign up for insurance at places like doctors' offices and pharmacies.

Insurers Cave & Agree To Cover Kid's Pre-Existing Conditions

Instructive what a little spine can do, no? From the NY Times:

Under pressure from the White House, health insurance companies said Tuesday that they would comply with rules to be issued soon by the Obama administration requiring them to cover children with pre-existing medical problems.

“Health plans recognize the significant hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition,” said Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group. Accordingly, she said, “we await and will fully comply with” the rules.

Ms. Ignagni made the commitment in a letter to Kathleen Sebelius, the secretary of health and human services, who had said she feared that some insurers might exploit a possible ambiguity in the new health care law to deny coverage to some sick children.

The White House immediately claimed victory.

In a Twitter message, Robert Gibbs, the White House press secretary, scored the tug of war as “Kids 1, insurance 0.”

Major provisions of the law take effect in 2014. Some, including a ban on “pre-existing condition exclusions” for children under 19, take effect in September. The law does not explicitly say that insurers must sell insurance to families with such children this year, but Democratic Congressional leaders and White House officials said that was their intent.

To eliminate any ambiguity, Ms. Sebelius said, she will issue rules defining the scope of the new law.

Under these rules, Ms. Sebelius said, “children with pre-existing conditions may not be denied access to their parents’ health insurance plan,” and “insurance companies will no longer be allowed to insure a child but exclude treatments for that child’s pre-existing condition.”

In response to a question, Nick Papas, a spokesman for the Department of Health and Human Services, said the rules would require insurers to offer coverage to children with pre-existing conditions, including those who have never had health insurance.

Ms. Sebelius said she was pleased that “insurance companies plan to do the right thing.”

It was not immediately clear whether the rules would allow insurers to charge higher premiums to families with children with pre-existing conditions. Administration officials said they would be monitoring any rate increases.

Some Democrats in Congress want Mr. Obama to take a tough line. If insurers could raise premiums without limits, they would, in effect, be denying coverage, Democrats say.

Obama To Open Vast Off-Shore Tracts To Oil Drilling

NY Times:

The Obama administration is proposing to open vast expanses of water along the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska to oil and natural gas drilling, much of it for the first time, officials said Tuesday.

The proposal — a compromise that will please oil companies and domestic drilling advocates but anger some residents of affected states and many environmental organizations — would end a longstanding moratorium on oil exploration along the East Coast from the northern tip of Delaware to the central coast of Florida, covering 167 million acres of ocean.

Under the plan, the coastline from New Jersey northward would remain closed to all oil and gas activity. So would the Pacific Coast, from Mexico to the Canadian border.

The environmentally sensitive Bristol Bay in southwestern Alaska would be protected and no drilling would be allowed under the plan, officials said. But large tracts in the Chukchi Sea and Beaufort Sea in the Arctic Ocean north of Alaska — nearly 130 million acres — would be eligible for exploration and drilling after extensive studies.

The proposal is to be announced by President Obama and Interior Secretary Ken Salazar at Andrews Air Force Base in Maryland on Wednesday, but administration officials agreed to preview the details on the condition that they not be identified.

The proposal is intended to reduce dependence on oil imports, generate revenue from the sale of offshore leases and help win political support for comprehensive energy and climate legislation.

But while Mr. Obama has staked out middle ground on other environmental matters — supporting nuclear power, for example — the sheer breadth of the offshore drilling decision will take some of his supporters aback. And it is no sure thing that it will win support for a climate bill from undecided senators close to the oil industry, like Lisa Murkowski, Republican of Alaska, or Mary L. Landrieu, Democrat of Louisiana.

The Senate is expected to take up a climate bill in the next few weeks — the last chance to enact such legislation before midterm election concerns take over. Mr. Obama and his allies in the Senate have already made significant concessions on coal and nuclear power to try to win votes from Republicans and moderate Democrats. The new plan now grants one of the biggest items on the oil industry’s wish list — access to vast areas of the Outer Continental Shelf for drilling.

"Sebelius to insurers: Make my day"

Ezra Klein:

The health-care story of the day is that insurers think they've found a way to get around getting around Congress's intent to ban preexisting condition discrimination for children. Details here. This afternoon, Secretary of Health and Human Services Kathleen Sebelius sent a letter (pdf) to Karen Ignagni, head of the insurers trade association, saying, essentially, are you sure you want to try this?

In the letter, Sebelius says that she will issue regulations clarifying that the law says children cannot be denied access to their parents' plan and that the plan cannot exclude coverage for their preexisting conditions. "I urge you to share this information with your members," Sebelius says, "and to help ensure they cease any attempt to deny coverage to some of the youngest and most vulnerable Americans."

The politics -- and policy -- of this fight will be interesting. For the Republicans, this is a good issue in that it makes the bill look shoddily written. "If they can’t get these two things right," Sen. Mitch McConnell asked in his weekly radio address, "how can we expect them to properly manage the rest of it?"

Oddly, this is also a good issue for the Democrats. Why? Well, it lets them pick a fight with insurers who are trying to deny health-care coverage to sick little kids. Ignagni might as well kick an endangered puppy-panda hybrid in the face. On national television. While rooting for Duke to win the NCAA tournament.

The losers here are actually the insurers. As far as I can tell, their reading of the law is legitimate. And they have a lot to lose from a fight with the administration. It's not obvious that Sebelius actually can change this with a stroke of her pen, but there are plenty of other things she can do with a stroke of her pen that will make the insurance industry's life very, very difficult. And since this policy actually isn't a very big deal -- fairly few kids are uninsured because their preexisting conditions are keeping them off their parents' plan -- I'd guess that the administration and the insurers reach some sort of accord on this.

Ezra was right. The insurers quickly caved.

Special Corporate Interests Bemoan The Loss Of Their Lobbyist Given Tax Breaks

Poor, poor corporate giants. The favored megacorps are decrying the loss of a special tax break that they get on top of a subsidy and is available only to them, according to the NY Times:

An association representing 300 large corporations urged President Obama and Congress on Monday to repeal a provision of the health care overhaul that prompted AT&T, Caterpillar and other companies to announce substantial charges for the current quarter.

The association, the American Benefits Council, said the provision — which reduces the tax deductions for companies with drug coverage for their retired employees — would deal a significant blow to corporate profits and would discourage companies from hiring more workers.

AT&T announced last week that it was taking a $1 billion charge because of the provision. Deere & Company announced a $150 million charge, Caterpillar a $100 million charge, and 3M a $90 million charge.

Many companies said they were taking these charges now, before the current quarter ended, to comply with accounting rules. But some corporate critics asserted that the companies’ rapid response to the health legislation was aimed at pressing the administration to repeal the provision.

James A. Klein, the president of the American Benefits Council, called the provision “a serious mistake that is having negative and unintended consequences.”

White House officials defended the provision, saying it was a deliberate effort to eliminate what they said was an unusually generous tax loophole.

They said the overall health care overhaul would save businesses more than $150 billion over the next decade by reducing health care inflation.

“We’re confident that the benefits are going to accrue and strengthen business’s bottom line,” said Linda Douglass, the communications director for the White House Health Reform Office.

When Congress and President George W. Bush enacted a prescription drug plan for seniors in 2003, the legislation encouraged companies to continue providing prescription coverage to retirees, instead of shifting retirees to Medicare Part D, by having the government give those companies large subsidies for each retiree — and also allowing them to deduct those subsidies from their income taxes.

Under the health care overhaul, the federal government will continue providing those subsidies — amounting to 28 percent of a drug plan’s costs — but companies will lose the tax break.

In a telephone news conference on Monday, Mr. Klein cited a study by Towers Watson, a consulting firm, saying the loss of the deduction would cost companies $14 billion in future years.

“Particularly in this economic environment, it makes no sense to impose this type of a hit on companies’ financial statements,” Mr. Klein said. The provision takes effect in 2013, but accounting rules require companies to take immediate charges equal to the current value of any known hit to future profits.

Defending the provision, White House officials said it was rare for companies to obtain a tax-free federal subsidy and be able to deduct it as well.

These officials added that the health care legislation contained a $5 billion subsidy for companies that maintain health plans to early retirees.

"The most promising cost control in the ... Act is the one that takes much of the responsibility for controlling costs away from Congress and hands it off to an independent board of experts"

Ezra Klein:

It is a sad commentary on Congress that the most promising cost control in the Affordable Care Act is the one that takes much of the responsibility for controlling costs away from Congress and hands it off to an independent board of experts. That board -- officially known as the Independent Payment Advisory Board -- has made it through to the final bill, and in substantially stronger form than I, for one, expected. The House had always been more skeptical of the idea, but then the Senate bill became everybody's bill and the energy on changing it shifted to the big-ticket items such as affordability and surviving reconciliation. The result was that a strong version of IPAB slipped through almost unnoticed.

The IPAB is a 15-person, full-time board composed of health-care experts and stakeholders. Members need to be confirmed by the Senate and will serve six-year terms, with one possible reappointment. But the important thing isn't who serves. It's how they vote. Or, as the case may be, don't vote.

If Congress approves the board's recommendations and the president signs them, they go into effect. If Congress does not vote on the board's recommendations, they still go into effect. If Congress votes against the board's recommendations but the president vetoes and Congress can't find the two-thirds necessary to overturn the veto, the recommendations go into effect. It's only if Congress votes them down and the president agrees that the recommendations die. “I believe this commission is the largest yielding of sovereignty from the Congress since the creation of the Federal Reserve,” says Peter Orszag, who's been one of the idea's most enthusiastic supporters.

The board will propose packages of reforms that bring Medicare in line with certain spending targets. Those reforms won't increase cost sharing or taxes and they won't change eligibility or benefits. Instead, they're reforms of what Medicare pays for and how it pays for it. By 2018, the target growth rate is the average five-year increase in GDP plus one percentage point. So if GDP has been growing at 3 percent, the target is 4 percent. If Medicare's growth is faster than that, then the board is charged with saving the lesser of 1) the difference between the target growth rate and the real growth rate, or 2) 1.5 percentage points off the projected growth rate.

There are some weaknesses in the board. If Congress can find 60 votes, it can amend the board's recommendations without finding offsetting savings elsewhere. The board can't seriously change payment rates until 2018. And if Medicare is growing more slowly than the rest of the health-insurance market, then Congress can protect it from the board every other year (so it would have to save more money in, say, 2020, but not in 2021).

Nevertheless, this is the most powerful cost-cutting agency we've seen. For all those folks saying Congress can't stick to cuts, this is the closest thing to a solution that anyone's come up with. It gives Congress a way to let someone else take on the hard decisions that it doesn't have the expertise or political will to make. If Congress so chooses, it could let the IPAB do its work without ever bringing the recommendations up for a vote: They'd still go into effect, and no one would be on the record in either direction.

As a commentary on Congress, is all this a bit sad, and even weird? Yes. But it may also be necessary. And it will be interesting to see how it interacts with the private market: You could see the reforms that get seeded into Medicare being adopted by everyone else (which is common even now). And if Medicare does bring its costs far down while private insurance finds itself unable to make meaningful changes, pressure could increase for some sort of Medicare buy-in program along the lines of what Alan Grayson is proposing.

The bottom line is that IPAB creates a continuous system for controlling costs in Medicare and trying out new reforms and experiments. For all those disappointed by Congress's fecklessness when it came to cost controls in the Affordable Care Act, know that Congress actually agrees with you, and is trying to do something about it. Or at least let someone else do something about it.

Some Insurers Are Trying To Weasel Out Of Covering Children With Pre-Exsiting Conditions

NY Times:

Just days after President Obama signed the new health care law, insurance companies are already arguing that, at least for now, they do not have to provide one of the benefits that the president calls a centerpiece of the law: coverage for certain children with pre-existing conditions.

Mr. Obama, speaking at a health care rally in northern Virginia on March 19, said, “Starting this year, insurance companies will be banned forever from denying coverage to children with pre-existing conditions.”

The authors of the law say they meant to ban all forms of discrimination against children with pre-existing conditions like asthma, diabetes, birth defects, orthopedic problems, leukemia, cystic fibrosis and sickle cell disease. The goal, they say, was to provide those youngsters with access to insurance and to a full range of benefits once they are in a health plan.

To insurance companies, the language of the law is not so clear.

Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the “availability of coverage” for all until 2014.

William G. Schiffbauer, a lawyer whose clients include employers and insurance companies, said: “The fine print differs from the larger political message. If a company sells insurance, it will have to cover pre-existing conditions for children covered by the policy. But it does not have to sell to somebody with a pre-existing condition. And the insurer could increase premiums to cover the additional cost.”

Congressional Democrats were furious when they learned that some insurers disagreed with their interpretation of the law.

“The concept that insurance companies would even seek to deny children coverage exemplifies why we fought for this reform,” said Representative Henry A. Waxman, Democrat of California and chairman of the Energy and Commerce Committee.

Senator John D. Rockefeller IV, Democrat of West Virginia and chairman of the Senate commerce committee, said: “The ink has not yet dried on the health care reform bill, and already some deplorable health insurance companies are trying to duck away from covering children with pre-existing conditions. This is outrageous.”

The issue is one of many that federal officials are tackling as they prepare to carry out the law, with a huge stream of new rules, official guidance and brochures to educate the public. Their decisions will have major practical implications.

Insurers say they often limit coverage of pre-existing conditions under policies sold in the individual insurance market. Thus, for example, an insurer might cover a family of four, including a child with a heart defect, but exclude treatment of that condition from the policy.

The new law says that health plans and insurers offering individual or group coverage “may not impose any pre-existing condition exclusion with respect to such plan or coverage” for children under 19, starting in “plan years” that begin on or after Sept. 23, 2010.

But, insurers say, until 2014, the law does not require them to write insurance at all for the child or the family. In the language of insurance, the law does not include a “guaranteed issue” requirement before then.

Consumer advocates worry that instead of refusing to cover treatment for a specific pre-existing condition, an insurer might simply deny coverage for the child or the family.

“If you have a sick kid, the individual insurance market will continue to be a scary place,” said Karen L. Pollitz, a research professor at the Health Policy Institute at Georgetown University.

Experts at the National Association of Insurance Commissioners share that concern.

“I would like to see the kids covered,” said Sandy Praeger, the insurance commissioner of Kansas. “But without guaranteed issue of insurance, I am not sure companies will be required to take children under 19.”

A White House spokesman said the administration planned to issue regulations setting forth its view that “the term ‘pre-existing’ applies to both a child’s access to a plan and his or her benefits once he or she is in a plan.” But lawyers said the rules could be challenged in court if they went beyond the law or were inconsistent with it.

The Next Big Democractic Push: Financial Reform

Noam Scheiber on the big next Democratic push Obama has planned and how it could play to their electoral advantage in November:

Pretty much no one who follows the regulatory reform issue can quite believe the sudden change. In the span of a few days, reform has evolved from one of those debates newspaper editorialists have among themselves to Washington’s NEXT BIG PUSH. Clearly much of this derives from the parties’ changing fortunes, as Democrats bask in the glory of their health care victory and Republicans suddenly lack self-esteem. Indeed, try to recall the last time a GOP senator lacerated his party for blowing a chance at bipartisanship, as Tennessee Senator Bob Corker did on reg reform this week, and you begin to understand how far we’ve come.

The key shift is arguably the one that’s taken place at the White House. Prior to late last week, it wasn’t entirely clear whether the White House actually wanted a bill this year, or whether it simply wanted to bloody Republicans over their opposition to reform. But, as health care began to look like a fait accompli, the White House seemed to subtly change its posture. One administration official says it wasn’t so much that the White House was ambivalent, as that it was massively preoccupied with health care--and that it wasn’t sure until recently that a solid bill was achievable. “We didn’t want to do the thing … where you cut a deal here and there with every special interest available,” says the official. Whatever the case, the shift was as palpable as it was significant: Another official was impressed that the president delivered a radio address about reforming Wall Street last Saturday, the day before the most historic health care vote in 45 years.

... on Wednesday, Obama told Dodd and his House counterpart, Barney Frank, that he could more or less live with either version, according to an official knowledgeable about the meeting. (Though he stressed that he’d like to combine the toughest elements of both, as with an exemption from derivatives regulation for non-financial companies, which is stricter in Dodd’s bill.) Mostly, he just encouraged them to press ahead, emphasizing the win-win dynamic at work. If Republicans dig in, the president argued, that’s a fight he’d welcome. (Administration officials have seen polling suggesting the public will assume Republicans are carrying Wall Street’s water, regardless of their arguments.) And if Republicans want to join in the effort to rein in Wall Street—well, no one at the White House would turn down a big, bipartisan victory. 

The Health Legislation "is an incremental bill with a comprehensive vision tucked inside ... the work of realizing that vision starts now. "

Ezra Klein:

As someone who has spent the past year tangled in the minutia of excise taxes and curve bending and subsidy levels, it is good to finally say this: With the passage of the reconciliation fixes, the health-care reform debate is finally over. But if you're thrilled to hear that, then I also have some bad news: Health-care reform itself is just beginning.

This bill marks an evolution, not a revolution, for our health-care system. Whether it proves the cornerstone of a better, fairer, more affordable system or simply another expansion of the federal welfare state has as much to do with what happens when the law is implemented as with what's written in the legislation.

The system will not change in a year. Even by 2014, when it is broadly implemented, life will not change for most people. This is not single-payer (though you wouldn't know it listening to the GOP) or the ambitious Wyden-Bennett reforms. Come 2019, about 10 percent of Americans will have a different insurance arrangement than they would have had without the bill. Most of us won't notice any difference.

But right around then, the system could go one of two ways. The key is the regulated insurance exchanges. They are where the bill's most transformative reforms happen: Risk-adjustment payments so insurers aren't penalized for having sicker customers, regulations so they can't discriminate based on pre-existing conditions, and transparency requirements so individuals can see the full cost of insurance plans and compare them based on quality and satisfaction measures.

Under New Law, States That Provided More Health Care (Ma, Wi) Will Do Much Better Than Those That Didn't (Tx, Az, Al)

It pays to be ahead of the curve and have done the right thing. States that already provide an extensive health care safety net will have to do less to bring all the new uninsured into the system than the generally GOP states that did not. NY Times:

Because of the new health care law, Arizona lawmakers must now find a way to maintain insurance coverage for 350,000 children and adults that they slashed just last week to help close a $2.6 billion budget deficit.

Louisiana officials say a reduction in federal money to hospitals that treat the uninsured under the bill could be a death knell for their state-run charity hospital system.

In California, policymakers estimate they will have to come up with an additional $500 million a year to make necessary increases in payments to Medicaid providers.

Across the country, state officials are wading through the minutiae of the health care overhaul to understand just how their governments will be affected. Even with much still to be digested, it is clear the law may be as much of a burden to some state budgets as it is a boon to uninsured consumers.

States with the largest uninsured populations, like Texas and California, might be considered by its backers the biggest winners to emerge from the law, because so many additional residents will have access to health insurance. But because those states are being required to significantly expand their Medicaid programs, they are precisely the ones that will face the biggest financial strains, in many cases magnified by existing budget shortfalls.

“The federal government has to account for states’ inability to sustain our current programs, much less expand,” said Kim Belshé, secretary of California’s Health and Human Services Agency.

In contrast, states like Massachusetts and Wisconsin, which already have extensive health care safety nets, do not expect to spend much more money, while still taking in billions in federal grants.

In Massachusetts, for example, which already has a form of universal coverage, the federal government will wind up taking over from the state a significantly larger share of the costs of Medicaid coverage for adults without children, officials said.

“On balance, it’s definitely a gain,” said JudyAnn Bigby, secretary of the Massachusetts Office of Health and Human Services.

Supporters of the new law have argued that states will benefit from efforts to slow health care inflation and billions of dollars in new federal spending on subsidies for the uninsured and on an array of programs like community health centers.

But even with more federal help, the challenge for states like Alabama, Arkansas and Texas that now offer only limited Medicaid coverage will be substantial. In these states, Medicaid has been mostly restricted to low-income families with children, pregnant women, certain people with disabilities and some elderly. The income cutoffs have also been extremely low.

Google Stands Up To China (cartoon)

 

Historic Overhaul Of Higher Ed Aid Also Becomes Law Of The Land

NY Times:

Ending one of the fiercest lobbying fights in Washington, Congress voted Thursday to force commercial banks out of the federal student loan market, cutting off billions of dollars in profits in a sweeping restructuring of financial-aid programs and redirecting most of the money to new education initiatives.

The revamping of student-loan programs was included in — if overshadowed by — the final health care package. The vote was 56 to 43 in the Senate and 220 to 207 in the House, with Republicans unanimously opposed in both chambers.

Since the bank-based loan program began in 1965, commercial banks like Sallie Mae and Nelnet have received guaranteed federal subsidies to lend money to students, with the government assuming nearly all the risk. Democrats have long denounced the program, saying it fattened the bottom line for banks at the expense of students and taxpayers.

“Why are we paying people to lend the government’s money and then the government guarantees the loan and the government takes back the loan?” said Representative George Miller, Democrat of California and chairman of the Education and Labor Committee.

Democrats celebrated the legislation, a centerpiece of President Obama’s education agenda, as a far-reaching overhaul of federal financial aid, providing a huge infusion of money to the Pell grant program and offering new help to lower-income graduates in getting out from under crushing student debt. Still, the final bill is less ambitious than the original proposal.

Congressional allies of the student-loan industry attacked the overhaul as an overreaching government takeover. The legislation substitutes an expanded direct-lending program by the government for the bank-based program, directing $36 billion over 10 years to Pell grants, for students from low-income families ...

Even as the Democrats’ decision to attach the student-loan overhaul to the health care package virtually ensured its passage, banks fought fiercely up to the last minute, prompting some lawmakers, like Senator Ben Nelson, Democrat of Nebraska, where Nelnet has its headquarters, to cast their vote against the overall bill.

Although private banks will no longer be allowed to make student loans with federal money, many will continue to earn income by servicing those loans.

The Congressional Budget Office said the direct-lending approach would save taxpayers about $61 billion over 10 years. Roughly $40 billion of the savings will be redirected to higher education. Education programs will get an additional $10 billion from the health care package.

The bill includes some landmark changes, like automatic increases, tied to inflation, in the maximum Pell grant award. But for individual students, the increase in the maximum Pell grant — to $5,900 in 2019-20 from $5,550 for the 2010-11 school year — is minuscule, compared with the steep, inexorable rise in tuition for public and private colleges alike.

And because college costs are rising so quickly, the maximum Pell grant now covers only about a third of the average cost of attending a public university, compared with three-quarters in the 1970s, when the program began. So each year, more students graduate with debt of more than $20,000.

The legislation will make it easier to pay back student loans, by reducing the share of income that a graduate must devote to loan payments and by accelerating loan forgiveness — but not right away. Those who take out new loans after July 1, 2014, will have to devote 10 percent of their income to payments, down from the current 15 percent, and those who keep up their payments will have their loans forgiven after 20 years, reduced from the current 25.

“Income-based repayment is a fantastic addition to the Senate bill that will allow over a million students to avoid being crushed by unmanageable levels of debt,” said Rich Williams, a higher-education advocate at the U.S. Public Interest Research Group.

With the new legislation, students will have to take out their loans through their college’s financial aid office, instead of using a private bank.

Cap & Trade Is Dead. Long Live Cap & Dividend!

NY Times:

Less than a year ago, cap and trade was the policy of choice for tackling climate change.

Environmental groups and their foes in industry joined hands to embrace the approach, a market-driven system that sets a ceiling on global warming pollution while allowing companies to trade permits to meet it. President Obama praised it by name in his first budget, and the authors of the House climate and energy bill passed last June largely built their measure around it.

Today, the concept is in wide disrepute, with opponents effectively branding it “cap and tax,” and Tea Party followers using it as a symbol of much of what they say is wrong with Washington.

Mr. Obama dropped all mention of cap and trade from his current budget. And the sponsors of a Senate climate bill likely to be introduced in April, now that Congress is moving past health care, dare not speak its name.

“I don’t know what ‘cap and trade’ means,” Senator John F. Kerry, Democrat of Massachusetts, said last fall in introducing his original climate change plan.

Mr. Kerry’s partner in promoting global warming legislation, Senator Lindsey Graham, Republican of South Carolina, pronounced economywide cap and trade dead last month and has since been working with Mr. Kerry to try to patch together a bill that satisfies the diverse economic, regional and ideological interests of the Senate.

That plan, still being written, will include a cap on greenhouse gas emissions only for utilities, at least at first, with other industries phased in perhaps years later. It is also said to include a modest tax on gasoline, diesel fuel and aviation fuel, accompanied by new incentives for oil and gas drilling, nuclear power plant construction, carbon capture and storage, and renewable energy sources like wind and solar.

Why did cap and trade die? The short answer is that it was done in by the weak economy, the Wall Street meltdown, determined industry opposition and its own complexity ...

Two senators, Maria Cantwell, Democrat of Washington, and Susan Collins, Republican of Maine, have proposed an alternative that they call cap and dividend, under which licenses to pollute would be auctioned to producers and wholesalers of fossil fuels, with three-quarters of the revenue returned to consumers in monthly checks to cover their higher energy costs.

Ms. Cantwell said that cap and trade had been discredited by the Wall Street crisis, the Enron scandal and the rocky start to a carbon credits trading system in Europe that has been subject to dizzying price fluctuations and widespread fraud.

She said her bill would require every pollution permit to be auctioned rather than given away and was 39 pages long, compared with Waxman-Markey, which weighs in at some 1,400 pages.

The Cantwell-Collins plan is almost exactly what Mr. Obama proposed in the campaign and after first taking office — a 100 percent auction of permits and a large tax rebate to the public.

“He called our bill ‘very elegant,’ ” Ms. Cantwell said. “Simplicity and having something people can understand is important.”

New Health Law Reverses Trend Of Increasing Inequality In America Begun By Reagan

A fascinating column by David Leonhardt discussing the little noted but powerful impact the new health law will have on reversing the trend Reagan started of increasing inequality in America. He concludes with a nearly independent essay on how Reagan-like Obama is (remember that brouhaha during the campaign when he suggested he was?):

For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

Nearly every major aspect of the health bill pushes in the other direction. This fact helps explain why Mr. Obama was willing to spend so much political capital on the issue, even though it did not appear to be his top priority as a presidential candidate. Beyond the health reform’s effect on the medical system, it is the centerpiece of his deliberate effort to end what historians have called the age of Reagan.

Speaking to an ebullient audience of Democratic legislators and White House aides at the bill-signing ceremony on Tuesday, Mr. Obama claimed that health reform would “mark a new season in America.” He added, “We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their health care.”

The bill is the most sweeping piece of federal legislation since Medicare was passed in 1965. It aims to smooth out one of the roughest edges in American society — the inability of many people to afford medical care after they lose a job or get sick. And it would do so in large measure by taxing the rich.

A big chunk of the money to pay for the bill comes from lifting payroll taxes on households making more than $250,000. On average, the annual tax bill for households making more than $1 million a year will rise by $46,000 in 2013, according to the Tax Policy Center, a Washington research group. Another major piece of financing would cut Medicare subsidies for private insurers, ultimately affecting their executives and shareholders.

The benefits, meanwhile, flow mostly to households making less than four times the poverty level — $88,200 for a family of four people. Those without insurance in this group will become eligible to receive subsidies or to join Medicaid. (Many of the poor are already covered by Medicaid.) Insurance costs are also likely to drop for higher-income workers at small companies.

Finally, the bill will also reduce a different kind of inequality. In the broadest sense, insurance is meant to spread the costs of an individual’s misfortune — illness, death, fire, flood — across society. Since the late 1970s, though, the share of Americans with health insurance has shrunk. As a result, the gap between the economic well-being of the sick and the healthy has been growing, at virtually every level of the income distribution.

The health reform bill will reverse that trend. By 2019, 95 percent of people are projected to be covered, up from 85 percent today (and about 90 percent in the late 1970s). Even affluent families ineligible for subsidies will benefit if they lose their insurance, by being able to buy a plan that can no longer charge more for pre-existing conditions. In effect, healthy families will be picking up most of the bill — and their insurance will be somewhat more expensive than it otherwise would have been.

Much about health reform remains unknown. Maybe it will deliver Congress to the Republicans this fall, or maybe it will help the Democrats keep power. Maybe the bill’s attempts to hold down the recent growth of medical costs will prove a big success, or maybe the results will be modest and inadequate. But the ways in which the bill attacks the inequality of the Reagan era — whether you love them or hate them — will probably be around for a long time.

“Legislative majorities come and go,” David Frum, a former speechwriter for President George W. Bush, lamented on Sunday. “This health care bill is forever.”

•

Since Mr. Obama began his presidential campaign in 2007, he has had a complicated relationship with the Reagan legacy. He has been more willing than many other Democrats to praise President Reagan. “Reagan’s central insight — that the liberal welfare state had grown complacent and overly bureaucratic,” Mr. Obama wrote in his second book, “contained a good deal of truth.” Most notably, he praised Mr. Reagan as a president who “changed the trajectory of America.”

Would You Spend 4% To Get Close To 100%?

Ezra Klein provides a great service by putting what admittedly look like eye-popping cost numbers into perspective:

We should start by putting the health-care bill into proper perspective. Opponents and supports of the bill have both profited immensely from exploiting the average person's inability to put billions and trillions into context. So let's begin by breaking down the numbers. The $900 billion price tag is repeated with the regularity of a rooster's crow. That's a shame, as the number is, somewhat impressively, misleading in both directions.

On the one hand, that $900 billion -- or, more precisely, $940 billion in the final legislation -- is stretched over 10 years. But people don't think in 10-year increments. They don't pay taxes once a decade. Put more simply, the bill will cost an average of $94 billion a year over the first 10 years.

But that's not quite right either: The bill wouldn't really kick in until 2014. To get a more accurate annual figure, look at a year in which the bill is fully operational. In, say, 2016, the bill's spending will be about $160 billion (you can find these numbers on page 22 of the CBO report). According to the Center for Medicare and Medicaid Services, total health-care spending that year will be about $3.7 trillion. In other words, the bill's spending is equivalent to about 4 percent of what we'll spend in health care in a year, and it will be covering 30 million people.

So that's really what we're talking about here -- a large health-care expansion that's a slight fraction of overall spending. The graph on the right tells the tale (though the $175 billion refers to the Senate bill; the reconciliation fixes increase the 2018 spending to about $200 billion, which is no different for the purposes of the image).

Let's go even further: It's an expansion that most people won't notice in 10 years. According to the Congressional Budget Office, the Senate bill will change the insurance of about 40 million people by 2019, about 30 million of whom would have been otherwise uninsured. The other 10 million will come from the employer or individual markets in search of more affordable options. About 23 million people will still be uninsured, many of them illegal immigrants. About 90 percent of Americans will be exactly where they'd be if this reform had never passed.

Today's Health Care Cartoons

What Benefits Take Effect When?

Wall St Journal:

After years of debate, a health overhaul is finally becoming a reality. Now what?

Many big provisions don't kick in until 2014, including the mandate for most folks to have health insurance and many new requirements for health-plan designs. Before then, you'll see a mishmash of other things go into effect at various times—and of course some of the changes depend on the Senate passing the House's so-called sidecar, or reconciliation, bill of changes.

Here are some ways you can start dealing with the new health-care landscape: <Continue reading.>

Read the NY Times' analysis.

Details Of The Health Subsidies For The Lower Middle Class Become Clear

Wash Post:

The final health-care legislation that House Democrats are striving to pass this weekend would give about 19 million Americans subsidies averaging $6,000 to help pay premiums and other insurance charges, an unprecedented government investment in private health policies that leaves lingering questions about whether coverage would truly become affordable.

The details of the subsidies, which emerged in the past day, provide the clearest picture yet on a central question that has hovered over the health-care debate since it began a year ago: How much help would the government give people to cope with the expense of medical insurance?

In the final version Democrats produced, the subsidies would be part of a two-prong approach by the government to extend coverage to the vast majority of people who are uninsured. That effort is predicted to cost nearly $800 billion, more than $4 of every $5 of the legislation's total cost.

The private insurance subsidies would begin in 2014 and be intended for people eligible to buy coverage through insurance exchanges that would be created the same year.

The money the government spends to subsidize private policies would eclipse that devoted to a historic expansion of Medicaid, according to House aides and congressional budget analysts. And the subsidies are tilted more toward lower-income Americans than the measures in the Senate's version of health-care legislation.

The large infusion of federal money into insurance coverage would address one of the twin goals that have been at the heart of every attempt to redesign the nation's health-care system for decades: making health care more accessible and slowing medical costs. As Congress approaches what Democrats on Capitol Hill and in the White House are heralding as the finale of a year-long debate, policy experts across the ideological spectrum differ over how well the legislation would succeed at either goal.

Even some proponents of the subsidies say that, generous as they are, their buying power could erode over time in an era of rapid medical inflation. Some critics say the Democrats' approach of creating state insurance exchanges would help some Americans, those who now look for insurance policies individually or in small groups, but provide fewer new purchasing alternatives to most Americans, who rely on coverage through their jobs.

Still, liberal groups eager for the health-care legislation to pass are heaping praise on the final version of the subsidies, released Thursday among a set of changes to the Senate bill. "This is a huge step in the direction of making coverage and care affordable," said Ron Pollack, executive director of Families USA, a left-leDaning consumer health lobby.

Specifically, the subsidies would come in two parts, both available on a sliding scale to Americans with incomes too high for Medicaid. That would span families of four with incomes from $29,000 to $88,000 and individuals with incomes from $14,000 to $43,000.

Arizona Fixes Its Budget Woes On The Backs Of 47k Poor Children

NY Times:

Arizona on Thursday became the first state to eliminate its Children’s Health Insurance Program when Gov. Jan Brewer signed an austere budget that will leave nearly 47,000 low-income children without coverage.

The Arizona budget is a vivid reflection of how the fiscal crisis afflicting state governments is cutting deeply into health care. The state also will roll back Medicaid coverage for childless adults in a move that is expected to eventually drop 310,000 people from the rolls.

State leaders said they were left with few choices because of a $2.6 billion projected shortfall next year. But hospital officials and advocates for low-income people said they were worried that emergency rooms would be overrun by patients who had few other options for care, and that children might suffer enduring developmental problems because of inadequate medical attention.

The cuts also mean the state will forgo hundreds of millions of dollars in federal matching aid, and could lose far more if Congress passes a health bill that requires states to maintain eligibility levels for the two programs.

Ms. Brewer, a Republican, has warned that more cuts will be needed if voters do not approve a referendum in May to raise the sales tax by a penny for three years, to 6.6 cents per dollar ...

The Republican-controlled Legislature passed the budget last week, based largely on a proposal from the governor that included deep cuts to both health care and education. With state revenues down a third since 2007, the $8.9 billion budget reduced spending by about $1.1 billion.

Three states, including Arizona, had in the last year capped enrollment in the Children’s Health Insurance Program, financed jointly by states and the federal government. But two of those states — California and Tennessee — quickly removed their caps, said Jocelyn Guyer, co-executive director of the Center for Children and Families at Georgetown University.

“They really are standing alone in cutting children off during the downturn,” Ms. Guyer said. “It’s going to have long-term consequences that will be there for kids long after Arizona’s budget situation gets better.”

Millions Spent On Ads To Sway Democrats On Health Care

NY Times:

The yearlong legislative fight over health care is drawing to a frenzied close as a multimillion-dollar wave of advertising that rivals the ferocity of a presidential campaign takes aim at about 40 House Democrats whose votes will help determine the fate of President Obama’s top domestic priority.

The coalition of groups opposing the legislation, led by the United States Chamber of Commerce, is singling out 27 Democrats who supported the health care bill last year and 13 who opposed it. The organizations have already spent $11 million this month focusing on these lawmakers, with more spending to come before an expected vote next weekend.

An alliance of groups supporting the health care plan, which works closely with the White House and Democratic leaders, had been spending far less and focusing on fewer districts. But after pharmaceutical companies made a $12 million investment for a final advertising push, spending by both sides for the first time is now nearly the same.

Not only are these swing Democrats being pummeled in the new spate of advertising — which could total $30 million before week’s end — but extensive efforts are under way in Congressional districts, where groups on both sides of the issue are using tactics similar to get-out-the-vote drives to urge constituents to contact their lawmakers. Mr. Obama is calling lawmakers, too, and on Monday is traveling to Ohio to open a weeklong campaign to close this act of the health care debate.

Representative James E. Clyburn of South Carolina, the No. 3 Democrat in the House, said Sunday on “Meet the Press” on NBC that he had yet to lock down enough votes to pass the bill. But he added: “We’ll be working it going into the week. I am also very confident that we’ll get this done.”

Several on-the-fence Democrats said they were scrambling to sort out their constituents’ views as the outside noise grows deafening.

For Fiscal Hawks, The ""risk of doing nothing" exceeds the risk of passing the bill"

Ron Brownstein:

... For fiscal hawks, [the above cost control elements of the Senate bill are] a powerful incentive for action. But equally compelling could be the price of inaction. If Obama's plan fails, as President Clinton's did, it's likely that no president will attempt to seriously expand coverage for many years. The independent Medicare actuary has projected that under current trends the number of uninsured will increase by 10 million, to about 57 million, by 2019. Providing uncompensated care to so many uninsured people would further strain physicians and hospitals -- and inflate premiums as those providers shift costs to their insured patients.

Some fiscal conservatives want to attack rising costs without expanding coverage. But that approach looks impractical, politically and economically. While Republicans controlled Congress after the 1994 election, they never built enough of a consensus to pass the cost-control ideas they are now pressing on Obama, such as medical malpractice reform. Meanwhile, Nichols warns that imposing meaningful cost control on hospitals without reducing the number of uninsured patients they must treat "would bankrupt many and strain most to the breaking point."

Weighing such factors, Nichols concludes that the "risk of doing nothing" exceeds the risk of passing the bill. In interviews, Emory University's Kenneth Thorpe and Stanford University's Alan Garber, two other leading health economists, guardedly echoed his conclusion. Both men believe that the current proposal could move faster to control costs. But both also agree that it contains valuable first steps and establishes what Garber calls "a good platform" for further reform. By contrast, Thorpe says, "under the do-nothing scenario, everything gets worse." For Democratic fiscal hawks uncertain that approving Obama's plan will cure what ails U.S. health care, the real question may be whether defeating it guarantees that the system's chronic afflictions will metastasize further.

"Most sweeping overhaul of financial regulations since the Depression" To Be Unveiled Monday

Talk about doubling down and standing by your principles. In light of all the drama and politics around the health care bill, it's great that Obama and the Dems are still pushing for dramatic changes to education (Obama Proposes Sweeping Changes To 'No Child Left Behind' Law) and, as reported by the  NY Times here, financial regulation (and in the latter, they're still willing to go the Democrat-only route to get what they want):

The chairman of the Senate Banking Committee will unveil on Monday a proposal to revamp the nation’s financial regulations that would empower shareholders to have advisory votes on executive pay and to nominate directors for the boards of public companies through company proxy ballots, several people briefed on the draft legislation said Saturday.

The shareholder provisions, which have been vigorously opposed by many corporations and by Republicans, will be part of a bill that would amount to the most sweeping overhaul of financial regulations since the Depression. In one of the most fiercely debated provisions, the bill would create a consumer financial protection agency under the umbrella of the Federal Reserve, a move certain to disappoint liberal Democrats who believe the Fed failed to safeguard consumers in the years leading up to the banking meltdown.

With no Republican support yet for the proposal, Democratic lawmakers and the White House have been gearing up for a potentially bitter partisan fight.

The impending proposal by the chairman, Christopher J. Dodd of Connecticut, hews in many ways to a proposal advanced last summer by the White House, the people briefed on the legislation said.

Mr. Dodd said Thursday that Democrats would proceed on their own after months of stop-and-start negotiations with Republicans over a bipartisan compromise yielded little progress.

As Senate aides worked through the weekend on drafting the legislation, key elements became clear, according to the people briefed on the negotiations, who spoke on the condition of anonymity because the situation was still fluid.

The consumer financial protection agency would have a director appointed by the president and the ability to write rules governing mortgages, credit cards, payday loans and a wide range of other financial products.<Continue reading.>

Though The Reasons Differ, Divided Congress Mirrors Divided American Public On Obama's Health Reform

From Gallup (read actual pollee comments):

As President Obama begins a final push on healthcare reform, slightly more Americans say they would advise their member of Congress to vote against rather than for a healthcare reform bill similar to the one the president has proposed.

These results, based on a new Gallup poll conducted March 4-7, confirm the generally divided nature of public opinion on healthcare legislation that Gallup has found in recent months. The high point in public support was 51% in October.

"Supporters of healthcare legislation commonly cite a moral imperative as a reason for their support."

President Obama has called for a final up-or-down vote on healthcare legislation, which has dominated the domestic agenda for much of his presidency. Most of the Republican leadership in Congress would prefer that Congress begin work on a new bill rather than try to pass Obama's proposal, which is based largely on a bill the Senate passed last year with no Republican support.

The poll finds that Americans who oppose passing a healthcare bill like the one Obama has proposed do so more because they disagree with that specific approach, rather than the efforts to reform healthcare more generally. Sixty-two percent of Americans who oppose the bill would prefer that Congress start over on new legislation, while 37% say Congress should not work on healthcare legislation at this time.

Reasons Behind Support or Opposition

The poll sought to assess why Americans support or oppose healthcare legislation similar to President Obama's by asking them to say in their own words why they hold the position they do. The actual verbatim responses for all poll respondents are shown here, allowing the interested reader to review in detail the actual words Americans use to discuss their positions on healthcare reform.

Supporters of healthcare legislation commonly cite a moral imperative as a reason for their support. The most frequent specific response -- mentioned by 29% of supporters -- is that people need health insurance and there are too many without it. Another 12% specifically cite a moral obligation to provide it. An additional 4% say it would help senior citizens and 3% say it would help the poor.

Beyond moral concerns, 18% of supporters say more generally that the healthcare system is broken and in need of repair. About one in five cite cost or affordability, including 12% who say costs are out of control and 10% who believe the legislation would make healthcare more affordable.

These views have not changed greatly since September, when Gallup last asked Americans to say why they supported healthcare legislation. At that time, slightly more said there were too many uninsured and slightly fewer cited a moral obligation to provide health insurance.

There has been greater change in opponents' stated reasons for wanting to defeat the president's proposed healthcare legislation. Now, 20% of opponents say it will raise insurance costs, up from 9% in September. Nineteen percent currently believe the legislation will not address the real problems in the system, up from 10% in September.

Fewer Americans today than last fall cite a lack of information about the details of the legislation or cite general concerns about "big government."

Goldman Sachs Investment Analysis Of Insurance Industry To Play Prominent Role In Health Care End Game

NY Times (read the Goldman Sachs report):

To bolster the case for a far-reaching overhaul of the health care system, the Obama administration is seizing on a new analysis by Goldman Sachs, the New York investment bank, recommending that investors buy shares in two big insurance companies, the UnitedHealth Group and Cigna, because insurance rates are up sharply and competition is down.

White House officials on Saturday said that the Goldman Sachs analysis would be a “centerpiece” of their closing argument in the push for major health care legislation. The president and Democratic Congressional leaders are hoping to win passage of the legislation before the Easter recess. Republicans remain fiercely opposed to the bill.

The Goldman Sachs analysis shows that while insurers can be aggressive in raising prices, they also walk away from clients because competition in the industry is so weak, the White House said. And officials will point to a finding that rate increases ran as high as 50 percent, with most in “the low- to mid-teens” — far higher than overall inflation.

The analysis could be a powerful weapon for the White House because it offers evidence that an overhaul of the health care system is needed not only to help cover the millions of uninsured but to prevent soaring health care expenses from undermining the coverage that the majority of Americans already have through employers.

Republicans, however, could also point to the analysis as bolstering their contention that Democrats should be focused more on controlling costs and less on broadly expanding coverage to the uninsured.

The research brief is largely based on a recent conference call with Steve Lewis, an industry expert with Willis, a major insurance broker.

In the call, Mr. Lewis noted that “price competition is down from a year ago” and explained that his clients — mostly midsize employers seeking to buy health coverage for their employees — were facing a tough market, in which insurance carriers are increasingly willing to abandon existing customers to improve their profit margins.

“We feel this is the most challenging environment for us and our clients in my 20 years in the business,” Mr. Lewis said, according to a transcript included in the Goldman brief. “Not only is price competition down from a year ago,” he added, “but trend or (health care) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.”

The report also indicated that employers are reducing benefit levels, in some cases by adding deductibles for prescription drug coverage in addition to co-payments, and raising other out-of-pocket costs for employees as a way of lowering the cost of insurance without increasing annual premiums and employee contributions to them.

Kathleen Sebelius, the secretary of health and human services, is expected to discuss the Goldman analysis on two Sunday television talk shows, “Meet the Press” on NBC and “This Week” on ABC ...

Living & Dead Presidents Advice Barack On The Consumer Financial Protection Agency

Funny or Die's Presidential Reunion from Will Ferrell

A Parable For Our Times (cartoon)

 
 

White House To Use Power Of Federal Purse To Drive Up Wages & Benefits

And  surprise, surpise, the GOP is opposed. NY Times:

The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

By altering how it awards $500 billion in contracts each year, the government would disqualify more companies with labor, environmental or other violations and give an edge to companies that offer better levels of pay, health coverage, pensions and other benefits, the officials said.

Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and lift more families into the middle class. It would affect contracts like those awarded to make Army uniforms, clean federal buildings and mow lawns at military bases.

Although the details are still being worked out, the outline of the plan is drawing fierce opposition from business groups and Republican lawmakers. They see it as a gift to organized labor and say it would drive up costs for the government in the face of a $1.3 trillion budget deficit.

“I’m suspicious of what the end goals are,” said Ben Brubeck, director of labor and federal procurement for Associated Builders and Contractors, which represents 25,000 construction-related companies. “It’s pretty clear the agenda is to give big labor an advantage in federal contracts.”

Critics also said the policy would put small businesses, many of which do not provide rich benefits, at a disadvantage. Furthermore, government officials would find it difficult to evaluate bidders using the new criteria and to determine whether one company’s compensation package should give it an edge, said Alan L. Chvotkin, executive vice president of the Professional Services Council, a coalition of 340 government contractors.

From his earliest days in office, President Obama has called for an overhaul of government procurement policy, citing the contracting scandals of the previous decade involving cost overruns and no-bid contracts ...

In testimony last year to the Office of Management and Budget, Mr. Podesta said that 400,000 workers employed under federal contracts — like cafeteria workers, security guards and landscaping workers at federal buildings — earn less than $22,000 a year, the federal poverty line for a family of four, assuming just one paycheck in a household.

“We have a president who is talking about bringing more people into the middle class,” Mr. Stern said. “The government should expect contractors to obey the law, and at the same time contractors should not be building a poverty economy, but should be trying to build a high-road economy.”...

Even as business groups press the administration for more details, they are denouncing the plan, tentatively named the High Road Procurement Policy ...

Randel K. Johnson, senior vice president for labor at the United States Chamber of Commerce, called the plan a “warmed-over version” of President Bill Clinton’s regulations that sought to bar federal agencies from awarding contracts to companies with a record of breaking labor, environmental or consumer laws. President George W. Bush vacated those regulations soon after taking office ...

On Feb. 2, Senator Susan Collins of Maine and four other Republican senators sent a letter to Peter R. Orszag, director of the White House budget office, saying, “We are concerned that the imposition of these requirements, during a time of significant economic turmoil in the private sector and tight federal budgets, could have serious, negative consequences, especially for our nation’s small businesses.”  ...

Surprise! Conservatives Love Government, Too.

The Numerologist:

Conservatives agree that the government spends too much. But ask them what to cut ...

At last week’s Conservative Political Action Conference, Minnesota Gov. Tim Pawlenty called on the attendees to imitate the wife of Tiger Woods: "We should take a page out of her playbook and take a nine iron and smash the window out of big government in this country."

But there’s a problem for Pawlenty and the activists who cheered him: Rank-and-file conservatives actually like big government.

In 2008, the American National Election Study asked a national sample whether federal spending on 12 different programs should be increased, decreased or kept about the same.

As the graph above illustrates, the respondents who identified themselves as "conservative" or "extremely conservative" had little appetite for specific spending cuts.

Very few conservatives said they favored reducing (or cutting out altogether) spending on any program. The least popular program proved to be childcare -- with a grand total of 20 percent of conservatives saying they’d slash it. The most popular is highways; only 6 percent want to cut spending there. Even bugaboos like welfare and foreign aid fare well, attracting the ire of only 15 percent of conservatives. Amazingly, the survey found that, on average, 54 percent of them actually wanted to increase spending.

Political scientist James Stimson has suggested that a fifth of the country consists of what he calls "conflicted conservatives," those who might respond positively to a broad appeal like Pawlenty’s, but not once specific windows start getting smashed.

At CPAC, Glenn Beck turned to 12-step lingo: "Hello, my name is the Republican Party and I have a problem! I’m addicted to spending and big government." But why blame the GOP? After all, the party is being enabled by its own base.