Holding Back The Tide

The White House has done a pretty good job of rolling out these deals with the health care industry. They made the main announcement of $2 trillion in savings months ago, and that got a large news hit. Then they've been dribbling out each element of the industry and their pledges to lower costs. We haven't reached $2 trillion - in fact, we haven't come close - but every time they do it, the White House gets another news hit. It's pretty brilliant.

The latest is an agreement with the hospital industry to give back $155 billion in profits over a decade, on the heels of an $80 billion dollar agreement with the drugmakers to help fill the dreaded donut hole for prescription drugs for seniors. Because of the way in which Max Baucus (who is brokering most of these deals) and the White House have done it, assenting to changes in how they are paid, this money can be used to help pay for reform, unlike the $2 trillion, which was outside the purview of the CBO. But they seem to be bargaining, like the drug industry, for the best deal they can get, instead of designing the policy and forcing the various industries to accept it.

Still, you have to wonder: Could these industries be giving up more? The drug deal, at least, doesn't look all that great--except, perhaps, to the drug industry. My reading of the agreement--and, to be clear, there's still a lot of ambiguity here--is that the drug industry has agreed to kick in some of its own money to help fill in the "donut hole" in the Medicare drug benefit.

That's very nice and will, I think, make it easier for seniors to afford their drugs. But it also seems that, as part of the deal, seniors have to buy more drugs from name-brand manufacturers rather than generics. It's entirely possible that the name-brand drug industry--that is, the companies represented by PhRMA--could actually come out ahead [...]

The expected hospital agreement seems may be more signfiicant--and, for liberals, more encouraging. Although it's impossible to know without seeing the details, $155 billion is a decent chunk of change. That could represent a serious sacrifice on the part of the hospitals.

On the other hand, it's not clear whether, perhaps, this is an example of some hospitals effectivelly cutting a deal that hurts others. Insofar as the savings come from reduced payments for charity care--payments that now flow through Medicaid--is this a case in which suburban and speciality hospitals actually do just fine but charity hospitals take a hit?

Perhaps the most important question to answer is what these industry groups are getting in return. Changing payments to the health industry isn't simply about generating savings that can finance expansions of insurance coverage. It's also about changing the behaviors of these industries--and, in so doing, creating a health care system that offers better quality care for less money.

To accomplish that, reform should ideally include measures like strengthening the hand of the Medicare Payment Advisory Commission (MedPAC), developing more data on comparative effectiveness (CE), or building a strong public insurance plan. But hospitals don't like the idea of a stronger MedPAC, drug makers are pretty hostile to good CE, and insurers (among others) hate the idea of a public plan. When the industries cut these deals, are they prying promises from Baucus--or the White House--not to push too hard on these levers?

The effect has been to set a ceiling for what the drugmakers and the hospital industry and the other stakeholders will accept, brokered through the most conservative and industry-friendly committee in Congress, Max Baucus' Senate Finance Committee. Any committee that seeks more savings from industry immediately gets attacked, even though they never made such an agreement.

Having struck a bargain with Senate Finance Committee Chairman Max Baucus (D-Mont.), the industry is aggressively targeting individual House Democrats, warning of repercussions in the 2010 elections if they go along with a tougher set of savings advocated by House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.).

PhRMA, the powerful Pharmaceutical Research and Manufacturers Association lobby, is openly playing one chairman against the other. Billions of dollars are at stake; a politically sensitive population, the elderly, is caught in the middle. With House Democrats expected to finalize their bill this week, President Barack Obama could face pressure to come off the sidelines and spell out better where he stands.

What Baucus agreed to specifically in his June 20 bargain is still in some dispute. But PhRMA is bluntly telling House moderates that the senator will oppose the rebates demanded by Waxman and that the smart move is to kill that provision outright and save themselves political pain in 2010.

Then there's the effort in the Senate Finance Committee to deny women legal medical services inside any insurers operating inside the Health Insurance Exchange:

The Senate Finance Committee has been writing a health care reform bill and struggling to create legislation that will have bipartisan support. Chairman Max Baucus considered several compromises to win Republican support, so they can claim it is bipartisan legislation. One of these potential compromises comes in the form of an abortion exclusion, which would prevent abortion services from being covered by some or all insurance plans in the Health Insurance Exchange. We fear that members of the Senate Finance Committee are considering such a compromise.

Remember, most of the groups inside the insurance exchange are private companies. I thought conservatives didn't want to put a government bureaucrat between the patient and the doctor. I guess when it comes to reproductive choice, that's OK.

The Senate HELP Committee's favorable budget score raised hopes that a workable solution was on the way, which was affordable and used a public health insurance plan to increase that affordability. But there's a whole maze of committees and votes to maneuver through. And the Senate Finance Committee is really building a dam to hold back the tide of a legitimate overhaul. Must be all of that industry money.

...see also the tactic of arbitrarily lowering the cost of the bill for no real reason other than $1 trillion is a nice round number.