Discussion

DR. FINEBERG: I’ll moderate and help with questions so the floor is open for question or comment.


AUDIENCE QUESTION: (Off microphone)


DR. FINEBERG: Could you repeat the questions too because I think we won’t pick it up otherwise?


MS. ROVNER: The question is where do I think the biggest divide will be between Republicans and Democrats. If you’d asked me this before the election I would have said probably the role of government, you know, who sort of provides. Do we go with a government-type plan or do we go with more of a private-sector plan? But, actually, right now what’s shaping up as the biggest divide is whether or not this gets paid for.

I think the democrats are leaning toward trying to do some kind of a plan that perhaps is not paid for, that maybe they would suspend some of the pay-as-you-go requirements to do some deficit spending at least in the early years. There’s no way that this will not be expensive, particularly at the beginning. You know, Max Baucus, Senate Finance Committee Chairman, is starting to use the word investment, starting to talk about well, maybe this is part of the stimulus, of getting the economy going. It’s sort of his way of trying to prime the pump, if you will, for saying we don’t really need to offset all of it as a way of not having that little redistribution chore that everyone knows is going to be so politically perilous.

Immediately today after this meeting Chuck Grassley walked up right



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Discussion ❧ DR. FINEBERG: I’ll moderate and help with questions so the floor is open for question or comment. AUDIENCE QUESTION: (Off microphone) DR. FINEBERG: Could you repeat the questions too because I think we won’t pick it up otherwise? MS. ROVNER: The question is where do I think the biggest divide will be between Republicans and Democrats. If you’d asked me this before the election I would have said probably the role of government, you know, who sort of provides. Do we go with a government-type plan or do we go with more of a private-sector plan? But, actually, right now what’s shaping up as the biggest divide is whether or not this gets paid for. I think the democrats are leaning toward trying to do some kind of a plan that perhaps is not paid for, that maybe they would suspend some of the pay-as-you-go requirements to do some deficit spending at least in the early years. There’s no way that this will not be expensive, particularly at the beginning. You know, Max Baucus, Senate Finance Committee Chair- man, is starting to use the word investment, starting to talk about well, maybe this is part of the stimulus, of getting the economy going. It’s sort of his way of trying to prime the pump, if you will, for saying we don’t really need to offset all of it as a way of not having that little redistribution chore that everyone knows is going to be so politically perilous. Immediately today after this meeting Chuck Grassley walked up right 9

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0 PROSPECTS FOR HEALTH REFORM IN 2009 AND BEYOND behind him and said, “I don’t know about that not paying for it part.” So I think there may be more of a possibility of finding an agreement on a fundamental plan for covering the uninsured and finding ways to change the health system. We may well come to blows over whether it’s on-budget or off-budget or finding a way to pay for it. But it’s so very, very early. You know everybody is going to be finding their way so it could be something entirely unpredictable now that it all comes to blows over. AUDIENCE QUESTION: Two other issues that may be points of dis- agreement are whether there should be any cap on the tax exclusion and whether there should be mandates on individuals. Could you comment on those? MS. ROVNER: Yes, two questions, things that are on the table, two big issues. One is the tax exclusion, which is a large source of spending and/ or revenue. This is a fact when 160 million people who get their health insurance on the job do not pay taxes on the value of the insurance that is provided to them. This was something that John McCain had wanted to change in his health plan and President Elect Obama basically said over my dead body. Well, the problem with that is that there are an awful lot of Demo- crats who think that maybe that would be a good place to get some of this money to finance health care. So the new president may have to have some dealings with Congress over that issue because it’s an awful lot of money and there are ways, as some Democrats are already talking about, to perhaps maybe not make it go away but to make it go away for the very wealthy or to find some way to adjust that. It is, as I mentioned, a very large source of potential revenue. So I think that’s probably more on the table than the president might have intended. The other question is whether or not there will be mandates. Again, President Elect Obama ran on a plan that did not provide universal cover- age. It only provided mandatory coverage for children. He was careful to say (at least his advisers were very careful to say) all during the campaign that he was open to the possibility of mandates down the road. I think I read that to say that if a democratic Congress really wanted to cover ev- erybody that he would be happy to sign such a bill. So I think he’s boxed himself into much less of a corner on that than he has on the employer tax exclusion. AUDIENCE QUESTION: You’ve already mentioned this a little bit about the fraction of the health care dollar that goes toward administration of

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 DISCUSSION health rather than delivery of health. What’s the prospect of getting some of that money moved into the act of delivering health care? MS. ROVNER: Well, that’s certainly been talked about for an awfully long time. Having a multi-payer system with private insurers means that there’s more overhead than we would have in a single-payer system. Certainly there is a lot of work going on and a lot of desire to have more electronic medical records (to reduce the amount of overhead) on the clini- cal side. No one has yet figured out exactly how to make that work, how to make those records talk to each other. There was a small move toward it last year when Congress mandated e-prescribing but that’s just the tip of the iceberg on getting to full electronic medical records. Unless the country goes toward a full single-payer plan, there’s go- ing to be duplicative administrative costs and as long as there’s private insurance there’s going to be administrative overhead and administrative burden. So you’re not going to take that all the way down. AUDIENCE QUESTION: How does the U.S. compare to a place like Canada, which has universal health care? What fraction of the dollar goes to administration versus health care delivery? MS. ROVNER: Well, it’s certainly a lot more in the U.S. because we’re looking at things that they don’t have. They don’t have competing private insurers. They don’t have advertising. They don’t have a lot of the basic bureaucracy that gets duplicated in the U.S. system. But there’s a lot of argument. Again there is a large percentage, a significant percentage, of the country that would like to have a single-payer system and probably a majority that would not. I think certainly when you talk to members of Congress, even with large democratic majorities; the first thing they will say is that single-payer is not in the cards. Let us find a way to cover everybody first, perhaps go to single-payer at some point in the probably distant future. AUDIENCE QUESTION: In many of the meetings that I’ve been in, one of the wedge issues, of course, around mandates is that the unions have said we’re okay with individual mandates as long as there’s an employer mandate. Employers have said that is an issue that is just dead on arrival. It seems like there has to be matched care there. Do you have any idea of what the political field has to give back to the business community in order to sell mandates? MS. ROVNER: The question is about mandates and who’s going to accept what kind of mandates. What was interesting in California is that some of

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2 PROSPECTS FOR HEALTH REFORM IN 2009 AND BEYOND the big pushback on the individual mandate came from the people who wanted single-payer. They felt like the individual mandate was unfair because people were going to have to pay who might not be able to af- ford it. So that’s yet another level of political complication and of course the Obama plan did have both an individual—well, I guess it didn’t have an individual mandate but it had an employer mandate. Certainly if you’re going to mandate coverage for small business, you’re going to have to have very large subsidies and I think that goes pretty much without say- ing. Even so it’s going to be difficult. I mean, they saw that in Massachu- setts. It’s been very, very difficult and they’ve had basically to exclude people who cannot afford it. You know, they’ve got subsidies, they’re very generous, up to 300 percent of poverty but there are still a number of—you know, they’ve gotten down the cost of some of those policies and there’s still a gap between people who get subsidized and the people who they decide can afford those policies. So it is not an easy thing. If you’re going to have an individual mandate; if you’re going to basi- cally get everybody into the pool and somebody’s going to have to have that hardship. It’s either going to be the government in terms of having really big subsidies, or it’s going to be small businesses in terms of what they can afford, or it’s going to be the individuals, who are at that kind of cliff where they’re just over the subsidy level but still that lower-middle class. So the question is who—you know there’s going to be somebody in that really questionable area. DR. FINEBERG: Julie, let me ask you a question on timing and strategy if you were advising the secretary, the president how to proceed. One model says the President Elect has already articulated the top five priorities: eco- nomic problems number one, energy number two, health number three, and so on. We know that the State Children’s Health Insurance Program (SCHIP) bill, which was supported by majority and then not enacted into law, is kind of low hanging fruit to deal with—a particular part of the problem. Would you advise the secretary strategically to go for that early, building up the sense that we can solve more of the health problem or would you say, you know, if you spend energy on SCHIP, we’re going to be distracting the focus on the real problem, which is getting in place a sufficient package for everybody, it’s important for the economy, etc. How would you advise him? MS. ROVNER: I don’t give advice but I can tell you what people are already saying, which is to my actual surprise. Pete Stark, of all people, said that they have to do SCHIP early, the bill expires in March, which was something that Senator Grassley did, I think, very much on purpose. He

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3 DISCUSSION was probably thinking that the Democrats were going to win and giving sort of a little welcome gift to the new Congress and the new administra- tion that you have to grapple with this right away when you get back. The Democrats really didn’t want to have to deal with that in March but the Republicans insisted. So it comes up right away and Rahm Emanuel said, very early on when he was appointed White House Chief of Staff, that they wanted to get that through very quickly. This is a model that goes back to the Clin- ton administration. One of the first things that President Clinton did was pass the Family Medical Relief Bill that had been kicking around in the Bush administration and had, again, gotten through the Congress but just couldn’t override the veto. So that was sort of a slam dunk, get something popular and bipartisan through the Congress, get it signed, have an early victory. SCHIP looks very much like that. My question for Stark was that, you know, yes, to get this bill to President Bush and to get all of those Repub- licans on it, they had to compromise away a lot of stuff that Democrats really believed in. They had to take most of the parents off the program. They had to really bring down a lot of the income limits. They had to dump an awful lot of Medicare stuff that they wanted that the House had passed in this bill. I was thinking that, boy, you could really have a fight early on if the House Democrats wanted to load some of that more popular stuff back now that they have a much bigger majority. I wondered about that and I asked him just last week, will this be the House SCHIP bill or will this be the bill that got vetoed? Without missing a beat Stark goes no, no, we don’t want it to get messed up, and maybe we’ll add one or two little things to it—but this is basically the bill that got vetoed. That was a big change in attitude. I was really surprised. I think they’re looking to do SCHIP quick, fast—though they may have a problem with funding and I mentioned it. He said no, we don’t even need to do it 4 or 5 years because we’re going to have health reform. So not my advice but I’m telling you what’s coming down the pike. DR. FINEBERG: That’s actually the best kind of advice you can get. AUDIENCE QUESTION: And the Medicare advantage? MS. ROVNER: That’s not that much money. It’s about $50 billion and that may well get plowed right back into Part D. Well, the other thing that they’re talking about in Medicare is they’re looking down the barrel of the physician payment fix again, which I think is now up to 20 percent—an- other little going-away present from the last Congress—but there’s talk about trying to perhaps forgive that debt, which I think Congress simply

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4 PROSPECTS FOR HEALTH REFORM IN 2009 AND BEYOND has to do. That hole has just been dug so deep that you’re just going to have to throw the dirt in over top of it and start clean. For those of you who don’t know, this is the payment mechanism that Congress did in 1997 and it worked for a couple of years. Well, it actually overpaid doctors for a couple of years and since 2001 it’s been threatening to cut doctor pay every year and they actually let the cut take effect once. It’s now gotten to the point where what you hear about the reductions and the increase, these are actual cuts to payments that doctors get from Medi- care, and if they were to take effect in the manner in which they are now scheduled to take effect, basically doctors would stop seeing Medicare patients and then they wouldn’t have a lot of choice. So no one believes they should be allowed to take effect but to make them go away really costs just staggering sums, hundreds of billions of dollars, basically at this point there’s almost no way to offset them. The numbers have gotten just so stupendous so that at some point, there is really going to be no choice but to say that we made a mistake and have to wipe the books clean and start over, which I think they’re getting ready to do. DR. FINEBERG: Sounds like they’re getting ready to do a lot of things. MS. ROVNER: I’m not making any predictions; I’ll predict that one. DR. FINEBERG: I will take another question, last one. AUDIENCE QUESTION: One big question is whether improving cover- age, whether through mandates or universal coverage, will actually im- prove health outcomes and the health status of the American people. Are there any lessons to be learned from the Massachusetts example or other vehicles that might give us some insight? MS. ROVNER: Well, it’s a little bit early. I certainly have learned from reading the IOM reports that if you don’t have health insurance, you don’t do well and if you don’t have health insurance, your community doesn’t do well. One interesting thing that we’ve learned in Massachusetts is that if a lot of people suddenly get health insurance, you may have trouble finding a doctor. They’ve had primary care shortages in Massachusetts. So your delivery system has to be up to par if you’re going to suddenly enfranchise a lot of people, which is another issue that hasn’t been looked at closely enough. One that Congress really needs to look at. I think they’re so busy thinking about the finances and getting everybody covered that they’re kind of ignoring the fact that we’ve got 78 million baby boomers about to qualify for Medicare and not nearly enough primary care doctors to deal with this. All of the students who are graduating from medical school

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 DISCUSSION want to become interventional cardiologists, which I guess we’ll need some. DR. FINEBERG: Some want to be dermatologists. MS. ROVNER: Yes, that too. DR. FINEBERG: Although I know Julie could continue to respond to these very, very interesting questions, I know she also has her work cut out for her tonight. She’s a working woman and with the announcement of today, there’s a lot to try to tie up in a neat little bow for tomorrow and I am very impressed that someone who is professionally equipped to ask questions is so adept at answering questions. It is truly a great advantage for all of us, Julie, to have someone with your experience and talent in exactly the position you are, helping to keep all of us informed and alert to develop- ments for health policy. Thank you very much for being here today.

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