Pelosi backs off Medicare rates in “consumer option”

posted at 9:30 am on October 29, 2009 by Ed Morrissey

Nancy Pelosi and the House Democratic Caucus will unveil their version of ObamaCare this morning, and the New York Times reports some significant changes made in the last few days.  First, the “public option,” which had changed to the quasi-Orwellian name of “competitive option,” now goes the full 1984 to the “consumer option.”  Gone, though, is the reliance on Medicare rates for the government-funded coverage plan, as moderate Democrats from rural districts insisted that hospitals would go out of business:

Under pressure from moderate-to-conservative members of the House Democratic caucus, Speaker Nancy Pelosi has decided to propose a government-run insurance plan that would negotiate rates with doctors and hospitals, rather than using prices set by the government, aides said Wednesday.

Ms. Pelosi said the public plan, which she prefers to call a “consumer option,” would compete with private insurers. But the speaker was apparently unable to muster the votes needed for the “robust” liberal version of a public plan, which she has repeatedly said would save more money for consumers and the government.

Members of the House Democratic leadership team offered these details of their bill, to be unveiled on Thursday. It would provide coverage to 35 million or 36 million people. The 10-year cost of expanding coverage would be less than the $900 billion ceiling suggested by President Obama. The cost would be offset by new taxes and by cutbacks in Medicare, so the bill would not increase the federal budget deficit in the next 10 years or in the decade after that.

The new bill, like an earlier version, retains a surtax on high-income people, but increases the thresholds. The tax would hit married couples with adjusted gross incomes exceeding $1 million a year and individuals over $500,000 — just three-tenths of 1 percent of all households, Democrats said.

“Consumer option”?  Any choice made by consumers is a “consumer option”.  It’s an almost meaningless phrase, except for what it hides.  Pelosi’s newest nomenclature hides the fact that consumers don’t pay for it — taxpayers pay for it. 

Ending the Medicare reimbursement rates will certainly gain Pelosi some votes, but that sounds fishy.  The bottom-line number didn’t change from last week to this.  How did the House bill calculate the costs of negotiated rates as opposed to the Medicare rates they used in their earlier calculations?  How did that not increase the overall cost of the bill?  

Well, it turns out that Pelosi & Co have decided to shift more of those costs onto the state.  Earlier versions had people at 133% of the poverty line eligible for Medicaid, the costs of which states largely have to bear.  The new version hikes that to 150% of poverty line, forcing more people onto state rolls rather than federal.  That allows Pelosi to claim some cost savings, but the public burden felt by taxpayers will increase, thanks to unfunded mandates on the states.

For that matter, increasing the surtax thresholds should have cut back on their revenue expectations.  Did they increase revenues elsewhere to maintain deficit balance?  If so, where?  Here’s one place where Pelosi cribbed from Max Baucus in the Senate:

The new House bill would also impose annual fees on manufacturers of medical devices like heart pacemakers and artificial hips. The fees — in effect, excise taxes — would total $20 billion over 10 years.

Taxing innovation — the Democratic way to better health care!

Hopefully, the CBO will score this one quickly and answer the big questions.  Meanwhile, be sure to read Keith Hennessey’s analysis of upcoming Senate votes on ObamaCare.

Update: Politico notes another problem with the bill, which is that it runs surpluses its first five years — mainly because it doesn’t pay benefits until 2013 — and then deficits thereafter (via Geoff A):

The CBO analysis will show that the bill runs surpluses in the first five years and deficits in the second, making it deficit neutral during the first decade. BUT those late decade deficits were raising questions about whether the CBO will be able to declare the second 10 years deficit neutral.

It would appear that this is the same problem seen in the Baucus plan.  It uses a head start on revenues to mask deficit spending overall.  Also, the new Pelosi bill reneges on the White House agreement with pharmaceutical manufacturers, and it also engages in the same dishonest Doctor Fix strategy that flopped so badly in the Senate:

A permanent doc fix will be carved out of the reform bill and introduced separately today without pay-fors. That’s not going to make docs happy because even if the doc fix bill passes the House, the Senate has already killed a similar proposal. Drug makers are also getting shellacked. They’re looking at between $125 billion and $150 billion in cuts – almost twice the $80 billion they agreed to under the White House deal.

These aren’t even new ways to be dishonest.

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If you actually want to accomplish lower costs, probably the best route would be a single-payer system.

What if that ‘single payer’ decides a new treatment isn’t worth the cost? That’s the problem if you don’t have choice, it is a monopoly.

It sounds good (like world peace), but it doesn’t work. It will always end up with rationing and denying care because the single payer won’t pay. If you only have a single payer that doesn’t pay, that limits the availability of new innovative cures.

The government will eventually ‘reduce costs’ by not paying the providers. So providers will stop providing care. We’ll have ‘single payer’ but it will be all pay and no care.

ThackerAgency on October 29, 2009 at 10:57 AM

If this is going to hurt Americans financially for the first 5 years without ANY benefit at all, that is a good thing.

I WANT it to hurt. PAINFULLY. EXCRUCIATINGLY. and the sooner the better. I want it all to be caused by the democrats. 100%. If people feel this next year, then November 2010 will be a bloodbath. I don’t just want them to be voted out… I want them to barely escape with their lives.

When the adults get back in charge Pelosicare can be dismanted.

kurtzz3 on October 29, 2009 at 10:58 AM

We need to have catastrophic plans with HIGH HIGH deductibles. Let the consumer feel the cost of the services they are getting without the danger of going bankrupt if something major happens.

The problem with our system is that we expect insurance to pay for everything and cost nothing.

Imagine how much more your auto insurance would cost if it had to cover oil changes, brake pads, fluids, clutch, new tires, CAR WASHES. That’s the equivalent of what people demand from health insurance. . . that’s why it’s too expensive.

ThackerAgency on October 29, 2009 at 11:00 AM

Ed, please don’t use that picture of Nancy Pelosi, even if it is Halloween week. Thanks.

Bruno Strozek on October 29, 2009 at 11:00 AM

How do you fight a Congressional majority that willing to stand before the cameras and the people and simply lie their azzes off?Griz on October 29, 2009 at 10:46 AM

That’s all they have, if they were honest, as in:
Hey, we want to control your healthcare because we want to control YOU,

There would be howls of protests everywhere.
So they have to LIE, playing name games, “consumer option” instead of  “public option”.
Lib or Progressive instead of Socialist or Statist.They really do need to answer the question: Why do they have to LIE If this is so great for us unwashed masses?

Juno77 on October 29, 2009 at 11:02 AM

Here’s a link to the bill

Let the lie-counting begin!

hawksruleva on October 29, 2009 at 11:19 AM

Breaking News: House Democrats unveil health-care reform legislation‏
House health-care reform bill includes public option

OmahaConservative on October 29, 2009 at 11:19 AM

That photo scares the fecal matter out me, please find some way to reduce the fright factor.

Thank you,


oldleprechaun on October 29, 2009 at 11:20 AM

Next week it’ll be re-named “The Only Truly Patriotic Real American Option“.

profitsbeard on October 29, 2009 at 11:43 AM

So here is your consumer option simplified … All food will now have to be bought from the federal government. You apply and get your gruel coupons, which you can then take down and get your Soylent Green from an approved seller.

And so is Peloser’s government rationed healthcare any different?

Neither are Constitutional … And real Americans will stand from either.

tarpon on October 29, 2009 at 12:01 PM

How can a bunch of brain dead idiots who will drive the price of bread to $ 20.00 a loaf in near future because of all the money printing and spending even begin to think they can lower the cost of health care. What a line of sh*t.

bluegrass on October 29, 2009 at 12:04 PM

Wonder what would happen if Ms. Polosi’s hands were tied to the podium when she speaks to the press? The lady has some pretty strange hand movements when she talks.

yoda on October 29, 2009 at 12:30 PM

“Nazi Pelosi! Nazi Pelosi! You’ll burn in Hell for this!!”

Love that guy with the bullhorn.

Oathkeepers, we need you, the Constitution is under assault.

NTWR on October 29, 2009 at 12:38 PM

Can I have the “Consumer Option” to pay the tax?

bbordwell on October 29, 2009 at 12:42 PM

I just can’t believe that Pelosi has and credibility, or influence anymore. If anyone listens to the lying crud that passes her lips, they have to be as stupid, as they think the rest of us are.

All this basically does, is create a new medicare plan, and force everyone on it , eventually. We already pay for medicare, and medicaid thru taxes. This is just one more added tax, and when congress needs to dip their sticky fingers into the till, to fund some other bogus program, or fund some dumb ear mark….they will feel free to borrow, and we get the bill.

I’m sick, and tired of this dreck. I need to find the combined amounts insurance companies pay, for our doctor, and hospital , and health care needs…and compare that to this 900 billion cost (which is a lie), and then wonder…why it cost so much to insure the so called 40 million? This is rediculous!


capejasmine on October 29, 2009 at 12:57 PM

More appropriately, it should be called the “Consumed Option,” because we will be eaten alive if it goes through.

Connie on October 29, 2009 at 1:08 PM

I don’t want Artificial Intelligence–I want the REAL McCOY!
Vote these Commie Clowns and Dear Leader out in 2010 and 2012.
John Bibb

rocketman on October 29, 2009 at 1:22 PM

If you actually want to accomplish lower costs, probably the best route would be a single-payer system.

AnninCA on October 29, 2009 at 10:45 AM

So you think that creating a government-run monopoly results in lower costs?

Fine. Give us an example. Give us ONE real-world example in which a government-run monopoly resulted in lower costs than could be found from competition in the private sector.

Just one.

Do it.

But if you can’t, doesn’t that tell you something?

PackerBronco on October 29, 2009 at 1:29 PM