Pelosi backs off Medicare rates in "consumer option"

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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