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Deficit Hawks: Keep Excise Tax, Ax LTC Program

By Arthur D. Postal

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WASHINGTON BUREAU — The Concord Coalition is urging Senate Majority Leader Harry Reid to use real budget cuts and real sources of revenue to pay for any health coverage expansion.

Senate leaders should keep the proposed 40% excise tax on high-premium insurance plans that is included in the Senate Finance Committee’s America’s Healthy Future Act bill draft when combining that draft with the Senate Health, Education, Labor and Pensions Committee’s health bill, leaders of the Arlington, Va., coalition write in a letter addressed to Senate Majority Leader Harry Reid, D-Nev.

“It is a lot easier to come up with new ways to expand health care coverage than it is to find politically acceptable ways of paying for it,” coalition leaders warn.

The Concord Coalition promotes discipline in federal budgeting.

The coalition leaders who signed the letter are the co-chairman- former Sen. Warren Rudman, R-N.H., and former Sen. Robert Kerrey, D-Neb. – and the president, former U.S. Commerce Secretary Peter Peterson.

Several key Democratic senators, including Senate Finance Committee Chairman Max Baucus, D-Mont., have been saying they will vote for a health bill only if it either will decrease the federal budget deficit over 10 years or have no effect on the deficit.

The Senate Finance Committee recently sent the AHFA bill draft to the Congressional Budget Office and the congressional Joint Committee on Taxation for an analysis of its possible effects on the federal budget deficit.

The CBO says the bill, as implemented, could cut the federal budget deficit by $81 billion over a 10-year period starting in 2010, but that achieving those results would depend in making cuts in Medicare provider reimbursement increases stick.

In the past, Congress has been unable to implement plans to cut provider reimbursement increases, CBO Director Douglas Elmendorf has warned.

Concord Coalition leaders write in their letter that using “scoring gimmicks” to make a health reform “deficit neutral” could keep the U.S. health care system on an “unsustainable track.”

“Medicare is already facing a $38 trillion unfunded obligation over the next 75 years,” the coalition says in a memo accompanying the letter. “Using savings from this program, which we strongly support, to pay for new commitments would not leave overall health care spending on a more sustainable track.”

The Joint Committee on Taxation says the proposed excise tax on “Cadillac plans” could raise $201 billion over 10 years, and “it would also serve as a constraint on plan premiums — thereby encouraging insurers to exert downward pressure on provider costs,” the coalition says.

The coalition also recommends shifting toward paying for bundles of health care services, and away from fee-for-service arrangements; tailoring subsidies carefully, to avoid encouraging families incentives to drop coverage; getting serious about slowing Medicare physician reimbursement increases; cutting Medicare Part D prescription drug program subsidies; and avoiding creation of any kind of “Medicare for all plan.”

The coalition also repeats a call made earlier in the week that congressional leaders drop the Community Living Assistance Services and Supports Act proposal.

The proposal, included in the Senate HELP Committee’s health bill and the House Energy and Commerce Committee’s bill, would create a voluntary long-term care entitlement program.

The provision was added to the HELP bill at the request of the late Sen. Edward Kennedy, D-Mass., the former chairman of the HELP Committee.

The provision is well-intentioned, but it “is structurally unsound and fiscally irresponsible,” the Concord Coalition said Wednesday, in an announcement that it was

“The long-term cost of this new entitlement, which could be substantial, is hidden by the fact that it appears to produce a short-term windfall,” Robert Bixby, the executive director of the coalition, says in a statement.

The House version of the CLASS Act would authorize creation of the program and leaves it up to the secretary of Health and Human Services to set premium and benefit levels.

The Senate version would require a minimum average daily benefit of $50. It would guarantee coverage without exclusion for pre-existing conditions and allow enrollees to opt in and out of the program. Benefits would begin after a 5-year vesting period.

Congress could treat the program as a revenue raiser in the early years, because workers would have to pay premiums for at least 5 years before receiving benefits, the Concord Coalition says.

But, once benefit payments begin in 2016, the annual cash surplus would rapidly dwindle, the coalition says.

Premiums would either be too high to attract a sufficient risk pool or not high enough to pay for the program on a sustainable basis, Bixby says.

“This sets up a classic ‘death spiral’ of adverse selection, as necessary premium increases would make the program even less attractive for younger, healthier workers,” Bixby says.

Allison Bell contributed additional information to this article.