By John Reichard and Drew Armstrong, CQ Staff

June 23, 2009 -- Senate Finance Committee Chairman Max Baucus wasn't specifying how, but the Montana Democrat was firm in his declarations to reporters Tuesday that he’ll meet his goal of paring down the cost of a comprehensive health overhaul to below $1 trillion over 10 years.

Whether he will be able to do so this week — his GOP colleague Charles E. Grassley of Iowa said Baucus is shooting to finish his "mark" by the end of the week — is unclear. "We'll be ready when we're ready," Baucus said — repeating the mantra about timing he began intoning to reporters last week. “I’m not going to give an arbitrary date because it's just hard to know. We may even have to go back and get another CBO score or two.”

Grassley said the committee was making progress in its talks but did not elaborate. But other committee Republicans did not sound so sanguine.

A Congressional Budget Office (CBO) score last week putting a $1.6 trillion price tag on the committee’s overhaul package helped set off a wave of news reports that congressional Democrats are flailing about ineffectually in their efforts to assemble a package with any pretense of affordability.

But the committee is looking at a revised package that modifies subsidies to buy coverage and appears to be progressing thereby in lowering the price tag. The panel is "a lot closer. We’ll make it," Baucus said after emerging from a bipartisan negotiating session Tuesday morning with other committee members. Committee Democrats are tentatively scheduled to meet again Wednesday. Both committee Republicans and Democrats are scheduled to meet Thursday.

Baucus said his confidence is growing that the package he unveils will be bipartisan. Why? "Because there’s a good number of Republicans who understand the need to vote for meaningful comprehensive health care reform that will pass. A lot of Republicans know that this is the time. And they know that costs are going up at such a high rate that we must slow down the rate of growth. . . because if we don’t do it now when are we going to be able to have a chance again?"

Among the issues discussed at Tuesday’s committee meeting were: subjecting a portion of employer-paid health insurance premiums to taxation; how and whether to include a government-run insurance option or some variation; and how to deal with "free rider" employers who don't cover their workers and so drive up emergency room and other costs that providers shift back to employers offering health benefits.

Baucus suggested that bipartisan agreements on dealing with these controversial issues may be in the offing. "The comfort level of all the senators in the room is much better now on all those issues," he said.

But committee Republican Orrin B. Hatch of Utah sounded much more doubtful about progress toward bipartisanship in the committee. "There are a lot of different ideas, a lot of approaches, and I don't think we’re anywhere near to having a consensus," Hatch said. "One of the things that worries most people is how heavily are [Democrats] going to hammer the American taxpayer."

Hatch added that "I think the government plan is a non-starter." And on the issue of requiring employers to help pay the costs of health care for the poor if they do not provide coverage, Hatch observed, "That's a tough problem for most Republicans." He added that such a requirement would be a disincentive to hire low-wage workers.

However, GOP committee member Olympia Snowe appears to be seeking common ground with Democrats on the public plan controversy. She said she's negotiating with committee Democrat Charles E. Schumer about a public plan approach that would ensure availability of affordable coverage in markets where it does not now exist. Snowe indicated that such an approach — which has been referred to as a "fallback" mechanism offering some kind of public plan if private plan competition is lacking — could co-exist with establishing member-run health insurance co-operatives, an idea proposed by committee Democrat Kent Conrad of North Dakota as an alternative to a government-run insurance option.

Conrad said the costs of the bill "have come down quite markedly" in large part because of cuts in subsidies that would be given to lower-income Americans to buy coverage. Even with lower subsidies, 96 percent of the nation would have insurance under the Finance plan, Conrad said.

Conrad said the committee is reviewing four options on the issue of requiring employers to offer coverage or else help pay some health care costs. "That's one of the major areas still very much in discussion."

"The key is votes on the floor... Every single Republican is opposed to the public option, with one exception," Conrad said, referring to Snowe. "To get the votes, you've got to find some compromises." Regarding creation of co-ops as an alternative to a public plan, Conrad said some $3 to $4 billion in seed money would be needed.

By Emily Stephenson, CQ Staff

June 22, 2009 -- A new report released Wednesday says overhauling the health care system without a government-run insurance option could cost the federal government up to three times as much during an 11-year period than if a public insurer paying Medicare-level rates existed.

The report from the Commonwealth Fund examines the cost implications of three health overhaul scenarios: one that includes a public plan option that aligns payments with Medicare rates; one that includes a public plan option with rates that fall between Medicare payments and private plan rates; and one that does not include a public plan option at all. Each scenario includes individual and employer insurance mandates, and each would result in universal coverage, the report said.

A health overhaul scenario that includes a public plan approach would yield higher savings than one that only relied on private plans, according to the report. Adding a public plan to the overhaul also would generate those savings faster, said Cathy Schoen, vice president for research and evaluation at the Commonwealth Fund, during a media call Tuesday to introduce the report.

"Offering a public plan choice and the design of this choice makes a difference in the rate of change," Schoen said. "The scenario with only private plans would spread reforms more slowly and thus would reduce spending not as much over 11 years."

The report found that "cumulative health system savings between 2010 and 2020, compared with projected trends for that period, would range from a high of $3.0 trillion under the approach that includes a public plan paying providers at Medicare rates in competition with private plans, to $2.0 trillion for a public plan paying providers at rates midway between current Medicare and private plan rates, to $1.2 trillion in the private plan scenario."

Each scenario would involve a national insurance exchange, offering federal insurance subsidies, and changing Medicare payments to cover primary care and reward efficiency, which would yield overall health-system savings, according to the report.

A government-run insurance plan that paid providers rates about midway between those offered by Medicare and private insurers would result in cumulative net federal costs of about $232 billion between 2010-2020, according to the report. Allowing the public insurer to pay Medicare-level rates would drop costs to about $112 billion, while an overhaul with no public insurance option would result in cumulative net federal costs of $360 billion during that period, the report found.

The report said a public insurance plan would create savings by reducing administrative costs, lowering payment rates and immediately applying new payment methods and other changes to a larger population.

A public plan paying Medicare rates would reduce administrative costs by about $265 billion, while a plan with higher rates would reduce costs by about $223. But relying on private insurers to carry out changes would increase administrative costs by about $32 billion, the report states.

Schoen said even private insurers would see administrative costs decrease under all three scenarios as the insurance exchange reduced spending on marketing. And as private companies reduced premiums, families and businesses would spend less on health coverage.

Households would save more per year following the creation of a public option because it would curb the growth of premiums more quickly than if private insurers adjusted rates on their own, according to the report. With a public plan paying Medicare rates, Schoen said each household could save more than $2,200 per year by 2020.

"Over a three- to five-year period, premiums within the exchange should be nearly comparable within the public plan and the private plans." she said. "By moderating cost growth, the public plans would reduce costs for employers and households."

The report also states that physicians and hospitals would see new revenues under each plan because more patients would have insurance, reducing the burden on emergency rooms, and because of increases in coverage for primary care.

Draft overhaul legislation released by House Democratic leaders last week includes mandates and a public insurance plan that would pay a rate 5 percent higher than Medicare for the first three years. Karen Davis, president of the Commonwealth Fund, said that rate falls midway between the two public options in the report.

House Republicans have warned that the draft bill could hold hidden costs for the public if new taxes were required to establish a government-run option and an insurance exchange. House Minority Leader John A. Boehner, R-Ohio, called it a "government takeover of health care."

Insurance industry representatives have also pushed back against public insurance proposals, saying plans with rates close to Medicare’s would underpay providers and could force them to stop accepting new patients.

By John Reichard, CQ HealthBeat Editor

June 25, 2009 -- The Senate Health, Education, Labor and Pensions Committee’s markup of its much maligned health overhaul proposal came to an early end Thursday with Sen. Christopher J. Dodd saying the panel will reconvene the drafting session July 6 with the goal of completing it by July 10.

The Connecticut Democrat, who has been leading the markup as a stand-in for the panel's ailing chairman, Sen. Edward M. Kennedy, D-Mass., cited incomplete scoring of long-term care provisions as the reason for suspending the markup a day-and-a-half early. The session originally was set to run through June 26 before reconvening after the Fourth of July recess, the week-long congressional break leading up to the Fourth of July.

During its morning's work, the panel breezed through Title V of the draft bill dealing with fraud issues. It approved two amendments by the committee’s top Republican, Michael B. Enzi of Wyoming. One would ensure that the secretary of Health and Human Services (HHS) conducts workplace wellness evaluations of publicly-funded programs before evaluating privately-funded programs. The other would ensure that information under workplace wellness provisions are not used to establish federal requirements. The panel also swatted down an effort to add language allowing access to lower cost prescription drugs from abroad.

The abrupt suspension may bring a temporary cessation of hostilities toward the Democratic proposal, which have been considerable. Scored by the Congressional Budget Office (CBO) as reducing the uninsured population by just 16 million at a 10-year cost of a trillion dollars, the measure has been a big, slow-moving target for Republicans eager to stall progress on Democratic overhaul plans with accusations that haste is producing legislation that is poorly designed and far too costly.

But Dodd expressed pride in the panel's work in the face of criticism that missing language on controversial issues made a mockery of the markup session. "This has been eight or nine days, but it has been incredible progress," Dodd said. "We've dealt with close to 216 amendments, we accepted 87 Republican amendments, we rejected 22 of their amendments."

"This is a strong bill," he said. "My colleagues have done a very strong job in prevention, quality, workforce issues that I think go to the heart of what we're trying to achieve, and that is accessibility, quality, as well as reducing cost," Dodd said in remarks to reporters at the conclusion of the session.

Dodd told members he expected to get them the language dealing with major unaddressed provisions of the bill "by the first of the week," so that they would have a week to read over it during the recess. This is the language on creation of a public plan to create an alternative to private insurance, "pay or play" mandates requiring employers to offer coverage or pay a penalty, and "follow-on biologics," cheaper versions of costly biotech drugs.

Dodd labored under the scorn of Republicans in moving the incomplete legislation through the markup

process. Republican Sen. Judd Gregg of New Hampshire called it "fiscally irresponsible" to mark up an incomplete bill. The CBO "has rated this bill an abject failure," Gregg said. He added that the draft bill does not meet any of President Obama’s stated goals for health care: on expanding health insurance coverage; on containing costs; or on letting people who have coverage they like keep it. "Why are we marking up a bill that doesn't meet the president's test?" Gregg demanded.

"The easiest thing for me to do would be to throw up my hands and say, 'We can't do this,'" Dodd replied. But he said that would be wrong and called it a "daunting challenge" to work out the cost issues. "I don't believe in declaring failure when we've hardly started."

Thursday's session included a spirited debate over the issue of allowing Americans access to lower cost FDA-approved prescription drugs made in FDA-approved facilities overseas. It also suggested that backers of such access face an uphill fight getting such a "reimportation" provision written into law despite strong Democratic gains in the recent congressional elections.

An amendment by Sen. John McCain , R-Ariz., was rejected by a 10-to-12 vote, with Democrats Barbara A. Mikulski of Maryland, Patty Murray of Washington, Kay Hagan of North Carolina and Jeff Bingaman of New Mexico joining eight Republicans voting down the language.

Democratic Sen. Sherrod Brown of Ohio pressed the panel for a vote on the McCain language despite pressure from Mikulski, Murray and Enzi to postpone consideration until the panel marks up Title 1 coverage provisions of the bill. Both Mikulski and Murray warned that allowing access to the cheaper drugs from abroad was potentially dangerous in light of all the hazards Americans have faced in recent months from risky imported products.

"We are at tremendous risk of counterfeit drugs coming into the country. . . .this is real, this is certain," Mikulski said of the hazards. Both Murray and Mikulski said they would favor access if there was certification from the Food and Drug Administration or elsewhere in HHS that the drugs are safe and would lower costs. "I would have enormous anxiety voting for this amendment," Mikulski said.

Dodd too made a pitch for delaying action, but Brown insisted on a vote after huddling with aides to McCain, who had departed for another markup. Brown voiced frustration that the language on certifying safety is repeatedly urged on lawmakers by the pharmaceutical industry and effectively stops importation. (For example, then HHS secretary Donna Shalala declined late in the Clinton administration to issue such certification.)

Brown insisted that Americans would not be exposed to new hazards from abroad if the McCain language were adopted, suggesting that fears voiced by opponents of the amendment were exaggerated. "That's not what's going to happen on this," he said, dismissing notions that the United States would start allowing in drugs from countries with lax regulatory standards. "We have worked on this language for years," he said of the McCain approach. "It gives the [HHS] secretary the authority to figure out where the safe drugs come from." Brown added that he thought that the drug industry would have its way on the vote, but he wanted it anyway.

That drew an angry response from Brown's fellow Democrat Mikulski. "Sen. Brown, really. . .I really take offense here about what you're implying on safety," Mikulski said. "Don't imply that those of us who are going to vote for safety are shilling for the drug industry."

McCain is expected to offer his amendment again when the markup reconvenes and if need be on the Senate floor. Murray said on her way out of the markup that she would vote for the McCain language if it were modified to include the safety certification.

Dodd said that although the Congressional Budget Office has scored the long-term care provisions, estimates also are needed from the Joint Committee on Taxation and won't be ready for two days. Although language to allow care for the disabled outside nursing homes has drawn favorable CBO scoring, Gregg warned that the language would mean huge new costs for health care over 40 years.

Adjoa Adofo contributed to this story.

By John Reichard, CQ HealthBeat Editor

June 23, 2009 -- White House budget director Peter R. Orszag defended the approach the White House is taking to hold down the long term costs of a health overhaul, telling the top Republican on the House Budget Committee Thursday that the administration will only support a plan that is deficit neutral over 10 years, including in the tenth year.

Displaying his penchant for amiable but persistent questioning at a hearing by the panel Thursday, up and coming Wisconsin Republican Paul Ryan reminded Orszag of his warnings as director of the Congressional Budget Office against adding to the nation’s deficit woes.

Orszag, who has stated previously that the White House will use CBO scoring to assess whether a proposal meets its requirements for fiscal soundness, noted in his response that CBO doesn’t go beyond ten years in its budget projections. Orszag said deficit neutrality in the tenth year is the best proxy of the fiscal impact of an overhaul plan in the following decade.

He also noted that the Bush era tax cuts and the Medicare drug law spearheaded by the Bush White House had no payment offsets at the time of passage—a not so subtle reminder that GOP sensitivity to the long term costs of major legislation is relatively new.

Ryan praised Orszag for sticking with CBO numbers to evaluate costs rather than switching to evaluations by the White House Office of Management and Budget — which Orszag heads. But he kept after Orszag about what happens after the first decade of an overhaul, noting the possibility the nation will face the equivalent of yet another entitlement fiscal nightmare of Medicare-like proportions if long term controls aren’t tight.

He also pressed Orszag to commit to disclosing longer term estimates by the actuary at the Centers for Medicare and Medicaid Services of the costs of a health overhaul. Ryan faulted the Republican White House for sitting on estimates of the CMS actuary of the Medicare drug law and noted protests by Democrats at the time about the Bush White House not releasing those estimates.

Orszag said he favored disclosure but noted that the expertise of the CMS actuary lies with Medicare and Medicaid projections, not those for the entire health care system. He also said that CBO numbers do not reflect changes the White House favors to transform the health system.

Ryan tried again a different way, asking Orzsag that if what he was saying in effect was that the White House doesn’t really know the long term effects of a health overhaul plan it would favor. Orszag said no, adding that if the numbers are not "falling off a cliff" in the tenth year in the sense of adding to the deficit then that’s the best assurance spending will stay at deficit neutral levels thereafter. He also pointed to an "aggressive set of game changers" that aren’t scored by CBO but that the administration believes will bend down the upward curve in spending over the long term, such as creating "accountable care organizations" to foster provider teamwork to make care more efficient, bundling payments to encourage provider coordination of treatment, studies to identify the best treatments, and mandatory Medicare cuts if spending exceeds certain levels.

By Alex Wayne, CQ Staff

June 22, 2009 -- Senate Democrats have asked the Congressional Budget Office to examine three proposals that would require large businesses to contribute to their employees’ health coverage, according to a document released Wednesday.

The document was distributed by staff of the Health, Education, Labor and Pensions Committee, which is marking up a draft health care overhaul bill by its chairman, Sen. Edward M. Kennedy, D-Mass., this week.

According to the document, CBO has been asked to estimate the budget effects of two competing proposals that would require businesses to help pay for their workers’ private insurance, plus a third that would require businesses with many employees on Medicaid to pay extra taxes to the government.

Such requirements are known in the business community as "pay-or-play" mandates — and are hotly contested by groups such as the U.S. Chamber of Commerce. But Democrats want a business mandate to accompany a mandate that individuals obtain insurance in order to foster what they call "shared responsibility" for health care coverage.

The document says that “small businesses” would be exempt from any of the "pay-or-play" requirements — but it does not define small business. In a section of Kennedy’s bill that would provide tax credits for small businesses to help them purchase insurance for their employees, the term is defined as a business that employs fewer than 50 people on average in a year and pays an average wage of $50,000 or less.

Under the proposals CBO is considering, businesses that fail to provide coverage meeting minimum criteria spelled out in the bill would have to pay either a flat fee to the government or a tax equal to a percentage of their payroll. A bill that House Democrats have written would require employers to pay 8 percent of their payroll to the government if they don’t provide coverage to their employees meeting the legislation’s requirements.

Also Wednesday, the HELP committee adopted 20 amendments to its bill that were considered noncontroversial. The amendments, which weren’t immediately available to the press, were adopted on a voice vote.

Sen. Christopher J. Dodd, D-Conn., who is leading the markup while Kennedy is being treated for brain cancer at home in Massachusetts, said the committee had adopted 240 amendments to the bill. Republicans alone had offered more than 350 amendments to the measure, which they have criticized for being too costly and incomplete.

By Alex Wayne

June 22, 2009 -- Details of an agreement the White House announced this weekend to reduce prescription drug costs for seniors remain murky, leaving unclear how much money the deal might provide for a health overhaul.

Senate Finance Chairman Max Baucus , D-Mont., reached the agreement with the Pharmaceutical Research and Manufacturers of America (PhRMA) in recent weeks, after health care industry groups promised the White House last month they would come up with proposals to reduce the growth of health care spending.

Under the deal, drug manufacturers will give most seniors a 50 percent discount on brand-name drugs when they enter a gap in Medicare’s prescription drug coverage known as the "doughnut hole." The gap applies to seniors who require more than $2,100 in prescription drugs per year. Under current law, they must pay full price for the drugs until they reach $6,100 in spending, after which Medicare covers 95 percent of the cost.

"This is a significant breakthrough on the road to health care reform, one that will make the difference in the lives of many older Americans," Obama said Monday during an event trumpeting the deal.

Lawmakers intentionally created the "doughnut hole" to hold down the cost of the prescription drug benefit when it was enacted in 2003. Ever since, the coverage gap has been a nuisance for seniors and their advocates in Washington. Members of Congress regularly make proposals to close the gap — something the Congressional Budget Office estimates would cost $134 billion over the next ten years.

Baucus and PhRMA say their deal totals $80 billion over ten years. But it is unclear how that number is derived. It is also unclear what policies the agreement may cover beyond discounts for seniors. Baucus and his committee have been considering a number of ways to pay for a health overhaul that might affect drug companies, including an increase in the rebates companies are required to provide Medicaid when it buys drugs.

PhRMA senior vice president Ken Johnson made clear the association expects the $80 billion to cover any savings Baucus might seek from the industry.

"We have an $80 billion agreement with respect to health care reform," Johnson said.

Baucus aides did not specifically respond when asked if Baucus had promised drug companies that he would not seek more than $80 billion from them toward the cost of an overhaul.

"These conversations resulted from the industries going to the White House and volunteering to save $2 trillion over 10 years," one Baucus aide said. "Following that announcement, Sen. Baucus invited those groups to his office and asked them to put pen to paper and tell him exactly what they were willing to do."

The agreement may be a win for PhRMA if it limits the cuts in government reimbursement the association's members might suffer under Baucus’ overhaul bill while also casting drug companies in a positive light.

And the agreement could be important to Baucus and other Democrats in winning public support for an overhaul. A poll last week by Diageo/Hotline showed that people over age 65 are less supportive of a health overhaul than any other age group, possibly because there has been much talk in Congress about paying for an overhaul in part by cutting Medicare spending.

"I think what they’re reading about are big Medicare savings, and they're worried about the possible impact," said John Rother, policy director at AARP, which supports the deal with PhRMA. "Obviously something like this will go a long way to building a basis for enthusiasm and support among the 65-plus population."

But any of the $80 billion promised by PhRMA that goes to seniors in the form of drug discounts can’t be counted toward paying for a health overhaul, which may cost $1 trillion or more.

"There's no savings to the federal government involved in these discounts," Rother said. "If you're going to ask the pharmaceutical industry to help finance health care reform, you’re going to need something more than this discount program."

Johnson, of PhRMA, said the agreement includes additional provisions, many of which he said would save the government money. "It's still too early to tell what the final numbers will look like, but I suspect that more than half of the $80 billion will be scoreable savings" for the government," he said.

He declined to detail provisions other than the discounts; the agreement, he said, has to be scored by the Congressional Budget Office before it becomes final.

Drew Armstrong contributed to this report.