Obama promised Medicare beneficiaries that he’d veto any legislation asking them to sacrifice without also raising taxes on upper-income earners. But he didn’t issue them a complete pass.

Instead, he’s proposing to raise a range of costs for future retirees, while mostly shielding Medicare’s 48 million current beneficiaries. Under the president’s plan, starting in 2017:

_Upper-income beneficiaries would pay higher monthly premiums for outpatient and prescription coverage. Eventually about a quarter of all Medicare beneficiaries would be hit with the higher income-related premiums that only a small share of seniors now pay.

_Newly signed-up beneficiaries would pay a penalty if they also purchase private insurance that covers all or most of Medicare’s copayments and deductibles. Administration officials say such insurance encourages over-treatment.

_New beneficiaries would pay a $100 copayment for home health services, unless they have just been discharged from a hospital or nursing home.

_New beneficiaries would pay a higher annual deductible for outpatient services. The so-called Part B deductible, currently $162, is indexed for inflation. It would go up by $25 for new enrollees in 2017, 2019 and 2021.

“You can’t reduce the deficit without making some people pay more or get less,” said Paul Van de Water, a senior analyst with the Center on Budget and Policy Priorities, which advocates for the poor. “If you think there should be no cuts in Medicare, anywhere, then this obviously goes too far. If, at the end of the day, you recognize that they have to make some further reductions, then these are about the best you can do.”

Try telling that to the pharmaceutical industry. Obama’s plan would cut their payments by $135 billion over 10 years, accounting for more than one-third of his total health care savings. The president wants drug makers to pay rebates to Medicare, along the lines of what they now pay Medicaid. The Pharmaceutical Research and Manufacturers of America says it would lead to the loss of thousands of jobs in the industry.

Hospitals and nursing homes, slated for a mix of cuts and efficiency measures, are also complaining. The American Hospital Association says if Obama’s plan becomes law, hospitals and related businesses would lose 200,000 jobs by 2021.

Doctors also have reason to be concerned. Without endorsing any particular fix, Obama’s plan assumes that Congress will address the main issue facing doctors: a scheduled 30 percent cut in Medicare payments next year due to a previous budget law gone awry. A solution being considered by congressional advisers would cut payments to specialists and freeze rates for primary care doctors.

Obama also wants to give additional authority to a new agency called the Independent Payment Advisory Board, which could force further cuts for medical providers.

Read the whole thing here.

The Hill reported that the Obama White House attempted to calm Americans’ fears of the dreaded death panels:

The Medicare policy will pay doctors for holding end-of-life-care discussions with patients, according to the Times. A similar provision was dropped from the new healthcare reform law after Republicans accused the administration of withholding care from the sick, elderly and disabled.

However, an administration spokesman said the regulation, which is less specific than the reform law’s draft language, is actually a continuation of a policy enacted under former President George W. Bush.

“The only thing new here is a regulation allowing the discussions … to happen in the context of the new annual wellness visit created by [healthcare reform],” Obama spokesman Reid Cherlin told The Wall Street Journal.

In 2003, Medicare added a consultation visit for seniors new to the program, according to the Journal. Another 2008 law, enacted under Bush, said the visit can include “end-of-life” planning discussions.

However, what The Hill’s Jason Millman forgot to mention in his article was that President Bush VETOED the 2008 bill and the Democrats, along with some “good-willed” Republicans OVERRODE Bush’s veto forcing him to sign the legislation into law.  The bill dealt with doctors’ reimbursements and more, but the Democrats slipped in the end-of-life planning by opening up the Social Security Act, which I have stated many times is dangerous. Once the act is changed, it is difficult to amend again and allows for tinkering with the Medicare fee schedule and covered services definitions and requirements

.

For the record, here is the text that the Democrats changed:

(b) Revisions to Initial Preventive Physical Examination-

(1) IN GENERAL- Section 1861(ww) of the Social Security Act (42 U.S.C. 1395x(ww)) is amended–

(A) in paragraph (1)–

(i) by inserting ‘body mass index,’ after ‘weight’;

(ii) by striking ‘, and an electrocardiogram’; and

(iii) by inserting ‘and end-of-life planning (as defined in paragraph (3)) upon the agreement with the individual’ after ‘paragraph (2)’;

Comedy gold indeed, when Democrats blame Bush for, um, everything wrong in America, and then use him for cover on healthcare.

And while this may not be a precise analogy for the way things are done in Washington, it’s close enough.  “Just pay processing and handling” is our metaphor for the entire panoply of Washington speak that produces programs, the costs of which are often orders of magnitude more than originally represented.  We are, almost daily it seems, pitched free lunches or  “benefits” by our government.  And while the seemingly irreversible debt we are currently piling on our children and grandchildren is truly unprecedented in American history, this administration did not invent the government “free lunch” shell game; they’ve simply refined and extended it with complete abandon.  As Ronald Reagan so aptly warned, “The nine most terrifying words in the English language are I’m from the government and I’m here to help.”

Let’s count a few of the ways American consumers and taxpayers have been sold a bill of goods whereby the bill for the goods is, or will be, much higher than the assurance given in the Obama-Pelosi-Reid sales pitch.

Everyone can recall the “deficit neutral” healthcare reform bill.  It wasn’t going to add a dime to the deficit “now or in the future.”  Then, no sooner than you could transfer a bill into an Act (a law) the essential quarter-of-a-trillion dollar “doc fix,” which had been yanked from the original healthcare reform bill to make it “deficit neutral,” was, a short time later, enacted separately blowing the deficit neutral promise to smithereens — just pay separate processing and handling.

The Pelosi-Reid-led Congress established new high-risk pools in the new legislation and allocated $5 billion to take care of the chronically ill and uninsured until the government-controlled insurance exchanges, which are to be set up under the new law, are up and running in 2014.  But no sooner, it seems, was the legislation signed into law than the Chief Actuary for Medicare estimated that the tax-payer funded high-risk pools would run dry in 2011 or 2012, “resulting in substantial premium increases to sustain the program” — another new, hidden and unexpected cost compliments of Obamacare.  Just pay separate processing and handling.

Then, while throwing around a few billion here and a few billion there, your Congress established another $5 billion fund to offset health-care expenses for early retirees.  While at first blush the fund would seem to subsidize both public sector and private sector early-retirement plans, in reality, relatively few private firms offer early retirement plans, while such lush benefit programs are common in the public sector, compliments of the taxes paid by American private-sector wage earners. This has all of the makings of the biggest boondoggle in the legislation because it could eventually morph into a massive backdoor bailout for cash-strapped states, much like the job-saving bill for which Speaker Pelosi has recalled congress to subsidize state and local governments so that they can continue to avoid facing their bloated payrolls.  This temporary fund is also set to expire in 2014, but the same Medicare actuary has warned that this $5billion fund will also run dry before then.  We find it hard to imagine that the public employee unions will stand by and let the temporary subsidy lapse for lack of funding.

Many state and local governments are going broke (or have gone broke) paying for such lavish promises they’ve made to, or, more accurately, they’ve had squeezed out of them by, public-employee unions.  Less than a year ago the Government Accounting Office estimated that states and localities had more than $530 billion in unfunded liabilities for “post-employment” benefits, primarily for retiree health care. One can bet that states like New York and California will leap at the chance to offload their early retiree costs onto the feds, and that public-employee unions will push hard to expand funding for the early retirement subsidy and to make it permanent. No matter that this federal subsidy was simply supposed to tide these bloated plans over until 2014 when the government controlled insurance exchanges are to become effective.   Congress naively expects individual union retirees to transfer into the exchanges in 2014, but it’s hard to imagine unions surrendering their gold-plated plans when the rest of the country is picking up the tab.

So while Obamacare is barely six months old, the nation is quickly discovering what opponents of the legislation (which none of the legislators voting in favor bothered to read) argued all along: that it will cost taxpayers far more than expected and send health-care spending into the stratosphere.  The immense federal bureaucracy that is being cobbled together, i.e., rule writers, regulatory enforcers, thousands of new IRS agents (to monitor compliance in order to tax those who they find not in compliance) will cost hundreds of billions of new incremental dollars.  Just pay separate processing and handling.

The Congressional Budget Office, shortly after the President signed the Obama-Pelosi-Reid health-care reform legislation into law, reported (a bit late, we think) that the new level of deficit spending and the attendant debt that it imposes on the country is, to use their words, unsustainable. This is, of course, a concern we have voiced in these essays on numerous occasions during the past year.  Our concern is not merely the unbridled government spending which drives the deficit and the debt but, even more critically, that the indebtedness the government shows on its books doesn’t begin to tell the story of the mess we’re in. That’s because almost every government entity, federal, state, county and local has gotten into the very bad habit of utilizing multiple “sets of books” to account for debt, deficits, and unfunded liabilities. These include how they account for welfare programs and the costs of their own employee benefits. In some cases, most notably concerning health insurance continuation coverage, there is virtually no unfunded liability disclosed to taxpayers. But trust us, it’s there. It’s just almost impossible to find.  For example, the federal government does not include the unfunded liabilities of Medicare, Social Security, or its own retirement programs as part of the official US debt.  That’s because it is not considered public debt.  It’s money the government owes internally and, theoretically, the government can renege or reschedule these obligations.  To make matters worse, virtually all federal and most non-federal public sector entities now also pay higher salaries and offer better benefits to their employees than can be provided in the private sector (which, incidentally, provides the largess sloshing around in the public trough).  Small wonder public sector employment has been growing along with public sector union membership.

The massive cost of early retirement for public sector employees, which is often available 10-25 years earlier than is allowed by Social Security, together with free or highly subsidized health insurance during the early retirement years, is generally hidden from taxpayers. There are huge, absolutely unsustainable, understated and underfunded liabilities that are largely hidden from the taxpayers who pay the tab. Misleading or incomplete actuarial and accounting methods that the government would consider criminal in the private sector has become a common ruse employed by public-sector agencies. A report prepared by Andrew Biggs, a scholar from the American Enterprise Institute, states that the disclosed “debt” of non-federal public entities is approximately $2.2 trillion (the sum total of all state and municipal bonds), and that the additional “off balance sheet” unfunded liability for non-federal public sector pension plans is currently stated to be around $400 billion.  According to Biggs, the actual unfunded liability for these public sector pension plans would be $3.5 trillion if more realistic and conservative interest rate assumptions were utilized.   Admittedly, the precise level of these real but mercurial obligations is very difficult to pin down.  What is certain, however, is that the bill, when it is quantified will be far greater than the public imagines, and these chickens will come home to roost.

The true federal debt (including unfunded obligations) would, according to many experts, including the President of the Dallas Federal Reserve Bank, exceed $107 trillion, if one, integrated balance sheet were used — not the $13.0 trillion currently stated as “debt”. The result is that the total federal and non-federal government debt (if unfunded liabilities are included) is an estimated $112+ trillion, or SEVEN TIMES higher than the total $15 trillion currently disclosed to taxpayers.

We could go on and on (and probably will in future essays) writing about the gathering storm building as a result of our profligate elected officials.  They are almost all very outspoken about what they have, are and will do for us and, simultaneously, very soft spoken about what it is all really costing us.  They seem to believe we’ll walk down the primrose path over and over again and just pay separate processing and handing.

By Hal Gershowitz and Stephen Porter

Essentially, where Medicare goes, insurers follow for the guidelines in covered services and baseline physician fee schedules for private payers as well as worker’s compensation and automobile insurance companies in most states, as well as Medicaid and Medicare itself.

What Pelosi has effectively done is saved the insurance companies who use the Medicare fee schedule millions of dollars of payouts to physicians on their claims–regardless if the patient is a Medicare patient.  I’m not seeing the insurance lobby out there right now, are you?  However, on the provider side, the doctor’s lobby groups are outraged at Pelosi’s failure and the damage this inaction will cause physicians–especially private–and force them to layoff employees to make up for the loss in reimbursements to cover their enormous monthly overhead costs.

Pelosi is completely ignorant of the doctor’s fee schedules and how their reimbursements are calculated.  In a multilayered approach and working with the Centers for Medicare and Medicaid Services (CMS), the AMA Resource-Based Relative Value Scale (RBRVS) is used and the AMA/Specialty Society Relative Value Scale Update Committee (RUC) makes annual recommendations regarding new and revised physician services to CMS and performs broad reviews of the RBRVS every five years.  These values have not been adjusted since the 21% fee schedule reduction took effect and for Pelosi to ignore the fact that the doc fix will actually cost doctors to see their patients because their fees will be reduced, but the cost of providing the services and the supplies needed have not gone down and in some cases, continue to rise.  Additionally, student loan payments have not been decreased by 21% for doctors, have they?

The only business segment to ultimately win is the insurance industry.

Real-world exit questions:  If you own a company and your revenue just got nicked by 21%, but your supplies and cost of services has remained the same, how long before you will have to layoff employees to cover your monthly costs?

Do people understand that private practice physicians take most, if not all, of their salaries on assignment?  Physicians must do this because of provider contracts and other variables, but their fees are not a guarantee of payment; claims can be denied in part or in full.  (Some lawyers take their fees on assignment, but it is their choice.)  And now, doctors are being used as political pawns by the Democrats.

Is it possible that the Democrats are attempting to push doctors into the union, say the SEIU?  Only those doctors who are in private practices, not employed by hospitals cannot unionize, so what’s next for them?

Nothing like having a bunch of bureaucrats who have no idea about healthcare, costs of providing services,  running a business, covering overhead, etc. in charge of your salary, covered services, and future.

Finally, this is clearly a Democrat problem, after all, “You won.”  And by that, Americans now understand that to mean that the Democrats are clearly the party of cry-babies, finger-pointers, and blame-shifters.  And job killers, because if your more than $800 billion stimulus and jobs bills actually provided jobs, we wouldn’t need unemployment extenders in current legislation.  Americans would actually be back to work, wouldn’t they, Nan?

Democrat House Speaker Nancy Pelosi will not take up the Senate’s “doc fix” bill, which passed through the Senate on Friday.  A letter from Pelosi reaffirms her position and scolds Republicans for blocking the jobs portion of the bill:

“What is it that Republicans in the Senate and House don’t understand about the need for jobs in America? I see no reason to pass this inadequate bill until we see jobs legislation coming out of the Senate. House Democrats are saying to Republicans in the Senate: Show us the jobs!”

It’s humorous to hear Pelosi whine on this–if my memory is correct the Democrats control both Chambers and passed the $787 billion stimulus bill to create ” jobs, jobs, jobs.”  More than one year later, we now know that the “stimulus failed,” and a second $17 billion stimlus/jobs bill was passed–which somehow still is not enough.

So, we have more than $800 billion in stimulus spending “designed” to create jobs and now Pelosi has the audacity to blame the GOP after the two previous massive, generational-theft stimulus bills failed.  Are you kidding, Nan?

Why not release the remaining slush stimulus funds that have yet to be spent or are they really the escrow account you will need before the elections?  Or are you trying to backfill the failures of the original stimulus, which has proven to be nothing but a big payoff?

Either way, we cannot afford it, and maybe Washington should take a page out of German Chancellor Angela Merkel’s book.

Like a relentlessly advancing cancer, the news about the US fiscal deficit and the accumulated debt, which is its result, keeps getting worse.  Every week the press discloses some supposedly “new” information about either the federal budget, economic failure, projections of economic growth, the effects of the so-called “doc fix” (about which we have written several times), the sorry fiscal condition of state and municipal finances, or some further jobs stimulus proposal, all of which pile more costs on this nation that, if it were a private business, would be considered broke.

Before looking at the most recent spate of deficit and debt related news, let us start with the CBO’s updated March 2010 report which estimated that the cumulative effects of the Administration’s budget proposals would add $9.7 trillion to our current deficit of $14 trillion (an amount equal to approximately ninety percent of our annual GDP and clearly approaching the danger zone).  This amount does not include any spending for enacting climate legislation or the effect of rising interest rates to service our debt or spending for contingencies from unplanned events which will inevitably occur.

Moreover, it projects economic growth every year at four percent when we have had only two quarters of growth at four percent or higher in the past five years and, at least since 1982, have never had four consecutive years of growth as high as four percent per annum.  That overly optimistic CBO assumption if not realized will raise the deficit and the accumulated debt, perhaps by trillions of dollars.

In recent days we see once again the fantasy of the most recent budget the president presented.  After just a few months it is outdated.  Mr. Obama has just asked Congress for an additional $50 billion in aid to state governments.  It is uncontested that state and local governments are in terrible fiscal condition and, of course, they can’t print money to inflate away their accumulated debts.  Cumulative state shortfalls in 2009 and 2010 alone are approximately $310 billion and projections for 2011 and 2012 combined are for an additional $300 billion.

State governments have in the past few years either borrowed with abandon or resorted to accounting gimmickry to approach balancing their budgets.  They have consistently looked for new sources of tax revenue or raised taxes on existing sources, making a reality of Ronald Reagan’s statement about government: “if it moves, tax it.”

The figures are appalling.  California alone projects a $9 billion shortfall in 2011 but when the unsolved 2010 budget gap is added in, the total shortfall would be $19.1 billion (22.6 percent of the one year budget).  This hall of shame also includes Illinois where the shortfall projected for 2011 is a whopping 30.1 percent of the budget, New Jersey at 37.4 percent, Maine at 32.1 percent, Michigan at 26.4 percent, Vermont at 31.1 percent and Wisconsin at 25.3 percent.

How did we get to this state (no pun intended) where services now need to be drastically cut, employees laid off, contracts cancelled and previously negotiated benefit packages renegotiated?  Simple.  Politicians love to promise and spend and at the state and local level, unions have organized state employees and have demanded pay and benefit packages way beyond what is paid for like work in the private sector.  With union representatives sitting on pension boards or having its employee members negotiating on behalf of government, the unions are, in effect, on both sides of the table.  These devastating numbers are even more stark and depressing when we consider that over the past two years the federal government has provided $140 billion in state budgetary assistance…approximately thirty to forty percent of state shortfalls.  The effect of this assistance seems only to have postponed the day of reckoning and allowed states to increase hiring and avoid necessary fiscal discipline.  Since 2007 public payrolls have increased while the private sector went through the worst downturn since the Great Depression with unemployment, even with a nascent and fragile economic recovery underway, still hovering just below ten percent.

After that depressing digression, let us return to the president’s proposal for a new $50 billion aid package for the states.  The president has written Congressional leaders to say that the package is essential to avoid “massive layoffs of teachers, police and firefighters.”  As reported in the Washington Post the president calls this a request for “targeted investments.”  The president also wants to extend unemployment benefits which raises the cost of his package to $80 billion.  And while no one wants to be heartless to the jobless who are in great economic distress, these benefits have been extended several times already and cannot (nor should not) be extended indefinitely.

Wasn’t this all known in the White House when the president first sent his budget to Congress?  Why did this request dribble out later packaged as it always is in a wrapper of being necessary to avoid layoffs affecting our children or the public’s safety.  What about the swollen bureaucracies of other state agencies?  Why doesn’t the president mention the incredible cradle to grave benefit packages that allow some workers to retire at age 50 at high percentages of their final year’s salary, with health benefits for the rest of their lives.  Doesn’t this answer become more and more apparent with every additional request for money?  It is because that is the kind of America Mr. Obama wants…. an America that takes more and more resources out of the productive growth producing private sector and pays it over to the non-productive public sector.  Even France, the poster child for excessive public spending, seems to be getting the message that this kind of model doesn’t work but Mr. Obama is imposing, in step by step increments, France’s failed statist approach on the unwitting taxpayers of the United States.

We might also note, as we did in some detail in earlier essays, that the functions the federal government has been funding to defray these state costs have been, since the founding of our republic, the responsibility of the several states.  This raises the obvious question of why the citizens of those states who have lived within their means should have their federal tax dollars used to pay for the unbridled profligacy to which the spendthrift states listed above have obligated their own taxpayers.

The other bit of recent bad budget news which the president recently announced was the so-called doc fix to reverse the 21 percent pay cut scheduled to take place for doctors who treat Medicare patients.  Surprise, surprise.  This fix, as Mr. Obama noted, has passed Congress every year since 2003.  However, he is now complaining that Republicans are using budget austerity (demanding commensurate cuts in spending elsewhere in the bloated federal budget)  as an excuse to prevent a long-term solution to this problem.  How he dissembles.

Just a few short months ago the doc fix was part of the president’s healthcare reform legislation but Congressional leaders removed it from the bill so the CBO could certify that the legislation was revenue neutral and did not “add one dime to the deficit” as the president intoned daily.  So in a most disingenuous piece of fiscal trickery Speaker Pelosi and Majority Leader Reid separated the doc fix from the overall healthcare reform legislation and put it in a separate bill, claiming it was a totally separate issue.  Voila; the CBO could now certify the ten-year cost of the healthcare legislation as not increasing the deficit but the very same costs are now to be incurred in a separate law.

So there we have it; the costs of the annual fix which, if included in the healthcare reform bill, might have prevented its passage, is later acknowledged to cause an increase in the deficit by the same amount. This Pelosi-Reid grand-scale shell game, to which the President acquiesced, fooled no one except, seemingly, the CBO, which actually did know under which shell “the fix” was in. Yes, of course, the CBO knew, the White House knew, the Congressional Democrats knew, the compliant main-stream press knew, we knew (and loudly complained at the time), and now everyone knows.  How stupid do these politicians think the American people are?

Make no mistake about it; all of this is not an accident.  Every incremental piece of legislation involving further federal spending is designed to disguise the further centralization of power in Washington.  The inescapable conclusion is that the strategy of Mr. Obama and the Democratic left which holds majority power in Congress is to irreversibly and fundamentally change America by putting in place policies, programs and funding mechanisms that will be difficult, if not impossible, to reverse without devastating costs to the ties that bind us as a nation, and which raise the possibility of terrible social upheaval.

Medicare, the federal government’s health care insurance plan for the elderly and disabled established in 1965, is largely funded from payroll taxes and FICA, and supplemented with premiums paid by its beneficiaries. It is administered by the Department of Health and Human Services via the Centers for Medicare and Medicaid Services (CMS), and is the place to look to see how our government will administer a health care system.

Since 1998, the SGR has been a component of the formula used to calculate physician payments for providing services to Medicare patients. It is based on the GDP and not on actual health care practice costs (which have been rising faster than the GDP.) The SGR produced steep cuts in physician compensation for services to Medicare patients, in hopes that by paying individual physicians less, overall health care cost would decrease.

Unfortunately, this approach has failed.

Pay to physicians caring for Medicare patients has been stagnant, while health care costs have gone up. Many physicians report receiving little net income or are barely breaking even for their care of Medicare patients. Congress has stepped in nine times since 2002 to prevent or reverse increasingly larger Medicare physician payment cuts mandated by the SGR formula. As a contingent of its support for the health care reform passed in March, the American Medical Association demanded that the flawed SGR formula be abolished.

The doctors are still waiting.

Congress had chosen to delay the cuts three times this year, but voted Thursday to allow the 21% cut in physician reimbursement to take effect now. The impact of this will be dramatic. Medicare patients & those working in the medical field are already paying the price for Congress’ inaction. An AMA poll of over 9000 doctors last month revealed that delayed Medicare payments had already caused them to postpone or cancel scheduled services to Medicare patients, while 17% of these doctors report holding up paychecks or laying off their staff – with over 1500 workers affected by this. Physicians also report limiting the numbers of Medicare patients they will see, and some have opted out of Medicare altogether.

One might consider Congress’ inability to resolve the SGR predicament as the “anti-health, anti-stimulus bill.” The cost of using the flawed SGR formula was not factored into the cost of health care reform, and it is not going away. What will go away are doctors willing to care for Medicare patients, despite the promise “if you like your doctor, you can keep him.”

The SGR problem should have been solved before comprehensive health care reform was signed into law.