Issue Brief

November 2002

What will the next Congress do about health care policy?   

Introduction   

It is always fun to speculate about the future, even though one may be completely off base. This year, in particular, prognosticating poses an interesting challenge because for the first time since the Eisenhower years, the Republican Party has a real hold on the policy-making branches of the federal government. Admittedly, there was Republican control for a few months in 2001, but the President's mandate was fragile since his election was a virtual tie that had to be broken by the Supreme Court. And the Senate was in Republican control only by the slimmest of margins which quickly proved to disappear. This time is different.

After two years of gridlock in which almost nothing got done on health care, what will the next Congress bring?

No one knows for certain how events will play out, but by reviewing past efforts, public statements, last year's Presidential budget submission, and conversations with several Congressional staffers, one can make some guesses.

An Overview

A recent analysis by the Institute of Medicine (IOM) at the National Academy of Sciences stated that the United States health care system is in crisis and called on the President to act immediately. According to a panel of experts appointed by the IOM, “The health care delivery system is incapable of meeting the present, let alone the future, needs of the American public.” The panel called upon the Bush Administration to test several possible solutions, including universal insurance coverage and no-fault payment for medical malpractice in a handful of states.

Secretary of Health and Human Services, Tommy Thompson requested this study, so it is likely that the administration will pursue at least some of its recommendations. There are however, severe budget constraints looming on the horizon and the lack of money will have a major influence on the type and viability of proposals for reform. There also is a major demand on the Administration of both time and resources for the war on terror and a potential conflict in Iraq. 

Having acknowledged the difficulties, what are the areas in which there is general agreement that action is likely to occur? Perhaps the easiest way to think about them is on a programmatic basis.

Medicare

Medicare was established in 1965 to address a serious national health care problem—i.e., the fact that most senior citizens could not afford to buy health insurance. Seven years later the law was amended to add disabled persons to the Medicare program, and they started to receive their first benefits in July of 1973. Today the program covers 40 million seniors and disabled citizens and is estimated to cost $230 billion in 2003. While private health insurance has altered coverage to adjust to the changing world of health care over the last 40 years, Medicare has lagged behind in adjusting to these changes. The most critical shortcoming in the program is that its current benefit package does not include coverage for prescription drugs.

The President has said he wants a prescription drug benefit for Medicare beneficiaries passed immediately, and there is much agreement in Congress that this needs to be done.

What will it look like? Many believe that a plan similar to the Tripartisan Bill (S.2759) in the 107^th Congress will likely emerge as the solution to the prescription drug problem next year. That bill provided a voluntary drug benefit for all Medicare beneficiaries.  Competing insurers delivered the benefit in a similar manner to the system currently in place for federal employees in the Federal Employees Health Benefit Plan (FEHBP). It had a monthly premium and cost-sharing, which varied based on the individual's choice and a deductible of $250 which would be indexed in future years. It also included premium subsidies and cost-sharing reductions for low-income seniors. (For more details see the NIHP Issue Brief, Prescription Drugs for Seniors:  What Has Congress Done? What Has Congress Not Done?  August 2002). This proposal or something similar will cost $400 billion according to the Congressional Budget Office over the next ten years.

There will probably not be other large changes in Medicare in the next Congress because just dealing with the prescription drug issue is likely to require a Herculean effort. The conservative think tanks and many people close to the Republican leadership would still like to change Medicare and put the whole program into an FEHBP type of structure, but that will probably not happen in the next Congress.

Medicaid

Medicaid is the state-administered program that operates under federal guidelines to provide health care to low-income people.  According to the President's Budget for 2003, “Almost 37 million people were enrolled in Medicaid in 2001. It covers one-fourth of the nation's children and is the largest single purchaser of maternity care and nursing home/long-term care services. The elderly and disabled comprise one-third of Medicaid beneficiaries but account for two-thirds of Medicaid spending.”

 The states and the federal government share the cost of the program, with the federal share ranging from 50 percent to 77 percent depending on the per capita income in the state. The average federal match is 57 percent and the program is estimated to cost the federal government $159 billion in 2003. The total program costs will be approximately $280 billion. 

There is some discussion that the new Congress will try to change this program to a block grant program. Under a block grant program design, the federal government could cap its contribution and get a better control of its cost. This type of policy change has generated significant opposition in the past, but the states may be willing to go along with this change if they can trade it for greater flexibility in running the program. Advocates for the aged and disabled are likely to oppose it strongly even if the states go along with the idea. Since the states are also experiencing severe budget crunches at this time, the likely outcome of making Medicaid a block grant is a reduction in coverage either of the care covered or the number of people eligible. That, in turn, will increase the number of uninsured.

The Uninsured

The President and leading members of Congress of both political parties have expressed serious concerns about the increasing numbers of Americans without health insurance. This problem has become more serious over the last two years as more people have lost their jobs and, along with that, their employer-provided health insurance. Recent estimates show that one in seven Americans are uninsured.

In his budget for this year, the President proposed a refundable tax credit for the purchase of health insurance by people who are not currently covered by either an employer plan or a public program. The credit was designed to help people purchase coverage in the individual market by subsidizing a percentage of premium costs up to a maximum amount. The subsidy was greater for low-income people (up to 90 percent) and phased down as income rose. The maximum subsidy was $1000 per adult and $500 per child up to two children. A low-income family of four with two parents would thus qualify for a maximum credit of $3000. This proposal is likely to reemerge this year although the numbers may be different.

Other alternatives that may appear include different types of tax subsidies and the expansion of Medical Savings Accounts from the Republicans and an increase in eligibility for Medicaid and SCHIP from the Democrats. Provider groups are also planning to push for long-term care reform in Medicaid in exchange for greater Medicare and Medicaid funding in the next two years.

Medical Liability

The subject of medical liability and tort reform has been a simmering source of controversy between Republicans and Democrats for several years. Tort actions are civil lawsuits, usually for money, against a person, company, or organization whom the defendant accuses wrongful conduct. Medical liability lawsuits usually fall into this category. 

Now that there is one-party control of Congress and the White House, it is possible that tort reform will emerge as one of the major changes in the next Congress. Earlier proposals by the Republican majority in the House have approached it through various ways, but it has not yet been developed as a full-fledged policy change. That is likely to happen this year.

The advocates for change argue that many juries have awarded excessively large sums to people who have been injured through medical malpractice, and these awards are causing such problems for providers and insurers that they damage the entire system.   Further, they argue that the current system is merely a way for trial lawyers to make large sums of money, and it does not really help the injured parties that much.

The opponents of federal tort reform make two arguments, one substantive and one structural. The substantive argument is that injured parties must have a right to redress in our system of law and the Congress should not be limiting or impairing their ability to pursue that in any way. The structural argument they make is that tort law is the traditional purview of the states, and most of these cases involve state jurisdictions and state courts. They argue the federal government has no business sticking its nose in it. 

This debate is part of what has made it so difficult for the Congress to come to some agreement on a “Patients Bill of Rights.”  The American Medical Association has changed its focus on the Patients Bill of Rights to tort reform and now says its highest priority is medical liability. The subject of tort reform has also entered into efforts to advance new policies in the realm of patient safety. In last month's NIHP issue brief on medical errors, we noted that one of the major controversies in Congresswoman Nancy Johnson's bill on medical errors was its granting of “privilege” to individuals who report medical errors to the new Patient Safety Organizations the bill established. 

It is too soon to know what form tort reform will take in the next Congress, but the proposal from the National Academies of Science offers one way to approach the problem. They recommended that four or five states should test alternatives to medical malpractice lawsuits as a way of compensating patients who contend they have been injured by doctors and hospitals. According to Sally J. Greenberg, a lawyer at Consumers Union, “There’s no credible evidence that pure tort reform with strict caps on damages awarded by a jury, brings down medical malpractice rates. But a fair and equitable no-fault compensation system could conceivable be beneficial to patients.” Under their proposal, patients who waive the right to a jury trial could receive “faster, fairer, surer compensation.”  They propose that states could limit payments for pain and suffering and other non-economic damages, and the federal government would subsidize insurance for health care providers who compensate patients for “avoidable injuries.”   Another idea they offer is to have state agencies adjudicate claims and decide proper compensation using a schedule of damages or other benchmarks. 

Other Possible Factors

MedPAC—under the leadership of chair Glenn Hackbarth and new Executive Director Dr. Mark Miller—seems intent on repairing bridges to Congressional leaders and doing the research and analysis necessary to help Congress with a better design for Medicare payment policy. Our NIHP Chair, David Durenberger, has been a member of MedPAC since September and reports optimism from committee members, new and old, that the commission can play an improved role in coming debates on health care and medical reform.

Senator Bill Frist, M.D. has told us confidentially and The New York Times more openly on November 27 that he plans to unveil a blueprint for health policy reform in early 2003 and take his message on the road in the next two years. Often rumored as a replacement for Vice President Dick Cheney, Senator Frist has been invited to speak as part of the NIHP’s Distinguished Leadership Series in February 2003.

Conclusion

Obviously, no one knows for sure what will happen next year. The war on terror and the possibility of war in Iraq will probably take precedence over most domestic issues. But, the problems at home will not go away and as international events sort themselves out, voters will again become vocal about their concerns over health care, education, the economy, other domestic problems and the federal budget deficit.

Without a divided government, the Republican leadership in the White House and the Congress will have new opportunities to put their policy ideas into action. Although there is much punditry that says they will not be able to do the things they want because of the threat of filibusters in the Senate, that is not necessarily so. It is true that in the consideration of most legislation any senator who really opposes an idea can filibuster it and there will have to be 60 votes to end the filibuster. But, most of the proposals discussed above involve policy issues such as taxes, and entitlements such as Medicare and Medicaid that are often dealt with in a portion of the budget process called reconciliation. Under the provisions of the Congressional Budget and Impoundment Control Act of 1974, this legislation is handled on the Senate floor with special rules that preclude a filibuster and require only a simple majority (51 votes) for passage.

Given that reality, the Republican Party has a great opportunity to make its mark on health policy in the next two years. It will be interesting to watch what it does.

Author

This Issue Brief was written by Eileen Baumgartner, NIHP Senior Researcher and   former Democratic Staff Director of the House Budget Committee.