Yves Smith touched off a furious debate this weekend with her blog post on how the Roosevelt Institute, the Center for American Progress and the Economic Policy Institute accepted Pete Peterson’s money to develop  a “package of solutions” for closing the federal deficit and present them at the Peterson Foundation’s annual Fiscal Summit.    Smith asserted that the participation of ostensibly liberal think-tanks in the effort legitimized the “fiscal crisis” narrative, and in the case of the Roosevelt Institute, meant that “the arch-enemy of Social Security, Pete Peterson, rented out the good name of Franklin Delano Roosevelt” to further his goals of slashing the social safety net.

Andrew Rich of the Roosevelt Institute,  Matt Yglesias at the Center for American Progress and Larry Mishel of EPI all asserted that Smith’s concerns were unfounded, and aggressively defended the liberal integrity of the plans submitted by their respective organizations.  So I decided to take a closer look at the policies in the budgets submitted by each organization.  I found the plans offered by the three “progressive” organizations more disappointing than I have ever guessed.

Peterson cherry picked his participants wisely.  All three “liberal” groups totally abandoned the proven progressive health care policy that could fully fix any deficit problem.

While Medicare and Medicaid are technically what drives government spending, they are not the problem. They are both dramatically more cost effective than our broken private insurance system, which is what is actually driving all our health care cost radically higher than the rest of the industrialized world.  The projected deficit is due mainly to historically low tax rates, massively unnecessary military spending and most importantly a totally broken health care system.

The “progressive” solution to our current health care problems has historically been to copy the models of nations with cheaper and more efficient systems: it could be fixed by adopting the progressive solutions of socialized medicine (VA for all), or single payer (Medicare for all). If those are “too big a change,” most of the benefits of single payer can be replicated following the model of countries like Germany and Japan and adopting all-payer, where the government plays a role in setting uniformed reimbursement rates that all private insurance companies most pay.  Adopting any of these models would effectively eliminate our long term deficit.

Yet none of the three “liberals” deficit plans even come close to calling for any of these proven progressive solutions for health care. Only one of them, EPI, includes a moderately strong public option. “Tort reform” gets more play than single payer.

The Roosevelt Institute plan for health care:

  • Adopt bundled payments through Medicare.
  • Limit awards for medical malpractice torts.
  • Institute a public option, controlling non-Medicare costs to 3 percent of GDP.
  • Fund comparative effectiveness research, then automatically implement recommendations.
  • Require Medicare to directly negotiate for price with drug manufacturers.
  • Enact a permanent “doc fix” with 0 percent update through 2035
  • Adopt a regionally competitive model for Medicare fees and payments. Rather than having a national system for fee and payment updates, we will direct CMS to begin updating these payments each year only by region. Payments will vary based on increased cost per capita, but they will average out to GDP plus 1 percent. After 2021, they will average out to grow with GDP. To claw back the cost of a permanent doc fix, physicians’ fees will update at an  average rate of GDP minus 3 percent until 2021, after which they will update with GDP.
  • Repeal the health insurance industry’s monopoly exemption, increase price transparency, and allow states to pool insurance markets. We will permanently repeal the monopoly exemption  for insurance companies, allowing the Department of Justice to undertake any necessary and applicable investigations that apply under American competitiveness clauses. We will allow states to pool their insurance markets through mutual agreement, allowing them to aggregate their market power.

Note that the Roosevelt Institute plan doesn’t even call for what became the significant progressive compromise from single payer in the health care debate, an immediate public option. Instead, it calls only for a “trigger” that might make a public option available at the earliest by 2022 if cost continue to increase. If a robust public option can significantly reduce the deficit, which the CBO has concluded, what possible justification exists for waiting a decade to use it? So the Roosevelt Institute plan to reduce the deficit is to needlessly waste a few hundred billion dollars.

Center for American Progressive Plan for health care:

First, the Affordable Care Act currently exempts certain health care providers—most significantly hospitals—from any actions taken by the IPAB. [...]

Second, adding a public health insurance option to the new health care exchanges that will be up and running in 2014 would create competition in insurance markets, serve as a model for payment innovation, and put pressure on private plans to bring their costs down. Consumers purchasing health insurance in the health care exchanges could buy into a public option if they choose, or opt for private health insurance plans. Payment rates by the public health insurance plan to health care providers will not be tied to Medicare’s payment rates in our plan, making it a so-called “weak” public option. Instead, the public insurance plan would negotiate with health care providers in the same manner as private-sector plans.

Third, our plan requires that health insurance exchanges act not simply as
clearinghouses but as “active purchasers,” a health-policy term for exchanges that
set standards. [...]

  • A Medicare rebate program, requiring Medicare to negotiate reduced pharmaceutical prices as is already required of Medicaid
  • Reduced graduate medical education payments to tie Medicare payments to hospitals with teaching programs more closely aligned to actual training costs
  • Enhanced home health savings to accelerate payment reforms already required by the Affordable Care Act
  • Additional health care savings identified in President Obama’s 2012 budget

Our failsafe would be triggered if, starting in 2020, total health care expenditures— not just those in the public sector—grow at a rate faster than that of the economy itself. Should that happen, we would empower the Independent Payment Advisory Board—subject to the same congressional review process as exists currently in the health care law—to extend successful reforms in the public sector to all insurance plans offered in the health care exchanges, and then potentially to all health care plans, such that the target is met.

The CAP plan doesn’t even call for a robust public option or a medicare buy-in. CAP is literally leaving hundred of billion in saves on the table by calling for a weak public option that would produce only a fraction of cost savings of even modestly strong public option.

I’m going to be extremely generous to CAP and interrupt this 2020 failsafe as eventually, possibly calling for something sort of like a weak all-payer in the distant future. This is crazy. All-payer has proven to be a success for decades in other countries with hospital rates in Maryland. If your objective is reducing the defecit, again there is no reason wait another decade before considering a weak version of a proven solution.

The Economic Policy Institute solution for health care:

We propose the following policies to increase the efficiency of health care delivery by improving care while lowering costs:

  • Establish a “public option” of government-provided health coverage—similar to Medicare—to complement health care reform by reining in costs while expanding access.
  • Allow the Medicare program to negotiate prescription drug prices.
  • Encourage caregivers to coordinate patient care by bundling Medicare payments for post-acute care, leading to better health outcomes and reduced cost.
  • Enhance the Centers for Medicare & Medicaid Services program integrity authority, pursue other Medicare and Medicaid savings, and strengthen prescription drug reforms—building on the recently passed health care reform to promote savings and efficiency.

I will comment EPI for making the only actually reference to single payer or all payer in all three liberal deficit plans. Unfortunately the extent of it was, “Some have also suggested that a single payer system would be the most effective form of cost containment economy-wide, noting that other countries with a single payer system also have much lower costs.” People like Dr. William Hsiao, who determined that if Vermont adopted single payer it would result in a 25% reduction in total health care spending in the state.

I’m glad “some” feel this way but just apparently not EPI or the other two “liberal” groups.

Incredibly Timid Reform

In isolation many of these ideas are nice, but the totality of them is incredibly timid. Yes, we could save some money if Medicare negotiated directly for drug prices for seniors, but everyone could save significantly more money if Medicare negotiated lower drug prices for everyone through a single payer system or all-payer.

Given that as a country we probably spend $500 billion more a year than we need to on health care, is it truly depressing that these so-called progressive groups have totally abandoned even talking about a proven solution to our deficit and health care issues.

On an international level I would go so far as to say these three liberal health care plans are all significantly to the right of basically even center-right party in the rest of the industrialized world on health care.

If these constitute the “left flank” of the political discussion around the pressing issue of health care costs in America, we as a country are screwed.