Health Policy 2007

Next month, the 110th Congress opens for business under new Democratic management. The core elements of the nation's health policy agenda still involve addressing chronic problems of high costs, disappointing quality, and constrained choices. However, the Democrats' early playbook looks not only to roll back several recent Republican initiatives, but also to redirect resources toward an even more expanded role for political decision making in health care markets.

A closely divided Senate and a Republican president will put some limits on the new congressional majority's ambitions. Meanwhile, the recent Republican game plan for Medicare modernization, consumer-driven health plans, less-fettered private health care markets, and medical liability reform appeared to be sputtering, if not stalled, as the 109th Congress came to a close. Both parties primarily are posturing and rehearsing for the 2008 presidential campaign and a more action-oriented health policy agenda in 2009.

The Democrats' Agenda

Democratic leaders appear to have set three priorities for health policy over the next two years. First, they want to halt, if not reverse, the Republican push for a larger private health plan role within the Medicare program and for less-comprehensive and more cost-conscious coverage in private insurance markets. Second, they plan to redirect current health care spending and expanded taxpayer subsidies toward more traditional forms of coverage. Third, they want to reframe the parameters of the health policy debate to emphasize goals of more "equitable" and universal insurance coverage.

Generous payment formulas for private plan options under Medicare Advantage will come under greater scrutiny. As an early sign, last week's lame-duck Congress hunted for money to temporarily plug a shortfall in Medicare physician payments and ended up siphoning off roughly six billion dollars previously earmarked in a stabilization fund for private plans.

Don't expect legislation further liberalizing health savings accounts. Their limited track record will be criticized, if not belittled, in congressional hearings. Expanding the 10-year old SCHIP program, trying to make it an entitlement program for all children, and perhaps extending it to lower-income childless adults will instead gain the spotlight.

Despite a generally successful opening year for the Medicare drug benefit, most Democratic members of Congress simply don't like the program's structure. In particular they object to the so-called "non-interference" language in the 2003 Medicare Modernization Act which precludes direct price "negotiations" between Medicare administrators and drug makers.. Democrats in Congress who support making the traditional Medicare program a direct purchaser of drugs envision lower program costs, new budget money for benefits expansion, and less private sector competition for traditional Medicare. In reality direct negotiations would be more akin to administered price controls which would preclude current rules allowing competition between multiple buyers and sellers.

For Democrats tearing down "non-interference" language would be some measure of political revenge for having been frozen out of late-stage negotiations over the final 2003 drug benefit legislation.

The Republican Response

Proposing health policy changes and enacting them remain two very different political tasks. The Republican minority in Congress, aided and abetted by the veto power of President Bush, procedural rules, and budget constraints, could simply play defense. In other words, they could hold off significant changes while running out the clock until the next presidential campaign season heats up. The sheer difficulty thus far of coming up with workable mechanisms for Democratic health policy goals suggest that last year's campaign-season rhetoric has already outrun reality.

Nevertheless, it would be short-sighted for Republicans to try to beat something with nothing in the larger health policy debate leading up to November 2008. There are real and chronic problems that deserve serious health policy solutions. Republican leaders in Congress would be well advised to consider a two-tier strategy.

First, they need to ensure that initial efforts to expand the market share of consumer-friendly, private-sector-oriented agents can succeed. They are engaged in a race over the next two years against Democratic skeptics determined to frustrate them with changes in the rules of the game. The initial beachheads of consumer choice and private market competition are: Part D's stand-alone drug plans, Medicare Advantage's more comprehensive alternatives to traditional Medicare coverage, and various iterations of consumer-driven health products for working adults.

The initial ground rules for these fledgling efforts at competitive alternatives to business as usual health care are far from perfect. Early experience still leaves much to be desired. But to rephrase the words of a departing Secretary of Defense, "You go to political war with the health policy army that you have, not the one you want." An ardent defense of an imperfect, but improving, vision of consumer-driven health care in both the private and public sectors is vastly preferable to the Democrats' nostalgic agenda that won't work.

At the same time, Republican members of Congress should acknowledge that much more remains to be done to convert the rhetoric of consumer empowerment and market competition into the reality of a deeper and more robust array of thriving care options. We need a deeper information infrastructure that provides better measures of value to generate greater accountability by health care providers. We also need to establish a more level playing field in Medicare reimbursement for all care delivery alternatives, combined with robust head-to-head competition between traditional Medicare and private plans.

Finally, Republicans should emphasize that public and private resources will remain limited. They should focus on getting better value for our health care dollars. We all should recognize that setting qualitative floors that meet the expectations of the more affluent and politically active may create unreachable ceilings on access for the less fortunate.

Will the next two years produce stalemate along reshuffled political trench lines on Capitol Hill? The more things seem to remain the same, the more they will change -- eventually. Stay tuned for November 2008.

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AEI Resident Fellow Tom Miller studies health care policy and regulation. A lawyer by training, Miller was a senior health economist for the Joint Economic Committee of the U.S. Congress from 2003 to 2006.