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Deficit Plays Into Health Reform
Bill Needs to Rein In Federal Spending, Key Lawmakers Say

By Lori Montgomery
Washington Post Staff Writer
Friday, August 14, 2009

With polls showing rising concern over the government's grim financial situation, key Republicans and a growing number of Democrats say it will be hard to push an ambitious health reform bill through Congress unless it reduces projected federal spending on medical care and begins to bring the national debt under control.

"It's not good enough that it's just paid for; it actually has to start driving long-term costs down," said Sen. Mark Warner (D-Va.), one of nine freshman Democrats who last month urged Senate leaders to pay more attention to controlling federal health spending in this era of "exploding debt and deficits."

"The status quo is going to bankrupt the federal government and bankrupt most American families," Warner said.

For President Obama, the stakes are much higher than simply fulfilling a campaign pledge or crossing off an important item on his first-term to-do list. A reform bill that reins in the soaring costs of Medicare and Medicaid -- the primary drivers, along with Social Security, of the nation's financial problems -- could fundamentally alter the federal budget outlook, clear the way for other Obama priorities and cement his party's reputation for fiscal responsibility.

Obama heads to Montana on Friday to continue his pitch for a sweeping overhaul of the nation's health-care delivery system, a visit that will take him into the same kind of "town hall" meetings that have become the focus of media attention on opposition to Democratic reform plans.

Controlling spending holds the potential to defang some criticisms of Democratic proposals: A recent Quinnipiac University poll found that a majority of American voters say Obama should abandon his reform plans if they "significantly" add to the budget deficit. The annual gap between spending and revenue has skyrocketed since the nation sunk into recession in December 2007 and is projected to top $1.8 trillion this year.

Democratic leaders already have pledged that Obama's top domestic priority will not add to the red ink. But it is not clear whether Congress would approve a plan that truly cut costs. Some Democrats complain that it would require such stingy legislation that insurance would remain unaffordable for millions of families -- in the House, Democratic leaders have watered down their version of a government-run insurance plan and cut proposed subsidies for low- and middle-income families.

Meanwhile, some Republicans are attacking the very notion of reining in out-of-control Medicare spending, charging that efforts to force hospitals and other providers to become more efficient would lead to "fewer choices and lower health-care quality for our nation's seniors," as House Republican Leader John A. Boehner (Ohio) put it this week.

Still, the issue of cost has dominated health-care talks in Washington since Congress's chief budget analyst warned in mid-July that the plans under discussion would probably make things worse. An early version of the House reform measure would increase projected deficits by nearly $240 billion over the next decade, according to preliminary estimates. Fiscal conservatives won an initial round of concessions to get the bill through the House Energy and Commerce Committee, and Democratic leaders might add more cost-cutters before the bill moves to the floor in September.

"There is a recognition that we need to show we are very much aware of public concern about the deficit. That's part of what's going to drive the health-care discussion," said one senior House aide.

In the Senate, where the Finance Committee is painstakingly crafting the only bill that has a chance to win support from both parties, Chairman Max Baucus (D-Mont.) announced that his bipartisan working group had come up with a plan that would save the government money by 2019. With Congress in recess, the "Gang of Six" finance negotiators will probably continue to meet next week via teleconference, a Finance Committee aide said.

Baucus has declined to release details. But people involved in the talks said the plan would make more than $500 billion worth of changes to Medicare over the next decade, charging wealthy seniors more for prescription drug coverage, cutting $120 billion in payments to private insurance companies that serve some seniors and trimming projected payments to hospitals by $155 billion in an effort to spur efficiencies.

The measure contains a variety of other provisions aimed at bending the soaring trajectory of federal health spending, including a tax on insurance companies that offer very high-cost policies. Such policies help to drive up health-care costs, economists say. And it would create an independent commission empowered to cut Medicare spending to meet pre-set savings targets. Both ideas are being discussed in the House as well, House Democratic aides said.

While the Baucus plan is less generous than some Democrats would like -- the proposal would offer federal subsidies to a family of four if it earns less than $66,150 a year, compared with $88,000 in the original House measure -- other Democrats and several Republicans said it is more important for the proposal to save the government money.

"You won't get a Republican to sign on if it does not," said Sen. Olympia J. Snowe (Maine), one of three Republicans involved in the Finance Committee negotiations. "At this precarious time in our nation's history, frankly, we have to be rigorous in our fiscal approach. There's just no latitude."

Snowe and other Republicans are counseling Obama to scale back his expectations, not only to cut costs but also to deflate hysteria over reform. In a meeting at the White House last week, Snowe said she urged Obama to seek "practical" changes that "don't create too much upheaval and uncertainty."

Former Senate majority leader Robert J. Dole, a champion of bipartisan health-care reform who has been urging his former GOP colleagues to "stay in the game," echoed Snowe's remarks.

"Maybe we can't solve it all this year. If they can do half of it, it would be a miracle," Dole said. "And it would go down as a great example of bipartisanship and what a new president can do when he becomes a realist."

Dole added: "Republicans don't have to do anything. They see [Obama's poll] numbers falling and people protesting." But "we are not the 'no' party," he said. "I think a lot of Republicans do want to get a bill."

Among them are Sens. Bob Corker (Tenn.) and Judd Gregg (N.H.). Both say they are closely watching the Finance Committee talks. Corker wants to see Baucus go even further to reduce future deficits by offering a solution to the thorny problem of Medicare payments to doctors, which are scheduled to be cut by 21 percent in January. The Baucus bill contains $11 billion to delay the cut for one year, but Congress would have to come up with $285 billion to fix it for the next decade.

Gregg said that it is too early to tell whether he will support the Finance Committee bill but that the group is "saying the right things," including emphasizing debt reduction. Indeed, Gregg said, the health-care debate has exposed a fresh willingness in Congress to make "tough decisions" to fix the nation's budget problems, prompting him and Sen. Kent Conrad (D-N.D.), a member of Baucus's working group and chairman of the Senate Budget Committee, to revive their proposal for an independent commission to work on Social Security and the tax code, as well as federal health programs.

Conrad said he was "cautiously optimistic" that the Finance Committee's talks would succeed. "But this effort, while necessary, is not sufficient" to solve all the nation's budget problems, he said.

The committee's goal is to reach a deal by Sept. 15. If the talks fail or bog down again, Democrats could abandon the bipartisan effort and try to pass a health bill on their own.

But even if that happens, Democrats might find that they lack the votes to pass any plan that does not make good on Obama's pledge that health reform means entitlement reform.

"When I look at the federal budget and realize that if we don't control costs on health care, there is no way for us to close the budget deficit, it will just keep on skyrocketing . . . ," Obama said at a town hall meeting Tuesday, "I say, we have to get it done."

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