Straight talk on health care reform: The Gang of Six and health care reform

By Bob Semro

One of the possible solutions to address the debt-ceiling impasse is a proposal by a bipartisan group of senators known as the "Gang of Six." The six are Republicans Saxby Chambliss of Georgia, Tom Coburn of Oklahoma, Mike Crapo of Idaho and Democrats Kent Conrad of North Dakota, Dick Durbin of Illinois and Mark Warner of Virginia.

The proposal is important because it is the only plan thus far to garner bipartisan support. It has received a great deal of attention, including an indication of support from the Obama administration. Its chance of success, or how it will be modified and amended during the next two weeks, is difficult to predict.

This wide-ranging plan would raise the debt ceiling, significantly modify the existing tax code and attempt to rebalance the budget over time. As of Thursday morning, there were limited details, and the senators have only publicly released an executive summary of their proposal. Based on that document and additional reporting, it is clear that this proposal would also have a real impact upon health care and the Affordable Care Act.

This plan would affect the rate at which Medicare doctors are paid; eliminate the most significant provision concerning long-term care in the Affordable Care Act; and require the government to identify and implement hundreds of billions of dollars in unspecified health care savings.

The plan's executive summary contains very little in the way of detail, and that is probably by design, as the senators are being cautious as they try to win support. However, their executive summary gives some general ideas about the direction they want to go.

As of today, the proposal contains the following health care provisions:

1. The Sustainable Growth Rate (SGR) formula, used to determine reimbursement rates for Medicare doctors, will be permanently reformed or replaced. This formula has been a long-term problem, and Congress has repeatedly avoided coming up with a final solution, choosing instead to push the cuts off into the future. Under current law, recommended cuts in reimbursement rates would reduce the amount paid to Medicare doctors by 25 percent. The Gang of Six proposal recognizes that the pending cuts cannot be implemented without severely impacting access to care for seniors. The Gang of Six plan would offset the cost of this change (about $298 billion) with health savings that are not specified in the executive summary. (1)

2. The proposal would "find an additional $202 billion/$85 billion in health savings" while "maintaining the essential health care services that the poor and elderly rely upon." (2) The reason for the two target amounts is because the Republican and Democratic members disagree about how much money should be cut from public health programs. The Republicans want a $500 billion cut over ten years, while the Democrats want a $383 billion. The Democratic target is closer to the recommendation of the Bowles-Simpson Commission chairs' report. In either case, $298 billion of those savings would be earmarked to offset the costs of permanently fixing the SGR formula.

3. The Community Living Assistance Service and Supports (CLASS) program, the principal long-term care provision in the Affordable Care Act, would be eliminated. The program would establish long-term care insurance to guarantee a minimum level of non-medical coverage so that people could stay in their homes and communities. The Gang of Six may have zeroed in on the program because of concerns that it is not "actuarially sustainable" over time. Elimination would mean the problem of affordable community-based long-term care coverage largely must be addressed in some other way.

4. An additional $70 billion in savings would have to be identified by congressional committees overseeing health, education, labor and pensions. It is unclear how much of those savings will come from health care.

5. On a more positive note, the budget committee would be required to "review total federal health care spending starting in 2020 with a target of holding growth to GDP plus one percent per beneficiary and require action by Congress and the President if exceeded." (3) Allowing for growth in health care spending at 1 percent above GDP would allow for increased federal spending to accommodate the "baby boomer generation" as well as increased Medicaid enrollment.

6. Finally, it has been reported that the proposal will attempt to indentify an unspecified amount of savings through "malpractice reform." It is not clear whether these savings would ultimately result in capping malpractice awards.

In our view, the most significant aspects of the plan in terms of health policy are the SGR reforms, the elimination of the CLASS program and the formula limiting the growth in future health care spending. We'll learn more as details are released. If the Gang of Six proposal goes forward, it will certainly be subject to a number of challenges and amendments. However, broad changes in health care funding are likely to remain in any future budget strategy.

End notes
1) Executive Summary, A Bipartisan Plan to Reduce Our Nation's Deficits.
2) Ibid
3) Ibid