PLEASE NOTE: This is an unedited transcript. Please refer to the video of this event to confirm exact quotes.
SARAH DASH: Good morning everybody, thank you so much for being here. I’m Sarah Dash, I’m President and Co-CEO of the Alliance for Health Reform. And for those of you who don’t know us, the Alliance for 25 years has been a trusted source of non-partisan health policy information and dialogue here on Capitol Hill and for health leaders around the country. We are so thrilled to have you with us today for the very first in our 25th anniversary series on the future of healthcare and today obviously, we are focused on the future of health insurance. We chose to do this series because healthcare of course is as important as it’s ever been to our country, and the decisions we are making today, this week, this month, this year, they are all leading up to the future of healthcare and so we wanted to take a look at what is going on today, but also envision the future and think about where we are going with all of this.
So, we all have a lot of day-to-day responsibilities, so we all are really happy that you’ve taken the time to be here and we are thrilled to have our sponsors here as well, thank you. Now, the other thing about the Alliance of course, you are all the best audience. We have the best audiences. And so, I just want to quickly mention a couple of upcoming events that we are going to have. On May 5th, we are going to have a follow-on to this summit today. We are going to actually have a Congressional briefing over on Capitol Hill and it’s going to be on a topic based on what we hear today. What we want to expand on, what we want to focus on more. So, we hope you will fill out those blue evaluations, those never change, and tell us what you want to hear.
And finally, our next two summits, which will take place this summer and then this fall, will be focused on the future of chronic care and the future of the healthcare workforce. So, we hope you will join us for those as well. So, thank you again for being here, and without further ado, I’m going to turn it over to Marilyn Serafini, my Co-CEO. Thank you.
MARILYN SERAFINI: Fantastic, thank you, Sarah. And also, glad everyone could be here with us today. I have the pleasure of thanking a lot of people who made today’s event possible. We have three annual Summit sponsors who are with us here, and we are really excited about that. Anthem, Health is Primary and Ascension. We also have a handful of sponsors who are sponsoring this particular health insurance summit and we are just delighted to welcome Blue Cross/Blue Shield Association, Davida[?], The Association for Community Affiliated Plans, which we know as ACAP, the Children’s Hospital Associations and CVS Health. I would also like to recognize some board members from the Alliance who are hear with us today. We have Reed Tuckson, who is going to be moderating the first panel. We also have Tom Scully, who is going to be part of the first panel. I didn’t mention that Reed, who has a long history in the healthcare community, is with Tuckson Health Connections, his own firm. And Tom of course, former CMS Administrator, now with Welsh, Carson, Anderson and Stowe, and also, we have Kristin Sloan, who is with us from the Cancer Action Network and she will be part of the final panel.
Just a couple of housekeeping matters. If you are tweeting today, please use the hashtag #futureofhealthcare. We will be monitoring the Twitter feed and if you have questions, that is one way in which you can ask questions. I’m going to tell you about a couple of other ways in which you can ask questions. We will have roving microphones. If you have a question, please raise your hand and one of our staff members will bring one of these trusty mics to you, so that everybody can hear you. The other way to ask questions is that in your packet, you have a green card and if you would prefer, right your question on the green card, just hold it up, and one of our staff members will collect it and bring it up to us. I will tell you that with today’s sessions, we are going to be having an armchair conversation and then we will open it up to questions. So, we will probably have time for two or three questions for each panel. So, I will say that you will have a much better chance of getting your question asked if you raise your hand and take the microphone. But, we will try to do the best we can to answer as many questions as we can.
Before we get started on our very first panel, I would like to welcome to the state two our annual sponsors — Mark Hayes with Ascension, who is going to provide just a very brief opening remark, and then we will turn it over to Glen Stream, who is with Health is Primary. So, Mark Hayes of Ascension.
MARK HAYES: Thank you, and good morning everyone. We are so glad to have you here. My name is Mark Hayes, I’m the Senior Vice President for Federal Policy and advocacy for Ascension and for those of you that don’t know about us, Ascension is the largest non-profit health system and the largest Catholic system in the world. We are very pleased to be a sponsor of this summit, such an important topic and so very timely, we are so glad that you are here and thank you for coming. I will turn it back over to Marilyn.
MARILYN SERAFINI: Great, thanks very much. And now, Glen Stream with Health is Primary.
GLEN STREAM: Good morning everyone. I’m Glen Stream, I’m a practicing family physician in Southern California and here in my role as President and Board Chair of Family Medicine for America’s Health, which is a collaborative effort of eight national family medicine organizations. Health is Primary is our public facing communication effort to have the public understand the importance of a strong primary care system to the health of them and their family and their community. I would agree, the timeliness of this topic is just so important about — about health insurance reform in that there is opportunities in that process to strengthen our primary care system and the transition to more value-based payment that can promote that primary care foundation, is really critical. So, we are pleased to be here and really want to thank the Alliance for sponsoring this series. Thank you.
MARILYN SERAFINI: Great, thank you so much. So, I will ask our folks in the back whether we are ready to bring up our first panel or whether we will have a couple minute break already. Okay. We will start our panel in one or two minutes. So, have coffee. We will be starting in one or two minutes, promptly at 9:00. Oh, they are here. So, without further delay, I will introduce our moderator, Reed Tuckson, who I introduced before as an Alliance Board Member, is going to introduce our first panel and take it away, Reed.
REED TUCKSON: Well, thank you very much and we really excited about presenting this conversation with you. We want to make sure that we get your voice in the conversation, so at about 30 minutes in, we will turn to audience participation. So, just know that you will have an opportunity to participate. This conversation is designed to set the stage for the more in-depth panels that will follow, but we are going to kick it off and talk about how to stabilize the individual insurance market and what is likely to happen with Medicaid going forward. This is — there has been a lot of, obviously, activity lately and we are sort of looking at the state of play, where Washington is going, but also from the point of view of our two panelists, where should we be going?
Let me begin. Senator Tom Daschle, you served as United States Senate Democratic leader for more than a decade. You are the founder and CEO of the Daschle Group, a full-service strategic advisory firm, that advises clients on a broad array of economic policy and political issues. Particularly relevant to this conversation, you are a co-founder of the Bi-Partisan Policy Commission and you co-chair its Commission on Political Reform and Health Project. If we are to achieve bi-partisanship, if we are to have solutions that cross differences, it’s clear that we have to understand where people are coming from. How do they think about problems? It would be good to understand the motivation and objectives of the different camps. In a non-politicized environment, most people would see the objective of covering all Americans for healthcare and access to health insurance as a terrific social good. What are the priorities and purposes that drive the various factions? And I’m curious in terms of, as we sort of think about what could be on people’s minds, maximizing the health outcomes of all Americans, providing access to quality and cost effective care for all, decreasing federal expenditures, paving the way for major tax reform, paving the way for entitlement reform. Political ideologies focusing on diminishing the role of federal government versus state control and flexibility. Keeping campaign promises or just sticking it to the previous administration. What are the motivations that you sort of see that are defining how people from different camps approach this issue?
SEN. TOM DASCHLE: Well, Reed, that is an interesting question and a good way to start the conversation. Let me just say how pleased I am to share the dais with Tom Scully. I have been a huge admirer of his for long, long time and it’s been a little while since we have seen each other, so it’s great to be with him on such an auspicious morning. I think I would say that in the context of health reform in particular, I think it is surprising to a lot of people to — as you talk about the similarities that may exist in terms of what motivates people, I think people are motivated by the realization that healthcare costs too much in this country, it’s not as accessible as it should be in this country, they quality isn’t what it needs to be in this country. I think there is a lot of consensus around the reasons why those problems exist and there may even be a consensus generally about what the goal is. What are we trying to accomplish? And if you’d ask a liberal or a conservative or a Republican or a Democrat, it seems to me that they would say something to the effect that what we would like to do is to build a high-performance, high-value healthcare sector, with better access, better quality and lower cost. That is what motivates. I think most people, as they think about health, I think the real rub comes with what the role of government is. And for the last 100 years, especially, we have attempted to try to resolve that question: What is the role of government in achieving a high performance, high value, healthcare marketplace? And over the last 100 years, through a series of compromises, we have come to a point where I believe we’ve got, what I call a three trillion-dollar public/private partnership. That’s really what we’ve got now. We’ve got public entities and private entities, commercial and government and that collage of sub-systems is really what has created this public/private partnership. The ACA seven years ago, was the latest iteration in identifying and sort of describing what that partnership looks like. But it really comes down to what is the role of government today and that, I think, will continue to be a source of division within the ranks for a long time to come.
REED TUCKSON: Great, thank you. Tom Scully, you are a former administrator of the Centers for Medicaid and Medicaid Services during the George W. Bush administration. You are now a general partner at Welsh, Carson, Anderson and Stowe, a private equity firm. Particularly relevant to our conversation, you served as President and CEO of the Federation of American Hospitals, which represents more than 1,000 investor owned hospitals. Same question, how do you see the motivations of the different camps?
TOM SCULLY: It’s really never fair to put me after Senator Daschle. Anyway, we have been friends for a long time. When I was running CMS, he was the leader of the Democratic side of the Senate and shockingly, we actually talked to each other and he was always incredibly nice. So, I would advocate that to start. We were also in the same law firm for many years, so we have been good friends for a long time. Yeah, so I would say I assume my reason for being here largely is to give the Republican side of the thing.
So, I’m not saying, I agree with all of us, but how Republicans look at this, I will try to project that. I think they look at it as, number one, they were angry obviously in 2010, that this thing passed in a party line vote and they would have said, you should have been more bi-partisan. Now, they are obviously going roughly back the same way and seem to be trying to repeal it on a party line vote, so you can argue that either way. I think it’s a better model. If Senator Daschle remembers, we did Medicare Part D and Medicare Advantage back in 2003 and 2004, which were also extremely controversial, and we did in fact make a huge effort to pick off ten Democrats in the Senate — I think there were nine, and a handful in the House, just to basically take the edge off. And so, I think number one, I think it’s never a good idea to do big healthcare policy. They are creating the ACA or repealing by a party line vote and I think we are in a much tougher world than we used to be, so I wish it was a little friendlier. For a Republican point of view, I think they look at it as the ACA was just too big and they wouldn’t have done it that large and if you had asked them in 2010, they would have probably done — I would have been comfortable probably doing 50-60% of it, just on the Medicaid side, and I think Medicaid gets too little attention. The money and the real issues are in Medicaid expansion. When I got to O&B, I was at O&B in 1989, we had 20 million people in the Medicaid program and it cost $50 billion a year. Before the ACA, we had — before it passed, we had 55 million people in the Medicaid program in 2010 and I think it cost about $400 billion a year. Today, we’ve got 77 million people in the Medicaid program and it’s about $600 billion a year. So, what is the real difference in the next ten years Republicans want to do? If you look at what the Ryan Bill does, you’d have 75 million people in Medicaid in ten years, so a couple million — you are basically freezing the place. You would lose a few million people from the phasing out, you are assuming the government will drop some people, but the growth of Medicaid goes from $600 billion in the Republican plan to $750 billion in the next ten years. The Republican’s attitude is, this thing is growing too fast, it’s done too much, we are going to freeze it in place. If you continue with the ACA for the next ten years, you go from $600 billion to $950 billion. And you go from 77 million to 97 million people. Those are just the CBO scores. But people don’t look at that. If you look at it from a purely Republican view, their attitude is, this thing is too big, it’s out of control, let’s freeze it where it is. Most of the northern states had already done the expansions to 31 states, will roughly stay where they are. So, where is the inequity in that? Where is it unfair? It’s the 19 southern states — largely southern, southern and western, that didn’t take Medicaid expansions. Those governors, to my amazement, seem to be okay with that, but that is really what he Republicans are saying, is enough is enough, we are not doing anymore. We are going to make the states pay some of their match after 2020. We are going to basically not do anymore expansions. We are going to freeze it in place. Even doing that, spending goes from $600 billion a year in Medicaid to $750 billion a year in Medicaid. So, now it’s largely a fiscal issue and how big and how fast, and how much? So, you are not really cutting Medicaid. I mean, you are basically freezing it where it is and some of the northern states, we are telling the governors we are getting 95-100% matches. You know what? We are going to gradually scale you back to your match rate.
So, it’s basically, to me, if you look at the bill, the Republicans are irritated and a lot of people in this room, I think, if they don’t put the two together, there is a — in the Republican bill you had a .9% HI tax. Permanent for every American, pointing .9% more in income tax for theoretically Medicare taxes. Another 3.8% on top of that for basically a capital gains tax on investment. Those are permanent taxes. Those drove Republicans crazy. There is also taxes on devices, insurance companies. That’s what paid for it. If you look at the bill, it’s almost dollar for dollar, $880 billion is what you “save” by having Medicaid grow more slowly over the next decade, versus the taxes that disappear. It’s literally almost dollar for dollar. Getting rid of the taxes today and freezing Medicaid where it is. So, that is the Republican fiscal conservative side of it in a nutshell, I think, and the argument on the other side is: Oh, you are heartless and you don’t care about poor people and you don’t want to expand it. You know, I’m probably somewhere in the middle of that debate. I would probably do a little more of it, not all of it, but I don’t think either side is completely right or completely wrong as usually, and the right thing to do is probably somewhere in the middle and I don’t think we have too many middle discussions anymore, sadly.
REED TUCKSON: Well, let me ask you on that issue. We will come back and I am going to drill into some of the details in your opening comment. But, I think this notion — when you were in the Senate, there was clearly a much more opportunity for folks to get together from the different sides. A lot of that was driven, I think, by perhaps more compassion, more sense of caring, a sense that we are a great country that can solve problems. We have enough money to solve our problems, for those that we consider to be important. Why isn’t that the case now? And why is that — are you seeing that as a major stumbling block to getting folk to sit in a room together and try to work it out. You are sitting in those rooms, what is it going to take to make those conversations happen and be productive?
SEN. TOM DASCHLE: Well, first of all, I think it takes leadership. I sometimes don’t think we see the leadership necessary to bring people together. There has to be more opportunities for better communication, trying to resolve this. And Tom said something that I just couldn’t be more emphatic about. Anything that is done on a partisan basis is a temporary solution. The ACA became a temporary solution because — and we can decide who was responsible for the fact that it became so partisan, but you just know that if it passes on a unilaterally single partisan vote, you are going to come back and revisit that. The only real bi-partisan legislation is permanent legislation, and the only permanent legislation is bi-partisan. But I would go to — my assertion about the role of government, I think, is so much a part of how I look at this. I think a lot of times ate the federal level, there is no disagreement about the importance of ensuring that people have access to health. The real question is: Whose responsibility is it? There are a lot of Republicans who believe it’s not the responsibility of government. That it really ought to be the responsibility of non-profit organizations and churches, of others, to assist those who are in need of care. They also would shift a lot of responsibility to state and local governments, not the federal government. I worry a little bit, as federal policy makers, that they tend to do something — and I’m guilty of this myself. I did this many times; that our solution is just to cut and shift. To cut the federal program, whether it’s Medicaid or Medicare, or CHIP or anything, and shift the cost somewhere else; onto the state, onto the private sector, onto the individual. And cutting and shifting is a common practice done by both sides. And that really doesn’t solve the problem, it just shifts the problem and responsibility to somebody else. A much better approach is to redesign and improve and go after the real core issues that are causing those costs to go up. And those people not to get care. And that is a little harder to do.
REED TUCKSON: Tom, shifting from the federal government to the state government, Medicaid, what is your overall assessment on how stable the Medicaid program is and what does it look like from the point of view of governors? You mentioned 19 southern states that predominantly that didn’t accept the opportunity to expand coverage. But what is going on in the governors’ minds around Medicaid?
TOM SCULLY: Well, Medicaid is a wonderful program, it runs a lot of great services for 77 million people this year, actually 98 million people, during the course of the last year, that is a big number on Medicaid, at some point. It’s a great program. It structurally provides great services. I think it’s a structural disaster and I quote Senator Daschle, so I hope he still agrees with this, I have a been a fan of the per capita cap, which is much different than a block grant for years, for one basic reason: Since I got involved in the program in the late ‘80s, the states do a great job, but it was basically a matching program for many years. So, the match is basically supposed to be 50/50 for the wealthiest states, you know, the Connecticut’s and the California’s, up to 76% for the Mississippi’s. And that’s the way it’s supposed to work. Over the years, the states have come up with these wild — I would have done the same thing if I were a state Medicaid director or governor, but they came up with these cost shifts for provider taxes, you all have them, donations, so the states basically found a way to change their matches. So, the Medicaid system financially is broken. There is not a human being in the United States, zero, even at CMS, that can tell you what the match rates actually are for the 50 states and six territories. Now, think about that. If you went out and looked at it, you know, New Hampshire puts not one penny into its Medicaid program. Romney Care, which everybody is very proud of and I was Romney Advisory in the campaign, I love Romney, he’s a great guy. Do you know how much Massachusettes money is in the Romney Care Program? Zero. Not one penny. It was all funded through a Medicaid scam. Not many people know that. That’s a fact. Massachusettes knows that.
The point is, it’s just not — the program financially is broken, so the reason to go to per capita cap, is nothing to do with saving money. Conceptually, it has to do with saying, let’s stop the musical chairs, get rid of what they have, whether it’s South Dakota or Virginia or whatever. And everybody will — we will give you what you have today and we will give it per capita, adjusted, for recessions for the rest of time. Adjusted for inflation so that the financial gains can stop and people can focus on providing good care. So, I think the governors are looking for flexibility. I think per capita cap will give them that. You can discuss how much you want to put in or take out of the program. But the program, one of the problems for the last 30 years, and I have been very involved in it, is that if you are a Medicaid director, you spend more of your time trying to figure out how to cost shift to the federal government than you trying to run your program. And I think the program is a great program, but for $600 billion, if you are not on Medicaid, each one of you is paying $4,000 in taxes every year to pay for Medicaid. I am more than happy to pay for that program, but I’m not really happy to find out that there are not financial rules and it’s a structural — any government class in the country that could go out and explain how it works, can throw up. It’s outrageous the way it works financially and it ought to be fixed. So, whether you are going to shrink it or grow it or expand it, or whatever, the mechanism behind the second biggest program of the federal government is fundamentally broken.
REED TUCKSON: If you think about things like the 1115 Waiver Program, which allows all of the flexibility of sharing costs with the enrollees, is that a good way to approach it? Is that a reasonable kind of a model that we can use going forward?
SEN. TOM DASCHLE: Well, first of all, Tom is exactly right with regard to the formulas. The FMAP system is so convoluted right now and it’s really ended up sort of a collage of deals that governors have made with the federal government over the years and there is an unfairness as you look at the distribution today. It’s always one of the most contentious aspects of a healthcare generally, is the allocation of resources through Medicaid, through the FMAP system. And so, that needs fixing without a doubt. We have a demographic explosion about to occur with seniors and I think as we look at ways with which to address that demographic explosion, it’s going to be all the more important that we give states flexibility. So, I’m a huge believer in waivers and the 1115 program is a good example of that. We have got to give states as much opportunity to adjust to these demographic changes as we can. But we still are going to be faced with enormous financial challenges going forward, with or without all the waiver systems that exist today. So, we’ve got to work on ways with which to finance and organize. I do think that Medicaid, one can say what you will about the financing of it. The one thing I am encouraged by is the degree to which managed care has become part of the Medicaid system, unlike Medicare, where we haven’t really seen the same degree of evolution and opportunities for addressing that. That is changing. But the opportunities really to experiment and to find ways with which to explore more efficient ways of providing care, in part because we have the waiver systems, has allowed for managed care to play a more important role in Medicaid than it did 15 years ago.
REED TUCKSON: One of the experiments that people are talking about is asking and forcing Medicaid eligible people to work, as a work requirement. How do you feel about that?
SEN. TOM DASCHLE: Well, I think that is overplayed as an issue. 13% of the people are affected by it. A very, very small percentage. The fact is, most Medicaid recipients do work. A lot of those who don’t, are taking care of an elderly or sick member of the family and don’t have the capacity to work. So, I think it’s an issue that generates a great applause line in front of crowds around the country, but frankly, I don’t think it’s really that necessary.
TOM SCULLY: I agree. In some states, it’s going to be popular, and if the governor wants to do it to get a waiver — I am not particularly troubled by it, I don’t think it’s caused huge disruptions. But I think it’s a little bit overblown as an issue. So, I think waivers are great if you look at the states. If the waivers are done for creative financing, which is why a lot of them are done. I won’t get into which ones, but I have done a lot of them and I’m not a big fan, but if you look at California, which is heavily managed care, spends probably a third of what New York does per capita. It has a big Medicaid program and it’s a very efficient Medicaid program, it’s run very well. Theoretically, a liberal state, it was one of the first to go to heavy managed care. They have run it very well. And so, I think giving the states the flexibility to go run their programs effectively, which California has, Arizona has done a great job, I think, with their managed care program. They will – that was one of the biggest waivers. They were the last state in the Medicaid program. So, I think the state should have flexibility to go run their programs. And the flexibility is to be a partner with the federal government to run a program, that is terrific.
REED TUCKSON: I know Peter Lee is in the audience and he is going to be happy to hear you say that, he will be up next in the conversation. Real quick, before we turn away from Medicaid, you talked a little bit about alternatives to block grants or other kinds of proposals. Could you just give a little bit more color in that, so we can understand where you are on block grants and alternatives to block granting?
TOM SCULLY: Well, I mean, the two alternatives, which I’m glad you are still for, have always been block grants and per capita caps, in my view are completely different animals. A block grant basically says that the state of New York’s budget for Medicaid this year is $60 billion, which I think is by far the biggest per capita. So, at $60 billion you would be saying to New York, here is $60 billion, you are going to give that adjusted to CPI or Medical CPI for the rest of time. If we have a recession and your population goes up by 15%, tough luck, you get a block grant. You know, call us later, that is how much money you are getting every year. You know, that is not particularly sensitive to various disruptions in the economy. And per capita cap says, if you are spending $60 billion and it turns out to be — let’s say it’s $10,000, just to pick a number — $8,000 per head, and it’s broken up into different categories for disabled and for aged and for women and kids, but just generic, let’s say it’s $8,000 a person. The per capita cap puts in per person, the benefit remains an entitlement per person, which is also a big difference, it’s still an entitlement program. And if you have a recession and the population goes up, your funding goes up per capital, per person. that’s a much more flexible system that is much better for the states and protects much more in a recession and I think there is a huge difference between the two and I think a lot of times people throw them together and I don’t think they should be.
SEN. TOM DASCHLE: Tom is exactly right, there is a difference. I think the fundamental question on a per capita cap is, do you have a cost of living adjustment that adequately takes into account what costs are incurred? Sometimes health costs far exceed the costs of living generally. And so, having some mechanism that accounts for those significant increases in costs will be one of the key questions. But, there is a big difference. I really don’t think block grants have much of a chance of getting much attention in Congress, but there are those who support it.
REED TUCKSON: Let me switch to the exchanges and try to get a sense of the magical date of June 21st is upon us soon, where the insurers have got to make a decision about whether they are going to be in or out. We have seen already this week in Iowa some important exit — 21,000 people now will be negatively affected. I think I saw this morning in the news, Aetna is out in Iowa as well. What is going to happen? Is the administration going to prop up the markets? Are they going to let them implode or explode?
TOM SCULLY: You want to take that one. I think they are going to — I don’t know, I haven’t talked to Secretary Price, who is a great guy, I have known him for a long time, about — I don’t think they are going to prop up the markets. I think they are probably pretty upset about a lot of things that happened, including the Obama Administration and the opinion that Republicans created these premium support payments that went beyond the law. That the first step, they have to decide if they are going to continue those for year. That is a very tough call. I mean, I think they probably were not appropriate. Seven billion dollars that they — some people would say basically inserted into the payment system, seven million dollars a year of subsidies for insurance premiums that were on the law. So, are they going to continue for another year? I think to avoid disruption, if I had to bet, I would bet they probably will. They are not happy about it and I don’t think they think it should have been there. I think they would love to change the risk bands and change the risk rating bands. I think they can’t do that without a change in law. I think they are going to do everything they can to support the insurance companies that are in there to make their lives easier. And if I had to bet, I will bet they continue the premium subsidies for a year — low income premium subsidies. But I don’t think they are happy about it, and I think they are going to try to ease out of those as much as they can. I think with the insurance companies, and you obviously know that as well as anybody, are looking for stability and predictability. And I spent a lot of time with Senator Daschle 15 years ago, trying to get — we had a similar drop out of — we were down to 3% of the people in Medicare Plus Choice Program, Medicare Advantage, in 2001. And the insurance companies were dropping like flies and they didn’t want to be in that business, it was a miserable business, so we threw a lot of little things at them for a couple of years to try to show them that we felt they were paying and we are going to talk to them and listen to them. We made some very big changes in 2003, but I think if you are running an insurance company, the insurance company in my view, and I’m the Chairman of the Board of a small insurance company, is a predictable business. You want to make a 4 or 5% margin. You partner with the government with Medicare or Medicaid and you want to know that you can — that there is some certainty there. That if you are going to lose money, you are going to get out. It’s just a fact of life. So, I think the administration will do everything they can. I don’t think they are trying to blow up Obama Care or the ACA. They want to keep this going reasonably and they want to phase out what they consider to be excess subsidies and I think they will do everything they reasonably can.
REED TUCKSON: Let me make sure on the predictions and I will go to you and then you, in terms of the important — again, magical date of May 22nd when the decision has been made about whether the government is going to challenge or drop the suit on cost sharing. So, these subsidies are either going to happen or they are not, and we are going to know very shortly whether or not the lawsuit by the house is going to be dropped or not. What do you think is going to happen?
TOM SCULLY: Well, I don’t know, they haven’t asked me. If I were them, I wouldn’t drop the suit.
REED TUCKSON: You wouldn’t do it.
TOM SCULLY: I would probably pay the premium — pay them for this year to keep the — for next year to keep the system going and the fundamental suit has been more about, this is actually an effectively (indiscernible). I happen to think it was not in the law. So, I would not drop the suit in principle because I don’t think in the long run they want to do it. To keep the companies in it in 2018, to keep it going, I think it is highly likely. I certainly know a lot of people on the Hill want to keep the subsidies going. In principle, they can’t stand ‘em and they are not happy it happened. It reality, they don’t want the market to blow. So, it’s a very tough call.
SEN. TOM DASCHLE: I think the subsidies one way or another are going to continue, only because the viability, the individual market is so dependent upon them. But that is one third of the formula for survival and viability. The subsidies are key and I think Tom is right, they are not happy about it, but the reality is, without subsidies, you are going to see a dramatic decline in enrollment. And that’s going to devastate the individual market. The second issue though is equally as important to retaining that pool and that is having some sort of a mandate. Some sort of a requirement for participation. The Republicans have come up with a different option that I don’t think even CBO doesn’t believe is as effect as a mandate, but keeping a healthy and robust pool is critical to the individual market as well and we may not have that. And then the third thing is the thing that Tom really deserves a lot of credit for. We created a risk sharing program for Part C and D that had been incredibly successful and I have now advocated for a long time that if we did that for the ACA, most of the risk-sharing challenge would be gone. But we don’t have adequate risk sharing today in the Affordable Care Act and until we address it, reinsurance or some other way, with which to ensure that that public/private partnership is really a partnership and there is balance, we are not going to get there. So, all we have to do is to do what Tom and the smart people around him at the time realize is necessary to make Parts C and D viable and if we did that, I think we would be in a very good position today.
REED TUCKSON: Tom, let me ask you in terms of you weighing in on the individual mandate: Enforce the tax penalty or not?
TOM SCULLY: I think sometimes its things of semantics. I give you a kind of — he was involved in this back in 1990 when we were having a big fight over childcare and Republicans wanted to do vouchers and Democrats hated vouchers and we came up with a compromise and we changed the name to “certificate” and all of a sudden everybody was okay with that. I don’t know if you remember that, it was Senator Mitchell. And we got a big childcare program because it wasn’t “vouchers”. You know, mandate or not a mandate, if you are putting in a tax penalty and requiring people to get insurance, you can call it anything you want. I think we ought to get away from the mandates. The individual mandate was originally a Republican idea, it was originally a Heritage Foundation idea. I happen to think it’s necessary to make the markets work. I think mandates set off rockets with conservatives, they just don’t like the idea of a mandate. We don’t like telling anybody what to do. That’s telling them what they should be doing. So, you know, we are willing to do tax penalties, we are willing to do various tax incentives. I think we have to come up with a middle ground that say, non-mandate similarity.
REED TUCKSON: Alright. By the way, we are a couple minutes away from getting Q&A from the audience and so I want to just make sure there is a mic there and so, we will be turning to you in just a minute. We have talked a lot about access and different ways of trying to get access and how do you afford it? The question also becomes, access to what? You can really make stuff cheap if you give people crappy plans. How do you think about this notion of essential benefits, what should be in it, who should decide it?
SEN. TOM DASCHLE: Well, again, another great question about the role of government. I don’t think that the silver plans were all that great a deal, frankly. When you’ve got $7,500 deductibles, it really makes it hard for a lot of people to afford healthcare, even if they are insured. But at least the Essential Benefits Program, just as we do with almost anything, you buy a car, you have certain expectations about what that car has to do. If you buy a house or you buy a furnace or an air conditioner or refrigerator, there are certain minimum requirements to be able to find that particular product or service as a product or service that you think you are buying. That’s really what essential benefits — I mean, in the past, what we had in the dark days was, insurance being sold and people not really having a clue what’s in it. And so, when they first find out that they aren’t insured for half the things that they thought they were, it created an even greater uncertainty. So, having that floor, to me, is an essential part of the insurance system. But again, it’s a very arguable question. How far do you go? I do think preventative health services are key. And I think also if you look at what that pool is supposed to be, making sure that you’ve got healthy people helping to fund the unhealthy ones, is really a part of it as well. To me, it is an essential element to a good insurance program.
TOM SCULLY: So, I think the whole debate, since I’m a cheap, cold-hearted Republican, I will give the Republican side. The whole debate is about who do you want to subsidize and how much and how big do you want these (indiscernible) to be, and I think it’s similar with Medicaid. I would probably be advocating covering people to 138% of poverty, because I think it may be the right thing to do. I think you should subsidize those people and give low income people healthcare before you go to 400% of poverty. I have been a huge critic, as Senator Daschle knows, of what the ACA did, to go to 400% of poverty, to subsidize healthcare, I think is unsustainable. That is 67% of the population. It’s not a lot in Washington D.C. or New York, but if you go to rural South Dakota, $97,400 a year is a fairly good living in rural South Dakota and a lot of the parts of this country, and if you buy a $15,000 silver plan at that level, you get a $5,000 subsidy. I don’t think you can do that at that high of an income stream and I think it’s a mistake. So, my view is, we should cover low income people in Medicaid, and above Medicaid, just (indiscernible) you should probably subsidize people more and more, but where do you stop? I don’t think you get 67% of the population. I have had a lot of debates — Peter Orzag frequently says, “Oh, Scully, you and I agree a lot on this. You want to go to 300% of poverty and we want to go to 400% of poverty, and that’s not that big a deal.” There are 50 million people between 300 and 400% of poverty. It’s the middle class. So, the issue is, who do you want to subsidize here and how much? I think Republicans’ view is, subsidize people, absolutely for sure. How is Medicaid structured? You can debate that. Subsidized middle income people at the lower end, but at some point, people should get a catastrophic stop loss. I would say, that if you are at 55-60% of the population income wise, maybe you need a catastrophic stop loss. If you happen to get cancer, you get hit by a bus, you are going to have maybe a $7,000 deductible and not have to pay a $400,000 bill. That’s what this was about to begin with, is to make sure that people who are not poor, didn’t get — were not insured and going to the hospital to have a million-dollar bill that they had to deal with, that the hospital had to eat. I used to run a hospital association, the biggest issue for the hospital is not the $2,000 deductible or the $7,000 deductible, it’s the two-million-dollar unpaid bill.
REED TUCKSON: Outside of the financing, again, who should be determining or should anyone determine what is at least the kind of basic floor, the essential package? If at the end of the day you try to sell this politically, people are going to want to know, okay, what am I getting? And are we going to try to avoid that? Are we basically going to say it’s state by state? What is the approach that you think ought to occur?
TOM SCULLY: I think the Republican can answer that. I’m not sure it’s necessarily mine, but I will tell you what I think it is. You get 50 states, let’s come up with a basic federal subsidy level for people up to 300-350% of poverty for a catastrophic stop loss. Let the states decide what it is in that state. Utah may have a different idea of what the central benefits are then South Dakota or New York. I’m not sure that’s the answer everybody wants to hear, but I think that’s where it’s going with Republicans running things.
SEN. TOM DASCHLE: I obviously would disagree with that. I think there is chronic illness in this country, it’s really an issue that we haven’t adequately addressed. Long term care is something we haven’t addressed. Catastrophic plans only address for the most part acute illness and it ignores the need for preventative health and good prevention efforts overall. Population health. It doesn’t address the many issues — there was a poll recently — people were asked, if you had an unexpected $400 medical bill, could you afford to pay it? And 52% of the people said, no, they couldn’t afford a $400 unexpected medical bill. So, it gives you some sense of the incredible price sensitivity there is to healthcare today. We are the only industrialized country in the world that doesn’t have universal health care. Every other country has figured it out. It seems to me, in the 2017, we ought to be able to figure it out too.
REED TUCKSON: [inaudible] Is there any reason why there could be a bipartisan decision to keep the prevention fund intact?
SEN. TOM DASCHLE: Well, it’s been used as a piggy bank for almost everything else at this point. So, it’s there, but it’s not for prevention generally, and that’s the sad thing. But no, the answer to your question is that that shouldn’t be controversial, it wasn’t — initially the concept makes so much sense, but frankly I think it’s going to be drawn down for other purposes.
AUDIENCE MEMBER: Good morning, my name is Chris Urban, I’m with Kaiser Permanente and I would argue that out of control healthcare costs are attributable in part to three key words and that is: Fee-for-service. And I’m curious, when do you see our system, whether it’s a public program such as Medicaid or Medicare or private sector offerings, moving from a fee-for-service concept to a value based reimbursement concept. Thank you.
SEN. TOM DASCHLE: I am emphatically in agreement. I think we are going to be moving much more slowly on fee-for-service reform and the migration away from fee-for-service to other approaches — bundled, capitated, global, than I would like. I think value driven care is something most people can support, but I think it’s harder to define and in part, if value is quality over cost, quality is still a measurement issue that challenges us. And we haven’t been able to figure how to address quality in a value driven context as much as we should. That is going to take some time and one of the biggest drivers to doing that is probably Medicare. I think the previous administration was on a track to do that. They set some pretty ambitious goals under the Medicare program to do that. Frankly, I don’t know if it shares the same priority in this administration. So, I am not as optimistic as I would have been a couple of years ago.
REED TUCKSON: Tom Scully, let me ask you on that, especially looking through a private sector lens, I wonder whether you would agree that the private sector hasn’t really made some inroads into being able to establish guidelines and criteria for doing value based reimbursement?
TOM SCULLY: You know, I think we just put everybody on Kaiser, how is that for — that will make them happy. You know, Kaiser is a great system. Look, we have made big changes and I got this to (indiscernible) CMS in 2001, we had 3% of people in the Medicare Advantage program and it’s now 33% and growing. I think it will be 50% in five years. That is capitation, that it private health insurance that has turned out to be pretty good and its actually turned out to be pretty bipartisan actually over the years. Medicaid went from 10% in 2000, of Medicaid Managed Care, it’s now — depending on whose number you count, probably over 80%, led by California and other primarily Democratic states. So, I think to move to private healthcare is definitely happening and the reason I like it and I have always liked it, is because I don’t like fee-for-service for one basic reason: Price fixing has never worked in the history of man-kind, any place, any time, ever. And I was very involved in creating RBRS, which is the fee-for-service, 1989 thing we did. At the time, I thought it was a great idea. In hindsight, you know, paying every doctor and every hospital the same thing has turned out to be not a problem. And so, my view is, as long as they are well regulated, if you can take those populations (indiscernible) fix prices and give that to Kaiser or a Blue Cross plan or Aetna or whoever, and say, here is $15,000, call me next year. You could make a 4 or 5% margin. I just think the behavior and the outcomes are much better by having a little bit — I wouldn’t say it’s a lot, a little bit of markets come to bear and that is roughly what has happened. So, I think we have made great movement, these are big programs, things happen relatively slowly, but if you asked anybody in 2001 if they thought we would have one third of the Medicare program in Medicare Advantage at this point, I think they would think you were crazy. And the same with Medicaid. So, we are moving in the right direction. Kaiser wants to build a couple more hundred buildings, we could probably — I’m kidding.
SEN. TOM DASCHLE: One other thing on this question that I would be surprised if we all didn’t agree with, is that the lack of transparency is still really a major impediment. Healthcare is still the only sector or our economy where at the time of purchase, we don’t know what it’s going to cost, who is going to pay. And you can’t really have a competitive system without greater transparency. So, have to work on that if we are going to get there.
REED TUCKSON: Excellent point, thank you.
AUDIENCE MEMBER: Mike Miller. I’m a physician that does health policy for a long time now.
TOM SCULLY: Long time trouble maker.
AUDIENCE MEMBER: Yes, but just like you, Tom. In the mid-late ‘90s, the concept of people didn’t really need health insurance, access to healthcare was sufficient. That concept petered out, it went away. It went extinct. But in the last 6-12 months or so, I have seen it reappear and I don’t expect either of you to agree with that concept that access to healthcare is all people need, they don’t need access to health insurance. I’m just wondering how prevalent you think that concept is and how it might be impacting how we move forward, if at all. Thank you.
SEN. TOM DASCHLE: I think it’s a critical question that we’ve attempted to address in a series of ways. The community health center program is an example of access to healthcare that doesn’t necessarily imply access to health insurance. I have always associated all healthcare systems anywhere in the world, in the form of a pyramid, where at the base of the pyramid, you have preventative care and primary care and you work your way up and become more and more technologically inclined until at the very top of the pyramid, you have MRIs and heart transplants. Every society starts at the base of the pyramid and they work their way up until the money runs out. In the United States, we start at the top of the pyramid and we work our way down until the money runs out. And that is the question in large measure that your question — how do you get to the bottom of the pyramid care and providing those primary services that in many ways could be preventative services that preclude the need to go up higher on the pyramid. We are not doing a very good job of that even today and that really ought to be one of our challenges. How do we get full pyramid coverage going forward?
REED TUCKSON: Tom, your comment?
TOM SCULLY: Yeah, well you are always going to have some low (indiscernible) even if you have “universal coverage” to insurance and I’m sure there will always be some people that don’t like that idea and say, let’s have access through — l love community health centers — through community health centers. But we are always going to have 10 — pick your number — undocumented non-residents who are not going to get Medicaid. So you are always going to have to have some kind of safety net below that, no matter where you are. Certainly, in the border states. So, I think you are always going to have — you know, there is a population that is never going to be insurable, unless we fundamentally change these programs. So, if you see more people talking about access rather than coverage in insurance, access to healthcare, yeah, I think to me is the real issue is — I think most conservatives even think low income access to fundamental coverage in insurance is the right thing to do. As you get further up on the income stream, I think they feel less strongly about that.
AUDIENCE MEMBER: My name is [name] I’m a physician and I recently left the Obama White House as a senior policy advisor in healthcare. The question I have for you is, what do you think the trajectory for MACRA will be under this administration? What sort of changes should we anticipate or expect from this new administration?
SEN. TOM DASCHLE: Tom is the administration expert, I think, better than I. I will let him start, but I can weigh in as well.
TOM SCULLY: I think my phone must be broken, they haven’t called me. No, I have talked to some of them a lot. I’m not sure what they have got on MACRA. I think fundamentally MACRA was written by the House and Senate staff, largely the Republican side and they are pretty into it and a lot of Republican members spent a lot of time on it. I don’t think certainly Tom Price was in the House at the time, was very aware of it. I think MACRA is pretty fundamentally locked in with most Republicans in that it was a House or Senate thing, somewhat bi-partisan, I think, but it was largely driven by the Chairman of the House and Senate Republican Committees at the time, and I think it’s highly unlikely to change. I think it’s pretty much locked in. I don’t think there is a lot of feelings about rolling back MACRA.
SEN. TOM DASCHLE: I agree with that completely. It was — it was one of the better examples. When we think, just when we think that polarization in healthcare couldn’t get much worse, we passed 21st century cures, we passed MACRA, we did things that most people wouldn’t have predicted. And there was an overwhelming bipartisan vote on MACRA, partly because everybody wanted to get rid of the prior system. It was such a crazy, convoluted way of reimbursing physicians, but partly because I think it was a statement on the part of almost everybody interested in eliminating fee-for-service, that we come up with a mechanism statutorily that at least at the federal level, creates the opportunity to move to a more rational system. Obviously, a lot has to do with the way it was implemented and enforced and how much of a priority it is, and that’s the open question right now. To what extent will that have priority in this administration? As Tom said, I don’t think anyone really knows yet.
REED TUCKSON: Last question from me is, we had the question around what is causing the escalation of prices in health insurance? One of the things insurers talk about is the insurers tax on them. And that they bake that into pricing. What do you see happening with the — is there much conversation about getting rid of the tax on insurers?
SEN. TOM DASCHLE: Well, there is always talk, I don’t know if there is — as we have seen over the last couple of months now, it’s almost impossible to reach consensus on how to address whatever changes we are going to make to the ACA, and this is another example. I’m sure most people would probably be supportive of repealing taxes, but the question is, how do you fill that void? Is there an offset? What do you do for revenue going forward if the ACA remains? Is it further deficit spending? So, I mean, I think insurers have raised this as a priority, but at least right now, I don’t see a consensus in Congress about what to do with ACA generally.
REED TUCKSON: Any other comment?
TOM SCULLY: Yeah, the in-house bill, Speaker Ryan’s bill is gone — it was immediately gone originally. So, I think it’s highly likely that all the taxes on devices and on insurers will be gone and I think they are going to — you can debate the merits of it, I think they are going to pass something for July 4th. I think the freight train slowed down a little bit, but they have no choice. They move a little further right, they lose their moderance and it’s a difficult thing to get the 218 votes. But I think they will get there and I think they will get there for July 4th, and I think they will pass the bill and send it to the Senate and the Senate will be, as usual more moderate and that will cause its own – so where they can get something done, but I would be shocked if they don’t come up with a consensus in the House to get 218 votes to do something. And my guess is the insurance for tax repeal will be in there.
REED TUCKSON: What is the one thing you didn’t say that you wish you said. Or something you said that you love and you want to say it again?
SEN. TOM DASCHLE: Bipartisanship, bipartisanship, bipartisanship. I could say that about 100 times. Let’s try to figure out a way to do this on a bipartisan way. It is just so essential. The American people are yearning for it. They want to see it. They want to see cooperation. They want to see — they don’t want to see the uncertainty around all of this. So, the more we can emphasize that — one of the troubling things the speaker said is that if Trump didn’t work with Republicans, he might even work with Democrats. And he was saying what a tragedy that would be. I don’t know if he really meant it the way it came out. Because I hope that he really doesn’t — he’s worked with Democrats and Tom was incredibly good at working with Democrats, and so I think we’ve got to figure out ways to do that to go forward and that is key.
REED TUCKSON: Tom?
TOM SCULLY: Whatever — I love Tom Daschle. It’s hard and given the way the year started out, I think it’s unlikely that they are going to start working together on a bipartisan basis, but I wish they would. I mean, if you look at the (indiscernible) Congress, Senator Sherman likes to cut deals, I think all Republicans know that. Ron Widen is a great guy, easy to work with, not always easy if you are the leader, but he knows healthcare really well and is a really smart guy and people forget, if you look at 2012, a month before Speaker Ryan was picked as the VP candidate, the big news in healthcare was the Ryan Widen Bill. Senator Widen and Paul Ryan, who were good friends, I assume they still are, had spent a year together working with a bipartisan moderate who was the — all the rational people in the world said this was the answer to healthcare and they worked on it to (indiscernible) so they know each other well, they are both very good guys. The politics draws a lot of things and the world has gotten nasty and more political, but most of these guys, if you left them in a room together, they could work things out and Ryan is a great guy and a smart guy, and Ron Widen is a great guy and a smart guy. The people involved here in the leadership roles actually get along pretty well and if it weren’t for the grenade throwing on both sides, they probably would get along pretty well.
REED TUCKSON: Ladies and gentleman, thank the panel, please.