When Health Repeal Was 'Catastrophic'

by Dan Diamond, California Healthline Contributing Editor

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A president uses his pulpit to call for health reform, but initial agreement over the need for change eventually descends into partisan bickering. Angry constituents shout down lawmakers during congressional town halls. Congress ultimately faces pressure to repeal the health law.

If this all sounds familiar, it's because it already happened -- in the fight over the Medicare Catastrophic Care Act, more than two decades ago.

As the New York Times wrote in October 1989, just 16 months after MCCA was passed, "rarely has a government program that promised so much to so many fallen apart so fast."

Revisiting the MCCA's 'Short Life and Painful Death'

Twenty-five years ago this week, President Reagan used his State of the Union address to call for "recommendations ... to address the problems of affordable insurance" for people who faced financial ruin should catastrophic illness strike. Working off a White House proposal, Congress passed the MCCA in June 1988, following a 328-72 House vote and an 86-11 Senate vote.

The bipartisan accord lasted just 16 months before legislators -- shaken by public rage and industry firepower -- elected to overturn the law via the November 1989 Medicare Catastrophic Repeal Act.

The short-lived act has survived as an anecdote and watchword for would-be health reformers -- but policy experts have largely forgotten the legislation's details, 20 years after MCCA's sudden demise. The fight over catastrophic care is one "that I don't remember much about," a noted health law professor confessed to California Healthline. Other health policy veterans -- even those who worked on Capitol Hill amid the debate -- were stumped to recall more than a few vignettes.

As a refresher, the law was intended to cap Medicare beneficiaries' hospital and physician care costs. An accompanying drug benefit was designed to tamp down seniors' spending on pharmaceuticals. Altogether, MCCA affected more than 30 million people and represented the greatest federal expansion of health services since Medicare's creation.

MCCA also became a vehicle for health advocates to try and realize their long-deferred agendas. The law was the first major piece of health care legislation before Congress in years, and legislators eventually added coverage for mammography screening, extended nursing-home benefits and even crafted a proto-version of the Children's Health Insurance Program.

In order to finance these additional benefits, Congress raised Medicare premiums and enacted a surtax on the incomes of the wealthiest Americans aged 65 and older. This decision to tax only certain seniors -- and essentially ask them to finance their less-well-off peers -- fueled popular resistance and ultimately doomed the MCCA.

Failed Law Cut From Different Branch Than PPACA

While comparing PPACA and MCCA presents "an interesting analogy," the two laws were dissimilar from the start, according to Washington & Lee University law professor Tim Jost. In contrast to the high-profile debate that preceded the current repeal fight, Democrats and Republicans in 1988 were proudly amiable when crafting the much lower-profile catastrophic care act. Partisan sniping emerged only after MCCA ran into trouble, with some Republicans suggesting that a Democratic-led Congress was to blame for overreaching.

The two laws also represent a "very different set of circumstances," Georgetown University public policy professor Judy Feder told California Healthline. PPACA required a party-line vote for passage, but largely enjoys the industry's support and has clear political ownership by the White House and Democratic party. MCCA, on the other hand, won bipartisan backing but was fiercely opposed by the pharmaceutical industry -- which was critical of the drug benefit's impact -- and lacked a true champion.

Another marker underscores the different eras: How lawmakers buckled under public pressure.

The defining moment in MCCA's repeal groundswell came when House Ways and Means Committee Chair Dan Rostenkowski (D-Ill.) was booed and jeered following a raucous town hall; a senior citizen ultimately jumped on the hood of Rostenkowski's car, forcing him to exit the car and re-engage the crowd before he could run back to his vehicle and slip away.

The incident -- so unusual and definitive in 1989 -- would have been lost amid the heckling, violence and arrests that marked many lawmakers' town halls in 2009.

Catastrophic Care's Hard-Won Lessons Embedded in PPACA

Lawmakers crafting PPACA "understood what happened" with the catastrophic care act and took steps to avoid a reprise, Jonathan Cohn wrote last year in Kaiser Health News. Just a handful of seniors experienced the catastrophic expenses that MCCA was intended to address, and the drug benefit was not slated to begin right away. Conversely, PPACA was front-loaded with immediate benefits like support for seniors' drug purchases and new protections for patients seeking insurance, Cohn noted.

MCCA was partly undone by inconsistent messaging and direct mail attacks from the National Committee to Preserve Social Security and Medicare. In contrast, defense of PPACA has been coordinated by the White House and carried via multiple media.

Most importantly, MCCA's repeal offers a glimpse into how lawmakers respond to health legislation that's struck down: they abandon what's politically tarnished and find another vehicle to ferry their remaining ideas. But in the interim, health problems worsen and costs tend to rise.

Medicare's prescription drug benefit program is a good example, according to Bruce Vladeck, a former administrator of Medicare and Medicaid. Congress ultimately enacted a prescription drug benefit -- but the 2003 solution was "more expensive and less good" for patients than the 1988 model, which allowed for better price regulation, Vladeck tells California Healthline.

If PPACA is ultimately repealed, Congress will likely try to reform health care again -- but the next effort would have to pave over even more cracks in the nation's health system.

Jumping from the 1980s, California Healthline now casts an eye around the nation to see other health reform stories making news this week.

On the Hill

  • Opponents of the federal health reform law have criticized a recent report from HHS suggesting that consumers will spend significantly less on premiums for health insurance purchased through state-based exchanges than they would if the law had not passed. House Ways and Means Committee Chair Dave Camp (R-Mich.) said that the report would be "laughable if it wasn't so disingenuous," noting that it conflicted with Congressional Budget Office findings that premiums would increase under the reform law because health plans will be required to offer more comprehensive coverage (Norman, CQ HealthBeat, 1/28).
  • A bill (S 18) introduced last week by Sens. Mike Johanns (R-Neb.) and Joe Manchin (D-W.Va.) to repeal the 1099 tax-reporting provision has garnered 60 co-sponsors -- 45 Republicans and 15 Democrats -- and quickly is gaining bipartisan support. Johanns is now seeking legislation to which he can attach the bill as an amendment as soon as possible (Needham, "On the Money," The Hill, 1/27). Meanwhile, a competing bill (S 72) introduced by Senate Finance Committee Chair Max Baucus (D-Mont.) and Senate Majority Leader Harry Reid (D-Nev.) has 18 co-sponsors (Ethridge, CQ Today, 1/27).
  • Also last week, Rep. Phil Roe (R-Tenn.) introduced a bill (HR 452) to repeal the creation of the Independent Payment Advisory Board. Republicans have opposed IPAB because they say it gives too much power to unelected bureaucrats (Millman, "Healthwatch," The Hill, 1/26). Meanwhile, Sen. Jim DeMint (R-S.C.) introduced legislation (S 192) along with 35 Republican co-sponsors that would repeal the health reform law, mirroring the House bill that was passed last week. As of Wednesday, 11 Senate Republicans had not endorsed DeMint's bill (O'Brien, "Blog Briefing Room," The Hill, 1/26).
  • Republican staff on the Senate, Health, Labor and Pensions Committee recently released a survey of state insurance departments, finding that insurers in 34 states have discontinued offering child-only insurance policies, and 20 states now have no insurers offering such policies. Meanwhile, California and at least seven other states have taken regulatory or legislative action to encourage insurers to offer child-only plans (Kliff/Feder, Politico, 1/27).

In the Courts

  • Federal judges in the 4th U.S. Circuit Court of Appeals in Virginia have agreed to hasten their review of a December 2010 ruling by U.S. District Court Judge Henry Hudson, who ruled that the federal health reform law's individual mandate is unconstitutional. The court said it would hear oral arguments beginning May 10 (Pelofsky, Reuters, 1/26). Both HHS and Virginia Attorney General Ken Cuccinelli (R) requested that the appeals court expedite its review. "Major decisions are already being made, and money is already being spent to comply with a law that may not be around two years from now," Cuccinelli said (Carlson, Modern Healthcare, 1/26).
  • Last week, a U.S. District Court judge in Pennsylvania denied a request by the Department of Justice to dismiss a lawsuit by a Pennsylvania couple alleging that the federal health reform law's individual mandate is unconstitutional. DOJ sought to dismiss the suit on the grounds that the plaintiffs do not have standing to challenge the law because they have not yet been affected by the individual mandate. Judge Christopher Conner disagreed with that stance, saying the plaintiffs must prepare financially to purchase coverage under the individual mandate, which goes into effect in 2014 (Norman, CQ HealthBeat, 1/25).
  • Meanwhile, Oklahoma Attorney General Scott Pruitt (R) recently announced that he has filed a lawsuit in federal district court challenging the constitutionality of the federal health reform law's individual mandate, which requires nearly all U.S. residents to obtain health coverage by 2014 or pay a penalty. The lawsuit makes Oklahoma the 28th state to file a legal challenge against the health reform law (Estus, Oklahoman, 1/22).

Administration Actions

  • On Friday, President Obama delivered a speech at Families USA's annual conference and reiterated the importance and benefits of the federal health reform law. Obama also repeated a pledge he made in his State of the Union speech to work with lawmakers to "tweak" the law to make it better (Levey, Los Angeles Times, 1/28). In addition, the president reiterated his support for legislation that would repeal the reform law's 1099 tax-reporting mandate for businesses (Werner, AP/Washington Times, 1/28).
  • White House Council of Economic Advisers Chair Austan Goolsbee appeared before the House Ways and Means Committee last week and was asked to explain how the administration authorized the inclusion of the 1099 tax-reporting provision, which Obama has criticized as "counterproductive." House Ways and Means Committee Chair Dave Camp (R-Mich.) asked Goolsbee, "How is it that Congress passed a health care bill that is 'counterproductive' to American employers -- especially at a time when we need to be looking for solutions that encourage, not impede, job creation?" (Aizenman, Washington Post, 1/26). Goolsbee said that he was not present during the discussions (Nocera/Nather, Politico, 1/27).
  • HHS recently granted more than 500 new waivers to businesses that offer low-cost health plans, or "mini-med" plans, exempting them from a provision in the federal health reform law that prohibits caps on health benefits. Meanwhile, the agency denied waivers to "more than a handful" of plans, according to an HHS spokesperson. HHS officials said the agency anticipates an increase in waiver requests because insurers were required to file before their plan year began, which is Jan. 1 for many organizations (Millman, "Healthwatch," The Hill, 1/26).
  • Last week, the Obama administration faced off with CMS Chief Actuary Rick Foster, who has asserted that the federal health reform law would not generate the savings predicted by the administration. Testifying before the House Budget Committee, Foster said that it would be "false, more so than true" that the overhaul will control costs (McLaughlin, Washington Times, 1/26). Stephanie Cutter, a special assistant to the president, responded on the White House blog, writing, "History shows that it is possible to implement measures that will save money for Medicare and the federal government" (Pecquet, "Healthwatch," The Hill, 1/26).

Eye on the Industry

  • Leading executives from Aetna, Cigna, Humana, UnitedHealth Group and WellPoint have met frequently since last summer as part of an informal lobbying alliance seeking to alter various provisions in the federal health reform law, according to sources with knowledge of the meetings. Since its formation in July, the alliance has discussed how to improve the reputation of major insurers after frequent public criticism during the health reform debate. The group also is trying to decide to what extent it will become a visible political arm for insurers (Armstrong, Bloomberg, 1/31).
  • Although the passage of the federal health reform law caused most health lobbyists to decrease their spending in 2010, a few select stakeholders increased spending, according to a Kaiser Health News analysis. KHN found that 10 major organizations in the health field spent about $127 million on lobbying last year, down by about 9% from 2009. The Pharmaceutical Research and Manufacturers of America decreased its lobbying the most, cutting spending by 17% from 2009 to 2010. However, groups such as the American Medical Association, the American Hospital Association, America's Health Insurance Plans and the Biotechnology Industry Organization spent more in 2010 than in 2009, according to KHN (Vaida, Kaiser Health News, 1/27).

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