What the Sequester Means for Health Care, Education and the Exchanges (In-depth Analysis); Will “Looking Stupid” Motivate Legislators to Compromise? Why the GOP Would Rather Cut Defense than Close Loopholes

Before looking at precisely who will be hurt by of government-wide sequester cuts on health and education, it’s worth considering the possibility—however slim—that legislators still might reach a budget agreement that brings an end to these blind, across-the-board blows to government spending.

Earlier this week Senator Mark Warner told Bloomberg News that he places the odds for a bipartisan debt-reduction deal at better than 50-50.

Why the optimism?  

Warner, who isn’t a political naïf (he served as Virginia’s governor from 2002 to 2006), believes that ultimately law-makers will arrive at a compromise because as he puts it: “looking stupid at some point has got to motivate people.” 

Granted, this is Warner’s first term in the Senate. This could mean that he doesn’t yet understand the ways of Washington. On the other hand, the fact that he’s new to the beltway could mean that he’s still able to think clearly.

As he reminded his Congressional colleagues Wednesday morning: “These cuts were set up to be the stupidest way possible. No rational group of folks would allow them to come to pass.”

Warner is right. NO ONE wanted cuts that Republicans have rightly called “mindless and random.”  That was the point of the Sequester deal forged during a 2011 deficit-reduction agreement. Legislators purposefully chose targets that were so unpopular that everyone assumed that neither party would ever let them occur.  Conservatives wouldn’t countenance slashing military funding by 7.9%, Democrats wouldn’t accept deep cuts to social programs that our most vulnerable citizens need.  They would have to find a compromise. Or, at least, that was the theory.

Instead, Democrats and Republicans deadlocked, and now it seems that they have double-dared themselves into an impossible situation. Sequestration will increase unemployment, weaken the economy, and hurt children, seniors and the military. Even the Border Patrol will take a hit.  More public school teachers will lose their jobs.

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Why We Are Stuck With the Sequester

A month ago, it was clear that voters would blame Republicans if Congress went ahead with the for the so-called “Sequester”—some $85 billion in automatic government-wide spending cuts.

I thought this meant that Republicans would be forced to back down, call off the Sequester, and accept the fact that if we want to reduce the deficit, we’ll need to raise some taxes while also cutting spending.

I was wrong. The sequester took effect March 1 and Republicans aren’t budging.

The public does, in fact, blame the GOP for the budget stalemate that has led to the sequester:  a recent CNN poll shows that shows that only 38 percent say they have a “favorable view ”of the Republican Party, versus 54 percent who view it unfavorably.

                                  Why Republicans Aren’t Worried

Yet House Republicans are not terribly concerned about what voters think. This is because, back in 2010, they succeeded in re-drawing election district lines in many swing states in a way that creates “safe districts” for Republicans—districts where they have a solid majority. They feel untouchable.  At the same time the new boundaries pack as many Democrats as possible into as few districts is possible.

This is a major reason why Democrats didn’t win a  House majority in 2012, even as their congressional candidates drew about 1.4 million more votes than Republicans nationwide, according to data compiled by Bloomberg News. And, Bloomberg notes, the redistricting “will hinder the Democrats from regaining control of the chamber in 2014.”

District lines are re-drawn once a decade, right after the U.S. census is taken. The last census took place in 2010, and that year Democrats saw massive losses at the polls. As a result, the GOP controlled state government in key states, including Wisconsin, Michigan, Ohio, Indiana, and Pennsylvania. This gave Republicans the power to draw congressional district lines. They seized that chance, aggressively “gerrymandering” so as to protect Republican incumbents while isolating Democrats. The fact Democrats are concentrated in urban areas made their task easier. Nevertheless, creative cartography led to some crazy designs. For instance, Bloomberg points out, “Michigan’s 14th congressional district looks like a jagged letter ’S’ lying on its side.”

 

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Obama’s Proposals For Medicare — Do They Go Far Enough? Will They Become Law?

Not long ago, I wrote about the Center for American Progress’ (CAP’s) “Senior Protection Plan” —a report that aims to rein in Medicare “by $385 billion over ten years without harming beneficiaries.” In that post, I suggested that CAP’s proposals might well give us a preview of the “modest adjustments” that President Obama had said he would be willing to make to Medicare.  At the time, I highlighted three of CAP’s recommendations:

– increase premiums for the wealthiest 10% of Medicare beneficiaries (raising $25 billion);

– insist that drug-makers extend Medicaid rebates to low-income Medicare beneficiaries (saving $137.4 billion);

– prohibit “pay for delay” agreements that let “brand-name drug manufacturers pay generic drug manufacturers to keep generics off the market” (saving $5 billion).

Last week, in his State of the Union address, President Obama embraced the first two:  “Already, the Affordable Care Act is helping to slow the growth of health care costs,” he noted. “The reforms I’m proposing go even further. We’ll reduce taxpayer subsidies to prescription drug companies and ask more from the wealthiest seniors.”  (In time, I suspect that the administration also will call for a ban on those decidedly seamy “pay for delay” deals.)

“On Medicare,” he added, “I’m prepared to enact reforms that will achieve the same amount of health care savings by the beginning of the next decade as the reforms proposed by the bipartisan Simpson-Bowles commission.” The commission called for reducing Medicare spending by roughly $350 billion over 10 years–  a sum that is not far from CAP’s $385 billion target.

Are These “Adjustments” Too Modest ?

These may seem like small numbers. But keep in mind that this is on top of the $950 billion that the Affordable Care Act (ACA) saves by squeezing waste out of health care spending, while simultaneously raising new revenues. Of that $950 billion, some $350 billion comes in the form of Medicare savings achieved by:

–  Pruning over-payments to private sector Medicare Advantage insurers– $132 billion  

–  Containing Medicare inflation by shaving annual “updates” in  payments to hospitals and other large facilities by 1% a year for ten years, beginning in 2014– $196 billion

– Cutting disproportionate share hospital payments to hospitals that care for a disproportionate share of poor and uninsured patients over 10 years beginning in 2014 – $22 billion.

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Pelosi Says “There’s Still a Chance”

Last night House Majority Leader John Boehner withdrew his “Plan B” proposal for the budget. He had no choice:  conservative Republicans in the House made it clear that would not vote for a plan that raises taxes for ANYONE—even millionaires.

Many in Washington believe this makes a bungee-jump over the “fiscal cliff” inevitable. As I have explained, that is not as scary as it sounds. The precipice is an imaginary line drawn in the sand and dated “January 1.”  Any damage done if we miss the deadline can easily be reversed.  Early in January Congress would, no doubt, extend tax cuts for 98% of all Americans while voting down Draconian across- the- board spending cuts scheduled to kick in the first of the year.

But today, House Minority Leader Nancy Pelosi said “there is still a chance for a deal” before year-end. In fact, Pelosi probably knows that House Democrats and Republicans have more than enough votes  to extend tax cuts for the 98% now. The Senate has already passed a bill that would do just that. And in the House few  Republicans are eager to stand up and vote to hike taxes  for the vast majority of Americans. Conservatives just want to give the same break to the wealthiest 2%. But by now, most Republicans recognize that some tax increases are inevitable.

Pelosi’s optimism makes me hopeful. She’s a superb vote-counter, and she knows what’s happening on the other side of the aisle.

                    CEOs Urge Republicans to Compromise 

As Bloomberg reported yesterday, corporate chieftains have begun to lobby Republicans to give way on tax increases: CEOs such as Lloyd Blankfein of Goldman Sachs Group Inc., Robert Iger of Walt Disney Co. and Randall Stephenson of AT&T Inc. have been meeting with White House officials and their “support for Obama’s tax stance has split the Republican business alliance, driving a wedge between CEOs urging compromise and the nation’s most prominent small-business group.

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