Baucus Keeps Up His End Of Secret PhRMA Deal

Last month Ryan Grim at Huffington Post uncovered an internal memo outlining at the secret deal made between Baucus, the White House, and PhRMA. According to Grim,

Representatives from both the White House and PhRMA, shown the outline, adamantly denied that it reflected reality. PhRMA senior vice president Ken Johnson said that the outline "is simply not accurate." "This memo isn't accurate and does not reflect the agreement with the drug companies," said White House spokesman Reid Cherlin.

After complete my preliminary reading of the Chairman's Mark of Baucus' bill it appears that Baucus has followed the deal outlined in the memo quite faithfully. Baucus bill would increase the Medicaid rebates from 15.1% to 23.1% (page 53). It would provide Medicare part D patients in the donut hole a 50% discount of brand name prescription drugs (page 122).

In accord with the internal memo, Baucus bill does nothing to change current law regarding drug re-importation from cheaper countries. It does not contain the Medicaid/Medicare dual eligibility rebate promoted by Henry Waxman. It does not allow Medicare to directly negotiate drug prices which was added to House Energy and Commerce committee bill. There also appears to be no change to Medicare Part B in reference to pharmaceuticals.

Baucus bill differs from the memo in only two points. There does not appear to be any change to current law regarding follow on biologics, FOBs. The Baucus bill also imposes an annual fee of $2.3 billion on the entire drug sector ($23 billion total) which is more than what the memo says (page 214). If you do combine the $12 billion agreed to fee with the $9 billion agreed to savings from FOBs (which appear not to be in the bill) it is a total of $21 billion. Overall it appears that the internal memo uncovered by Grim very accurately reflects a secret deal Baucus and Obama cut with PhRMA.

Who Is Keeping The CBO's Public Plan Estimates Secret? - Updated

The House's bill contains a public option that would pay a Medicare rates plus 5%. According to the CBO this will make the House's public plan roughly 10% cheaper than private insurance. Since the size of subsidies are based on the average of the three cheapest plans it should dramatically reduce the cost of the bill.

Over a week ago Jonathan Cohn at New Republic was leaked a report that the House's public plan would reduce the cost of the bill by roughly $150 billion. The official bill has been out for days and the CBO must have evaluated the potential savings from the public plan. Yet no estimates have been released. Someone is purposely hiding the cost savings from the public plan.

Why would anyone keep the cost savings from the House's public option secret?

One likely possibility is that they are preparing to substantially change the public option to gain the support of more conservative Democrats. Ryan Grim reported that some blue dogs were working to replace the House's public plan with the Senate HELP committee's. The CBO projects that the HELP public plan would not be substantially cheaper and would not dramatically effect the overall cost of reform. This is because the HELP public plan does not base its payment rates on Medicare.

The Democratic party leadership may not want it to be publicly know just how much a strong public option would reduce the cost of reform, if they were preparing to compromise on it. If Progressive activists saw the CBO report about the strong public option, they may have vigorously fought a $150 billion sacrifice to gain the support of a few dozen blue dogs. There might be fear that the inter party battle could derail reform.

The only other possibility I can imagine is that Obama does not want estimates about a robust public option released until after the CBO calculated the effect of the new “MedPac on steroids” proposal. The new stronger MedPac should dramatically reduce the cost of Medicare and therefore also reduce the cost of a public option based on Medicare's payment rates. There might be a desire not to attach a number to savings from a strong public option until it is the greatest possible savings.

Either way someone is purposely keeping the CBO's estimates about the House's public option secret.

Updated: The members of the Congressional Progressive Caucus just sent a letter to Nancy Pelosi in which they claim that, "allowing providers to opt out of the public option has already created a loss of $91 billion in savings." This is clear proof that there is a CBO estimate about the savings from the strong public option which has not been released.

A Fair Compromise for Conrad's Co-op Plan

Senator Conrad is still pushing his idea of eliminating the public plan and only creating a “co-op plan” instead. But he is willing to greatly change his original proposal to gain the support of Senator Schumer.

Ryan Grim at HuffingtonPost.com is reporting that Senator Conrad would now support a single national “co-op”. For the first few years it would also be overseen by a federal board appointed by the Health and Human Services Secretary. (If it is controlled by the public sector how is it not a public plan?)

Senator Conrad wants to force the co-op to eventually lose its federal oversight board, while Senator Schumer wants the board to be permanent. Forcing the co-op to change (or not change) its governing oversight is in direct opposition to the basic principle of a cooperative.

Instead of having a small group of senators forcing millions of future co-op members to change the way they run their organization, they should leave it up to the members. The whole point of a co-op is to allow members to vote on the direction of the cooperative.

It seems the only smart, fair, and appropriate compromise is to put the issue up for vote by the members. For example, The cooperative would lose its federal oversight board only if 50% plus 1 of all members mailed in a ballot demanding the change.