Monday, November 2, 2009

Leavitt Says States Could Power Reform

By Jason Plautz  

Michael Leavitt

former HHS Secretary

Michael Leavitt, the former governor of Utah, joined the Bush White House as administrator of the Environmental Protection Agency in 2003. From 2005 to 2009, he served as secretary of Health and Human Services, where he helped implement the Medicare prescription drug benefit, retool America's pandemic preparedness, helped spread the efforts of the Food and Drug Administration internationally and also operated the first Cabinet-level blog. Leavitt now runs Leavitt Partners, an advising firm.

In an interview with NationalJournal.com, Leavitt discussed the outlook for health care reform and where he thought Congress could do a better job. Edited excerpts follow.

NJ: How do you feel about the debate as it stands today? Does health care reform have a chance of passing?

Leavitt: I continue to believe there will be a signing ceremony at some point during this Congress. What's actually enacted in law is still very much in play. I view this as a somewhat predictable process with a quite unpredictable product. Whenever a party has been out of power, they are required by their DNA to overreach, they just can't help themselves. We shouldn't expect anything else -- Republicans have done it, Democrats have done it....

There's no reason to think they will stop or constrain themselves until they've been stopped either by the opposition party or the weight of public outcry. I think that's what's happening. It became clear in September that the bills were beyond what public opinion would sustain, and they're now recalibrating.

NJ: Will the bill resemble what we're seeing in Congress right now?

Leavitt: That's the unpredictable product. I think there's a political imperative to pass something and my view is that the White House has been working hard to maintain an openness to whatever that might be so that the signing ceremony takes place this year.

NJ: You've been firmly against the public option. How do you feel about the opt-out provision in the Senate bill?

Leavitt: The idea that we're going to require all Americans through their taxes to pay subsidies that will surely accompany a public plan but have some states not participate is a phony idea. It's a false choice. The purveyors of the opt-in provision know that. This is an effort to find words that give cover to moderates who know that the public option is a bad ideological idea, but are looking for some way to justify a vote to be with their party. But it is as phony as a $3 bill.... The reality is that if Congress were to solve a number of specific problems that only they could solve and then create an imperative for states to act, the whole process would be better.

NJ: What are those specific problems?

Leavitt: States cannot solve the federal tax inequity that exists. When people are not buying insurance through an employer, the discrimination is blatant. There's no reason or explanation for why we deny a very large percentage of the American people a large tax benefit. Only Congress can fix that, and there are numerous proposals on the table, proposals that have been made by both parties in other years.

If the federal government were to assist states in subsidizing those in hardship, that would be another important tool. It would be important for Congress to provide standards, but those standards have to have some flexibility to them. If the fed government had standards that were flexible, fix the tax problems and develop the means by which subsidies could be provided specifically for those that are hard to insure because of health and create an imperative for state action, this problem could be solved within four years.

When you boil it down, people are saying, "Let's not opt in to a federal plan, let's opt in to an organized construct that drives action, creates innovation and solves the problems that exist without blowing the whole system up."

NJ: The bill would give the HHS secretary a lot of authority over costs and other health care decisions. As a former HHS secretary yourself, do you think the position can handle the new responsibilities?

Leavitt: The Department of Health and Human Services has a certain amount of administrative authority already. In many cases, that authority came because Congress was unable to deal with the specificity of some problems. Many times it's because it's too much detail, but often it's because they don't want to have a public debate. It's a way to allow for federal control, but avoid having Congress have to do it overtly. If people understood that federal bureaucracy was going to make decisions on what the benefits would be in plans... they are going to say that these are choices that have been made successfully in the private sector.

There are many new federal creations with new authorities and it's all done as a means of turning over [tough decisions] to the bureaucracy. I know that because I've exercised that authority. There's a lot of power there.

NJ: Are these bills going to be effective in bending the cost curve?

Leavitt: I see very little in any of these bills that deals with cost. This is about access to government insurance. Everyone has discounted the idea that this bends the cost curve. The budgets they're building on these things are spreadsheet budgets full of plug numbers designed to make it balance. They have deferred any benefit in a 10-year window in order to reduce the cost, but that doesn't defer the cost in the future. It makes the cost looks good in a 10-year window. It's all gimmickry and gamesmanship. But the reason we have problems with the deficit right now is that we phony up a 10-year window and pretend there's nothing after those 10 years.

In the Senate bill, they're talking about using $570 billion of Medicare for the growth rate. I have some experience here. I took a budget to Congress that had about a third of that -- I think it was $130 billion of Medicare reductions. The words I recall in the hearing were "dead on arrival." Why? Because it lacked compassion or sensitivity to seniors. It lacked reality of what was needed by hospitals. Their budget is the SGR [sustainable growth rate] on steroids -- these are promises that promise reductions that will never happen.

NJ: Last week in the New York Post you warned that insurance reform could increase the number of uninsured. How can we get around that?

Leavitt: The problem they're trying to solve is pooling by eliminating pre-existing conditions so that no one is discriminated [against because of] health. They could provide a means by which people who are hard to insure because of their health can get coverage. If they're going to use an individual mandate, they have to make sure it works. They're creating such a weak mandate that it's not going to be effective, they'll just buy insurance to avoid the mandate and drop it. The problem has to be solved -- how do you assure that everyone's part of the pool? There are many ways to solve it. They're just choosing to use what I think is the least effective.

NJ: What would be effective?

Leavitt: I'd prefer to see the availability of "uninsurable pools." The states will do it in different ways, but they'll have some of the same ideas. The federal government can help with some guidelines.