July/August 2011 Friends Like These

Buried in Obamacare is a secret weapon to contain Medicare costs. Meet the group of House Democrats who want to destroy it.

By Sebastian Jones

So when the Affordable Care Act was being drafted, key senators like West Virginia’s Jay Rockefeller and White House officials decided that what was needed was a health care equivalent of the Base Realignment and Closure (BRAC) Commission, the highly successful independent body Congress created in 1988 to make decisions about which military bases to close—decisions that Congress had repeatedly shown itself unable to make on its own. IPAB fits that bill. Composed of fifteen experts plucked from the health care world, IPAB will have the authority to impose binding, fasttracked changes to Medicare once per capita costs rise beyond specific levels outlined in the health reform bill. Congress could reject IPAB’s recommendations, but it would have to offer its own alternative cost-saving measures, reducing the chances of meddling. IPAB is prohibited by law from rationing care or raising premiums, and its authority over some sectors of health care won’t kick in for years. Moreover, the Affordable Care Act left many of the board’s powers undefined. But over time, with a proactive chair and a supportive White House, the board has a great deal of potential to fundamentally change the way Medicare does business.

Beginning in 2014, IPAB will be able to green-light many of MedPAC’s most promising ideas. But potentially even more important, it could take the best results of a number of innovative delivery reform experiments mandated by the new law—for instance, the “bundling” of services into a single payment to encourage doctors to forego unnecessary tests, or rewarding health care networks for providing higher-quality integrated care for patients with expensive chronic diseases—and fast-track their implementation systemwide. The hope is that, over time, these changes could substantially lower the rate at which Medicare costs are expected to grow. And since private insurers often follow Medicare’s lead, the reforms could lower cost growth in the broader health care system, which is the real source of the problem.

Given the threat IPAB represents to a status quo that is very lucrative for the health care sector, the industry has gone into a lobbying frenzy. Groups like PhRMA, the incredibly powerful drug industry trade group, were out of the gate almost as soon as Congress had passed the act. Though PhRMA supported the bill—which did, after all, expand their potential market of patients by about thirty million—their press release on the occasion of its passage was quick to mention “concerns” about IPAB and its “overly broad powers.” It was a message that Republicans found intrinsically appealing. But for any repeal effort to actually work, bipartisanship would be required.

Luckily for IPAB’s opponents, a group called the New Democrat Coalition was waiting in the wings.

The New Democrat Coalition quietly emerged on the scene in 1997, toward the end of the Clinton era. Like the Democratic Leadership Council and the Blue Dog Democrats, two other groups that broke through in the age of “Third Way” politics, they sought to tap into the vast campaign finance coffers of corporate America. While the Blue Dogs are known as a largely southern and rural club with interests in social issues, fiscal conservatism, and energy, the New Democrats have tended to come from suburban districts across the country and focus on matters of trade, finance, and health care. Throughout the group’s history, its members—names like Gary Peters, Adam Smith, and Martin Heinrich—have mainly been congressmen who are little known outside their districts, unlikely to chair a committee or hold a prominent leadership post. Instead, they have been positioned along the fault lines of major policy battles, using their status as fence-sitters to extract concessions for the business community.

If the New Democrats have a favorite buzzword, it is “innovation.” Their PR literature is full of phrases like “championing innovation,” “growing the innovation economy,” and “funding the innovation agenda.” In practice, the term has largely served as cover for the priorities of their corporate backers. For example, when the financial industry came to Congress in the late 1990s asking for the removal of the Depression-era Glass-Steagall Act’s restrictions on investment banks merging with depository institutions, many New Democrats voted for the Gramm-Leach-Bliley Act, which paved the way for “too big to fail” banks. New Democrats also threw their weight behind the Commodities Futures Modernization Act, which limited regulation of financial derivatives, including the—yes—“innovative” products that played a major role in the financial crisis.

When Republicans took back Congress and the White House in 2000, the GOP was able to monopolize campaign cash from lobbyists through the K Street Project, and the power of the New Democrats waned. For a time, membership in the group was akin to being “just a name on the list,” the current vice chair Representative Ron Kind has said.

All that began to change after the 2006 election. With their party again at the levers of power, setting the policy agenda for Congress, the New Democrats’ stock began to rise once more. The business community needed new Democratic allies in Congress; the New Democrats needed seed money for their campaign finance war chest. Then, when Barack Obama swept into office in 2008 promising broad reforms, some of Washington’s most powerful lobbying constituencies had more need for the New Democrats than ever.

During the health care reform debate, biotech companies wanted to prevent generic versions of a lucrative new class of drugs called biologics from entering the marketplace, claiming that a proposed seven-year monopoly, endorsed by the Federal Trade Commission and the Obama administration, would block “meaningful incentives for innovation.” In stepped the New Democrats, lending their collective support to an industry-endorsed twelve-year monopoly that included language consumer groups said would allow near-automatic renewals of monopoly periods if manufacturers changed dosages or delivery methods. With public attention focused squarely on the debate over the “public option,” ensuring that drug companies got the monopoly they wanted was a breeze.

Likewise, as Congress sought to reform the regulation of Wall Street in the aftermath of the financial crash, the New Democrats mobilized to block meaningful reform of derivatives. Though they were unable to squeeze out all the concessions they desired, their pressure shifted the boundaries of the debate toward weaker reforms.

In each case, one or two New Democrats would take the lead, either by introducing legislation, circulating a “Dear Colleague” letter, or writing up an op-ed endorsing a particular bill. As a floor vote neared or a debate intensified, additional members of the coalition would join in. Eventually, as was the case with derivatives language in Wall Street reform and biologics in health care reform, the coalition would take an official vote on whether to endorse a given measure and then fire off a letter on official coalition stationary to party leadership with dozens of signatures, making clear that the New Democrats meant business and could deliver the votes to prove it.

Sebastian Jones is an editor at the Washington Monthly.


  • humanetigor on June 21, 2011 12:29 PM:

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  • Florca on June 21, 2011 2:56 PM:

    This was apparent along time ago.You guys are a little late to catch on... These guys have been on the case for months:

    ...The Obama administration’s policies, in health care as in every other sphere, are tailored to the interests and demands of the financial elite. As the Times itself all but admits in its editorial, the Obama health care plan was not a progressive reform, but the first step in an assault on social benefits. It is part of an escalating campaign to eliminate every social gain of the working class made in the 20th century, in the United States and internationally..."


  • IUPAPAW on June 21, 2011 11:52 PM:

    anyone voting against social security and medicare is not looking to be re-elected

  • Nancy Irving on June 22, 2011 3:43 AM:

    This piece is excellent.

    The GOP, with the collusion of conservative Democrats, are demagoguing IPAB by calling its mission "rationing." Rationing implies depriving people of *needed* treatments, the exact opposite of what IPAB is tasked to do, namely, to dispense with useless or harmful treatments in order to improve outcomes while addressing health care cost inflation.

    I can offer personal testimony that it is not patients who are driving the anti-IPAB story.

    I was diagnosed with cancer a few years ago. I underwent chemotherapy, radiation, hormone therapy, and, really, more than I can even remember.

    I hope that all of these treatments were effective and did me good. But all were unpleasant or exhausting, caused debilitating side-effects, and some may have permanently affected my future health.

    Believe me, if a board like IPAB had produced good empirical evidence that *any* of these treatments were ineffective, I (and I think, most patients) would have been the first to say, please don't give me this treatment. If conservatives want to call this "rationing," then, please, bring it on!

    This article is absolutely correct: conservatives in the pay of drug and device manufacturers would like us to believe that IPAB will deprive patients of needed treatment. But IPAB's mission is actually the opposite: to save patients from undergoing unnecessary and even harmful treatment.

    Thanks for pointing this out so clearly.

    P.S. Florca, why not read the article before posting. It demonstrates the exact opposite of what you seem to be saying.

  • GoozNews on June 22, 2011 5:47 PM:

    Great piece. But I would worry less about Obama losing senior votes because he vetoes an IPAB repeal bill than his signing it because he buys the basic argument: that lowering costs and ridding Medicare of wasteful tests, drugs and procedures will somehow "choke off" innovation. That's always been industry's trump card.

    The reality is just the opposite. The high prices industry charges for new technologies, whose addition to medical value almost always remains unproven, has made medicine among the least efficient industries in America.

  • IUPAPAW on June 28, 2011 4:04 PM:


  • Fred Adler on June 29, 2011 6:33 PM:

    It would be very useful if someone pointed out that with current health care costs (caused by many different reasons some popular and some not so popular) are not sustainable using taxes. And that increasing taxes on "everyone else" won't work either because with the demographic freight train bearing down on us, there just will never be enough money to pay for the level of health care "given" (they certainly used more money than they put in) to seniors during the last couple decades. There just is not enough money. Look at your SS statement some time see how much money you actually put into the system and ask yourself, how much do you think you will take out. First move, take the "special program" away for all government workers and make them use only social security and their own savings and contributions for retirement and make them use only Medicare. How can they fix the system when they don't have the incentive to fix it for themselves? Now, they just buy votes...........that is there only incentive. They call it serving their constituency but really it is buying votes. Often that is buying votes and contributions from "interested parties". Stop that now. There is not enough money. There are not enough people paying enough to maintain the current system since our parents had 3 children and we had a little more than 1. Not enough people paying it forward.

  • tom h on July 07, 2011 11:56 AM:

    It's interesting that when Michael Moore in "Sicko" attacks the mean nasty health insurance companies (non-union private employees) for denying coverage, refusing to pay for certain types of treatment etc the ins companies are the devil. When the Medicare burocracy (federal unionized workers) does the same thing it's much needed reform and it's a great thing.

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  • appletree on July 17, 2011 3:42 PM:

    Excellent article. I will make sure that Congresswoman Schwartz hears from me. Loudly.

  • a on August 03, 2011 12:30 AM:

    This article is a massive smear job. It is stuffed full of assertions about others' motives while making no attempt whatsoever to substantiate those assertions and while making no attempt whatsoever to falsify the targets' own explanations for their actions.

    As such, both the article and its author are utterly ignorable.

  • Crissa on August 08, 2011 7:43 PM:

    You ever notice how an article like this comes up, and comments (with no or little reasoning) spring up without any citations?

    Why can't medicare be supported by taxes? Demographics! ...Why, though? It's not just supported by taxes, it's supported by user-fees as well. There's no reason it can't continue to work. If you think the growth of medical costs can't be sustained... That's a different issue.

    You never see these negative comments ever wondering why people in the US pay several times more for the same services.

    And you never see these negative comments ever differentiate between paying for things which the evidence says doesn't work, vs paying for things which are cheaper now than later!

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  • GreenRaccoon on August 16, 2011 3:11 AM:

    IPAB sounds like an absolutely brilliantly crafted idea to restrain the effect of the destruction of Medicare should the cost of medicine, itself, and particularly the cost of pharmaceuticals, [hopefully] leading to the improvement of our overall patent system to reign back on the length of monopolies that were once GIVEN to them and other inventors and producers long ago when such action was still needed. Today, the long, and perhaps efforts to make it longer, have caused a problem in the cost of medical delivery in this country, not present in others, as can be seen by the greatly variant costs that are present for such care in other similar nations. Thus, I can easily see why drug lobbyists have leaned on on both their Republican and Democratic friends to disallow or, better, the deletion of the IPAB authorization article from the Affordable Care--just in case it was needed after all. Let's hope that since the matter has been brought to the attention of at least some well read Americans, our Congressmen, and hopefully President Obama
    by that time, to press hard NOT to let it be removed. Thank you Mr. President.Thanks you for such foresight.

  • Evergreen2U on August 19, 2011 5:23 PM:

    Looked up the "New Democrat Coalition" referred to in this article. Sounds like they back the neoliberalism that is subsuming democracy...money to the top crappola. Pasted from their website below:

    In March 2005, the New Democrat Coalition (NDC) in the U.S. House of Representatives was re-launched and the New Democrat Coalition PAC was established soon after. Thanks to great support in Washington and across the country, the NewDemPAC is thriving.

    NewDems have built a reputation as effective leaders on the critical issues of technology policy, economic growth, security and personal responsibility. Intent on modernizing both the Democratic party and the country, New Democrats support policies to expand economic growth and ensure that all Americans have the opportunity to benefit; a fiscally responsible and efficient government; a secure home front; and a robust foreign policy that includes trade, constructive U.S. leadership throughout the world, and a modern and strong military.

    We encourage you to help us ensure that our leaders continue to have the support they need to be a strong voice in Congress.

    Joe Crowley, NY
    Joe Crowley
    New York 7th
    NewDem Coalition Chair Ron Kind, WI
    Ron Kind
    Wisconsin 3rd
    NewDem Vice Chair Allyson Schwartz, PA
    Allyson Schwartz
    Pennsylvania 13th
    NewDem Vice Chair Jim Himes, CT
    Jim Himes
    Connecticut 4th
    NewDem Coalition Vice Chair Rick Larsen, WA
    Rick Larsen
    Washington 2nd
    NewDem Coalition Vice Chair Jason Altmire, PA
    Jason Altmire
    Pennsylvania 4th
    NewDemPAC Chair

    John Barrow, GA
    John Barrow
    Georgia 12th
    Shelly Berkley, NV
    Shelly Berkley
    Nevada 1st
    Lois Capps, CA
    Lois Capps
    California 23rd
    Russ Carnahan, MO
    Russ Carnahan
    Missouri 3rd

    John Carney, DE
    John Carney
    Delaware, At-Large
    Andre Carson, IN
    Andre Carson
    Indiana 7th
    Gerry Connolly, VA
    Gerry Connolly
    Virginia 11th
    Jim Cooper, TN
    Jim Cooper
    Tennessee 5th
    Joe Courtney, CT
    Joe Courtney
    Connecticut 2nd
    Susan Davis, CA
    Susan Davis
    California 53rd
    Eliot Engel, NY
    Eliot Engel
    New York 17th
    Gabrielle Giffords, AZ
    Gabrielle Giffords
    Arizona 8th
    Charles Gonzalez, TX
    Charles Gonzalez
    Texas 20th
    Colleen Hanabusa, HI
    Colleen Hanabusa
    Hawaii 1st
    Martin Heinrich, NM
    Martin Heinrich
    New Mexico 1st
    Brian Higgins, NY
    Brian Higgins
    New York 27th
    Rush Holt, NJ
    Rush Holt
    New Jersey 12th
    Jay Inslee, WA
    Jay Inslee
    Washington 1st
    Carolyn McCarthy, NY
    Carolyn McCarthy
    New York 4th
    Mike McIntyre, NC
    Mike McIntyre
    North Carolina 7th

    Gregory Meeks, NY
    Gregory Meeks
    New York 6th
    Jim Moran, VA
    Jim Moran
    Virginia 8th
    Chris Murphy, CT
    Chris Murphy
    Connecticut 5th
    Bill Owens, NY

    Bill Owens
    New York 23rd
    Ed Perlmutter, CO
    Ed Perlmutter
    Colorado 7th
    Gary Peters, MI
    Gary Peters
    Michigan 9th
    Pedro Pierluisi, PR
    Pedro Pierluisi
    Puerto Rico
    Jared Polis, CO
    Jared Polis
    Colorado 2nd
    Laura Richardson, CA
    Laura Richardson
    California 37th
    Cedric Richmond, LA
    Cedric Richmond
    Louisiana 2nd
    Loretta Sanchez, CA
    Loretta Sanchez
    California 47th
    Adam Schiff, CA
    Adam Schiff
    California 29th
    Kurt Schrader, OR
    Kurt Schrader
    Oregon 5th
    David Scott, GA
    David Scott
    Georgia 13th
    Terri Sewell, AL
    Terri Sewell
    Alabama 7th
    Adam Smith, WA
    Adam Smith

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