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