In a July 20 Politico article, reporter Patrick O'Connor reported the goals of some “moderate[]” Democrats in negotiating over the House health care reform bill -- without noting that those goals are contradictory. According to O'Connor, “Moderates are angling for greater cost savings and other protections to ensure the government-sponsored health coverage created by the bill won't crowd private insurers from the marketplace.” O'Connor then reported that one of those “protections” moderates want is “to make sure the [public] plans don't peg payments to Medicare's reimbursement rates.” But O'Connor did not note the tension between these goals: Failure to peg those payments to Medicare's lower rates reduces the bill's “cost savings.” Indeed, O'Connor previously reported that failure to “peg payments under the public plans to Medicare” would add to the legislation's cost.

In a July 13 Politico article, O'Connor wrote:

“In order to establish a level playing field, providers must be fairly reimbursed at negotiated rates and their participation must be voluntary,” the Blue Dogs wrote in a letter signed by 40 lawmakers -- just enough to derail any party-line bill.

“Medicare reimbursement is, on average, 20 to 30 percent lower than private plans, and this inequity is even greater in some parts of the country,” the Blue Dogs continued. “Using Medicare's below-market rates would seriously weaken the financial stability of our local hospitals and doctors.”

“We can't support a public option based on Medicare rates,” [Rep. Mike] Ross [D-AR] said. “It doesn't matter if it's Medicare-plus-five or Medicare-plus-50.”

But there isn't an easy remedy to these complaints. Padding the current reimbursement rates, for example, would add cost to the already astronomical price of health care reform. The same would prove true if Democrats didn't peg payments under the public plans to Medicare.

And adding more money to the bill is the last thing conservative critics want to do.

A 2008 research paper from the Urban Institute Health Policy Center explained the effectiveness of Medicare in containing costs through low reimbursement rates:

Another response to consolidation in the insurer and hospital markets is to use a public plan with a substantial number of covered lives as an engineer of cost containment. Medicare has clearly had some success in restraining hospital and physician payments. For example, in 2005, the private payment-to-cost ratio for hospitals exceeded 1.20, while Medicare payments were about 4 percent below hospital costs. Medicare physician payments are also 20 percent less than rates paid by commercial insurers in 2006. Moreover, Boccuti and Moon have shown that the Medicare program had slightly lower average rates of growth in spending for comparable services between 1970 and 2000 than private insurers. Finally, White has shown that Medicare payment policies have reduced Medicare cost growth over time, particularly for hospital and post-acute care services; spending growth for the nonelderly did not show similar reductions.

From the July 20 Politico article, headlined “Moderates bedevil Henry Waxman -- again”:

Waxman might be the most powerful chairman on Capitol Hill today. He possesses all the qualities of a master legislator. He's intelligent, calm under pressure and a devoted student, both of policy and the people with whom he works. He's disciplined and never gives an inch more ground than he needs to in order to get what he wants.

He knows how to squeeze every ounce of power from the Energy and Commerce panel.And he'll need every drop.

Arkansas Rep. Mike Ross, a key negotiator on health care for Democrats in the Blue Dog Coalition, warned leaders last week that Waxman won't be able to get the bill out of committee unless he and party leaders make major changes.

Moderates are angling for greater cost savings and other protections to ensure the government-sponsored health coverage created by the bill won't crowd private insurers from the marketplace. They want to make sure the plans don't peg payments to Medicare's reimbursement rates, and they also want to iron out regional disparities in the existing payments.

On Friday, Ross and a collection of fellow centrists sent a clear signal that he wasn't bluffing. On the first amendment to come up for a vote, Ross and a handful of fellow moderates joined Republicans -- and beat Waxman -- in calling on the Health and Human Services Department to terminate duplicative programs created by the bill.