Mojo - March 2010

Big Pharma a Big Winner in Health Care Reform

| Mon Mar. 22, 2010 1:28 PM EDT

The Republicans look a sour lot this morning, but the pharmaceutical industry appears more than content with the health care legislation passed by the House, and with its Democratic friends in the White House and on the Hill.

Big Pharma helps foot the campaign bills of a sizeable chunk of members of Congress, and both parties generally lined up behind the insurance and drug industries from the get-go. So it should come as no surprise that the Democrats, who long ago gave up any pretence of opposing corporate power, found a way to accomodate the pharmaceutical companies on the way to passing their tepid reform. To a large extent, the "debate" over health care was a show debate, an extended round of Washington smoke and mirrors. The administration cut its deal with Big Pharma early on, and pretty much stuck to it throughout the process.

In fact, the Dems actually made the drugsters look good, celebrating the industry's generous "concessions" and "discounts" while ensuring that no real threat to Big Pharma’s profits would make their way into the final bill. The industry's main goal from the very beginning has been to fend off any government power to negotiate or seriously regulate drug prices—and this they did. Big Pharma's second big win was to prevent any measure that would have opened the way for American consumers to buy less expensive drugs abroad, especially from Canada.

At the same time, the supposed give-backs by the drug industry are projected to more than pay for themselves. The much-lauded discounts on brand-name drugs for seniors in the Medicare prescription drug program, for example, are good for Big Pharma because they discourage oldsters from switching to generics, or giving up meds they can't afford. (And just to be safe, the drug companies jacked up prices on their bestselling brand-name drugs this year.) Finally, more insured people simply means more money coming into the coffers, for Big Pharma as well as for the health insurance industry.

Confirmation of the industry analysis came early in the day from the stock market, where drug stocks initially remained level; there certainly was no rush to dump shares, which is what would happen if the bill actually represented any threat to profits. And by 1 p.m., CNN Money was reporting a rally in health care stocks.

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Dodd to Ram Through Finance Bill?

| Mon Mar. 22, 2010 12:30 PM EDT

Sen. Bob Corker (R-Tenn.), a top GOPer in the Senate's financial reform talks, told CNBC today that the committee charged with drafting a comprehensive Wall Street overhaul could ditch the negotiations and amendments process and vote on the bill as early as today. Nearly 400 amendments to the Dodd bill had been offered by Democrats and Republicans on the Senate banking committee over the weekend, but those all appear to be forgotten now. The move to vote now in committee, where there's a partisan split on the financial bill drafted by committee chair Sen. Chris Dodd (D-Conn.), sets the stage for a negotiations to take place in the full Senate, which won't take up financial reform until next month. "You'll have Easter recess, and that's when, I guess, over the course of the next several weeks when the real negotiations will be taking place," Corker said. "It's probably true that we have a better opportunity with a different cast of characters, the full Senate, to do something that is sound policy-wise."

The move to bypass committee-level negotiations and go straight into the full Senate, provided the bill gets out of the banking committee, will open financial reform up to a divided Senate already bogged down with its legislative agenda. Many of the amendments offered within the banking committee over the weekend—by turns to weaken and strengthen a new consumer protection bureau, kill a council that would tackle too-big-to-fail issues, and bulk up shareholder input on executive compensation—will likely emerge in the full Senate's debate, where Democrats will try to beef up Dodd's bill, introduced last week, and GOPers will fight an independent consumer agency and other expansions of government authority in the bill. At least one senator on the banking committee held out hope the bill could garner bipartisan support. "There is no choice other than a bipartisan compromise solution," Sen. Evan Bayh (D-Ind.) told CNBC.

Wall St. Reform's Death by Study

| Mon Mar. 22, 2010 10:24 AM EDT

When Sen. Chris Dodd (D-Conn.) unveiled his financial reform bill last Monday, among the numerous reforms included—an independent Consumer Financial Protection Bureau, greater say on executive compensation, a risk council created to prevent too-big-to-fail situations—was a version of what's called the "Volcker Rule." Named for the former Federal Reserve chairman Paul Volcker, the rule in Dodd's bill would ban insured banks from engaging in risky proprietary trading (i.e., trading for their own gain, as opposed to trading for their customers—a practice rife with conflicts of interest) and sponsoring casino-like entities like hedge funds and private equity funds. But there was a rub: Instead of mandating the "Volcker Rule," Dodd's bill requires a six-month study by the newly created financial risk council, after which the council will recommend whether or not to implement it. That study, as some observers see it, would more likely kneecap or kill the Volcker Rule than anything else.

A look at the nearly 400 amendments offered by senators on the banking committee, which begins marking up the bill this evening, shows the Death-By-Study strategy could become a tool to blunt financial reform. Sen. Richard Shelby (R-Ala.), the top GOPer on the banking committee, is the king of the study so far, judging by nine study-related amendments he's offered. Among others, he's requested studies to replace: the SEC's rulemaking power on arbitration, mandatory pre-dispute arbitration, and the Volcker Rule. Sen. Kay Bailey Hutchison (R-Tex.), in addition to requesting an exemption for banks with $150 million or less in assets from the Sarbanes-Oxley Act, which tightened accounting and disclosure standards for public companies, wants a study to see whether banks with $700 million or less shouldn't be exempted, too. An amendment offered by Sen. Bob Corker (R-Tenn.) would move an existing bankruptcy study in the bill from the tough, independent Government Accountability Office to the financial risk council, which is headed by top financial regulators.

That's not to say all proposed studies are intended to blunt the bill. One of Dodd's amendments would require the GAO to study the "Repo 105" accounting gimmick, a trick used by Lehman Brothers to cook its books and make it look healthier than it really was. Another study, by Corker, would require the GAO to study the government's role in propping up the troubled housing twins, Fannie Mae and Freddie Mac, a backstopping effort costing the government $125 billion.

But on the whole, as the banking committee begins tweaking and changing Dodd's financial reform bill (which we'll be covering here), keep an eye on any suggestions to replace mandatory rules or authority with "studies." Those studies could be just another way for the bill's opponents to punch holes in what's currently a relatively tough piece of legislation. And if they succeed, the bill could emerge from committee looking more like a piece of Swiss cheese than a Wall Street overhaul.

Warren Buffett Safer Than Obama?

| Mon Mar. 22, 2010 9:32 AM EDT

Bloomberg News reports today that, according to the bond market, you're safer investing in Warren Buffett than in what used to be the safest of all bets—the US government. The yield on bonds offered by Buffett's storied Berkshire Hathaway last month had a yield that was 3.5 basis points, or 0.035 percent, lower than the US government's Treasury bonds—essentially American debt. Joining Buffett in the safer-than-US-debt category as well were bonds for household names like Proctor and Gamble, Johnson and Johnson, and Lowe's, the home improvement store. "It's a slap upside the head of the government," one financial officer told Bloomberg.

So what's it mean? For one, that the US is selling massive amounts of Treasury bonds—$2.59 trillion since the start of 2009—to borrow money to finance its projects like the stimulus package, bailout, wars in Iraq and Afghanistan, and Obama's other projects. So much money, in fact, that the US will pay 7 percent of revenues to service its debt this year, according to Moody's rating service. According to the Congressional Budget Office, the federal budget proposed by Obama will create record deficits of more than $1 trillion this year and next, and the total deficit between 2011 and 2020 would reach $9.8 trillion, or 5.2 percent of GDP. The US' looming debt crisis is getting so bad and threatening to swallow so much money that Moody's said earlier this month that the US was "substantially" closer to losing its AAA debt rating, the gold standard of bond rating.

From a strictly financial standpoint, the Buffett-Obama comparison highlights just how grim the US' fiscal situation is. It's one thing to borrow deeply to try to create jobs, backstop an ailing housing market, and restart the American economy. But on the morning after the passage of a historic health care bill, the Bloomberg story nonetheless offers a rude awakening as to how deep in debt this country really is.

We're Still at War: Photo of the Day for March 22, 2010

Mon Mar. 22, 2010 4:00 AM EDT

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An Iraqi border enforcement officer, Candidate 2nd Lt. Mustafa Khayon, climbs down an obstacle at a course at the Shaibah Training Center near Contingency Operating Base, Basra, Iraq, on March 15, 2010. Photo via the US Army photo by Staff Sgt. Adelita Mead.

Health Care, Reformed

| Sun Mar. 21, 2010 11:57 PM EDT

You already know about the Democrats' big health care reform victory Sunday night, the deal it took to get there, and the debate that will come next. But if you haven't been paying close attention, you might not know what's in it for you. America, here's what you've won (and all of this stuff kicks in this year):

  1. Insurance companies can no longer impose lifetime coverage limits on your insurance. Never again will you face the risk of getting really sick and then, a few months in, having your insurer tell you "sorry, you've 'run out' of coverage." Almost everyone I've met knows someone who had insurance but got really, really sick (or had a kid get really sick) and ran into a lifetime cap.
  2. If you don't know someone who has run into a lifetime cap, you probably know someone who has run into an annual cap. The use of these will be sharply limited. (They'll be eliminated entirely in 2014.)
  3. Insurers can no longer tell kids with pre-existing conditions that they'll insure them "except for" the pre-existing condition. That's called pre-existing condition exclusion, and it's out the window.
  4. A special, temporary program will help adults with pre-existing conditions get coverage. It expires in 2014, when the health insurance exchanges—basically big "pools" of businesses and individuals—come on-line. That's when all insurers will have to cover everyone, pre-existing condition or not.
  5. Insurance companies can't drop you when you get sick, either—this plan means the end of "rescissions."
  6. You can stay on your parents' insurance until you're 26.
  7. Seniors get $250 towards closing the "donut hole" in their prescription drug coverage. Currently, prescription drug coverage ends once you've spent $2,700 on drugs and it doesn't kick in again until you've spent nearly $6,200. James Ridgeway wrote about the problems with the donut hole for Mother Jones in the September/October 2008 issue. Eventually, the health care reform bill will close the donut hole entirely. The AARP has more on immediate health care benefits for seniors. Next year (i.e. in nine months), 50 percent of the donut hole will be covered.
  8. Medicare's preventive benefits now come with a free visit with your primary care doctor every year to plan out your prevention services. And there are no more co-pays for preventative services in Medicare.
  9. This is a big one: small businesses get big tax credits—up to 50 percent of premium costs—for offering health insurance to their workers.
  10. Insurers with unusually high administrative costs have to offer rebates to their customers, and every insurance company has to reveal how much it spends on overhead.

There's a lot more that happens down the road. But this is most of what you get now. No death panels included.

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Woolsey To Introduce Public Option Bill ASAP

| Sun Mar. 21, 2010 11:50 PM EDT

Liberal legislators are among those who cheered the loudest for the passage of the Democratic health care bill on Sunday—but they're not done yet. Lynn Woolsey, co-chair of the Congressional Progressive Caucus, said after the vote that she would soon advance a separate bill for a strong public option.

"I'll introduce a robust public option the day that the President signs this legislation into law," Woolsey said as she left the House floor on Sunday evening. "We have more work to do, and we will do it."

Woolsey said that the other members of the progressive caucus would support the bill to create a government-run health insurance plan, but added they hadn't signed onto the proposal yet. She noted that other members of the caucus would be working on separate items "immediately." Though she didn't give details, such proposals are likely to include a repeal of the anti-trust exemption for insurance companies and other measures that had been dropped in order to woo moderate and conservative Democrats.

Obama may sign the health care legislation as earlier as Monday or Tuesday this week, before the reconciliation fixes to the bill go to the Senate for a vote. If the public option is put on the table again before the Senate votes, according to Woolsey's plan, the politics could become tricky. At that point, Democrats will still be making a huge push to celebrate the main bill and convince the public of its merits. And it's uncertain how reviving the public option once more will play out as Democrats try to unite themselves behind the bill and Republicans scramble to sharpen their opposition to it. While the public option has been the main rallying cry for progressives critical of the concessions made to moderates and industry groups, reform's supporters have spent an enormous amount of energy and political capital to pass the comprehensive bill. Will liberals gear up for the next fight so soon after the big battle has been won?

GOP Reps Rev Up Tea Partiers

| Sun Mar. 21, 2010 4:19 PM EDT

There have been some ugly scenes outside the Capitol this weekend as angry Tea Partiers have hurled racist and homophobic slurs at Democratic lawmakers who support health care reform. And on Sunday afternoon House Republicans cheered on these conservative activists from the balcony of the Capitol building.

Rep. Gresham Barrett, a South Carolina Republican, stood on the balcony to wave and cheer as the Tea Partiers chanted below. "These people came up to fight for what they think is right, and I support their position," Barrett said.

Yesterday there were reports that civil rights leader Rep. John Lewis had been called a "nigger" by protesters and that another black congressman had been spat on by a demonstrator. When asked what he thought of such incidents, Barrett simply responded: “I know emotions are running high.” He quickly added that he didn't condone “any kind of degradating [sic] activity," but said "it’s an emotional issue for a lot of people in America today.”

Barrett was joined by many of his Republican colleagues who walked out onto the balcony to show their solidarity with conservative activists as the House began its preliminary proceedings on the health care bill. Reps. Tom Latham, Jason Chaffetz, and Chris Lee held up handmade signs on notebook paper that read, "kill…the…bill." House Republican offices also hung up anti-health reform signs on the windows facing the plaza where the protestors were gathered.

Wall St. Bill Faces 400 Changes

| Sun Mar. 21, 2010 3:59 PM EDT

More than 400 amendments will likely be proposed beginning this week to change the Senate's financial reform bill, many of them in an effort to whittle down the relatively strong Wall Street overhaul offered by Sen. Chris Dodd (D-Conn.), chair of the banking committee. 110 of those amendments, according to a Senate document describing the amendments obtained by Huffington Post, come from Sen. Richard Shelby (R-Ala.), the top GOPer on the banking committee, who failed to reach a bipartisan agreement with Dodd last month. Almost a hundred more come from Sen. Bob Corker (R-Tenn.), whose talks with Dodd broke down earlier month despite reaching the "five-yard line," according to Corker.

The amendments range in scope and ambition. Some would bulk up Dodd's bill, like Sen. Jack Reed's amendment to make a new consumer protection agency independent and standalone (Dodd's version makes it independent, but houses it within the Federal Reserve). Others would weaken or radically alter what Dodd offered. Shelby, for instance, submitted an amendment calling for the merger of the Securities and Exchange Commission with the Commodity Futures Trading Commission. Another of Shelby's would strip a new Council of Regulators, designed to spot and tackle too-big-to-fail institutions, of the power to implement tougher rules for non-banks and bank holding companies, like Goldman Sachs and Morgan Stanley. One of Corker's would ban securitizing subprime mortgages altogether.

Further amendments push for "accountability and transparency reforms at the Federal Reserve" from Sen. Jim Bunning (R-Ky.), a demand that President Obama report to Congress on potential reforms of housing corporations Fannie Mae and Freddie Mac from Sen. David Vitter (R-La.), and giving a new consumer protection agency primary authority over non-bank companies, like payday lenders, from Sen. Charles Schumer (D-NY). One amendment offered by Dodd directing the Government Accountability Office to review "Repo 105" accounting gimmicks—the kind used by Lehman Brothers to cook its books—is a clear reaction to the recent report on Lehman's demise by its bankruptcy examiner.

As the Senate banking committee heads into mark-up this week, all of these amendments will come into play. While some of them would bolster the bill, many amount to death by a thousand cuts for Dodd's Wall Street crackdown. Check back here throughout the week for the latest on the maneuvering and potential gutting of the Senate's financial reform efforts.

 

Health Care Reform's Final Deal

| Sun Mar. 21, 2010 3:30 PM EDT

It took President Barack Obama and an executive order, but in the end, the Democrats got the deal they need to pass health care reform.

The White House and Rep. Bart Stupak (D-Mich.), the leader of a group of anti-abortion Democrats, reached a deal late Sunday afternoon on an executive order reiterating that the health care bill does not fund abortions. The final deal falls short of Stupak's ultimate goal: forcing people who receive tax credits to help pay for insurance to buy special, separate "riders" (basically abortion-only insurance plans) if they want abortion coverage. As it stands, people who receive tax credits and want abortion coverage have to pay for it with a separate check, but the abortion coverage doesn't have to be a separate "rider" policy. Stupak has apparently decided, after taking the Democrats' historic push for health care legislation to the brink of failure, that he can settle for that.

"You're not going to find Stupak language" in the executive order, the congressman admitted at a heavily attended Sunday afternoon press conference announcing his decision. Stupak tacitly acknowledged he had settled for less than his ideal. "We'd rather have a statute," he said. But he didn't get it. Earlier today, I wrote that there were two ways to understand Stupak: either he just wanted his moment in the spotlight and would compromise once given sufficient cover by the White House, or he really was prepared to stand his ground and let health care stand or fall on the issue of abortion funding.

Stupak chose the first option. By taking this deal, he has decided that his major goal was less important than passing health care reform. Perhaps at some point the Stupak bloc either realized they were wrong or decided they were fighting an unwinnable battle. As Rep. Steve Driehaus (D-Ohio), a Stupak ally, said at the press conference, the executive order provides them with political cover aplenty. The Stupak bloc "wanted to make sure that it was crystal clear to the American people" that the bill doesn't fund abortion, Driehaus says. The executive order definitely helps on that front. But many reasonable people already knew what it took Stupak, Driehaus, and their friends months and months to figure out.