Health Care Lobbyists Want Debt Committee to Fail

By Tim Reid and Anna Yukhananov

WASHINGTON (Reuters) Sep 06 - The powerful healthcare industry hopes a congressional "super committee" tasked with slashing America's debt will fail and is lobbying instead for automatic spending cuts that will kick in if the panel deadlocks.

Much of the health sector believes the spending cuts, which will be triggered if the committee fails to find at least $1.2 trillion in savings over 10 years, will be less draconian than any deficit-reduction deal, according to lobbyists and healthcare groups interviewed by Reuters.

Under the trigger mechanism -- a process called sequestration -- automatic spending cuts of $1.2 trillion will begin in 2013. But programs such as the Medicaid healthcare program for the poor and the Social Security retirement program are totally protected from cuts, while Medicare, the healthcare program for the elderly, would face only a 2% cut to providers.

Chris Jennings, a former healthcare adviser to Democratic President Bill Clinton, said: "Virtually all healthcare stakeholders would prefer the sequester to take place rather than worry about the near inevitability of the super committee coming up with a package of deeper and broader cuts."

Mark Hayes, who lobbies on behalf of healthcare clients and is the former chief health counsel and health policy director for the Senate Finance Committee, said healthcare companies would actively push for the automatic spending cuts.

"The message will be communicated to their members of Congress, through all the usual channels including letters, town hall meetings, phone calls and personal meetings," he told Reuters.

The bipartisan committee, made up of six Republican and six Democratic lawmakers, was formed as part of an August deal to raise the U.S. debt limit. It meets for the first time on Thursday and must report by late November, but if it fails to reach agreement, or if Congress does not endorse its plan, the automatic cuts are triggered.

The healthcare industry has one of the most powerful lobbying forces in the United States.

Between 1999 and August 2011, the 12 lawmakers on the super committee collectively received more than $9.2 million in campaign contributions from the healthcare industry, according to a Reuters analysis of Federal Election Commission data compiled by watchdog group OpenSecrets.org.

"Sequestration is the devil you know and the super committee is the devil you don't," said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, an advocacy group with 3.5 million members and supporters.

Richtman said he had spoken with some lobbyists who were planning on targeting Republican members of the committee to tell them not to "cave in" on their stance not to raise taxes. His organization was not planning to follow this strategy, however.

By persuading the Republicans not to compromise on taxes, "that will lead to stalemate" and thus the triggers, Richtman said. "They are talking about ways to induce stalemate.

"A lot of provider groups and healthcare groups would take a 2% cut to providers, no cuts to Medicaid and would find that much easier to live with."

One former Obama administration official told Reuters: "If I were a Democrat on the super committee I would not be too scared of the triggers."

But Republicans could be less susceptible to the healthcare industry's lobbying effort because the automatic spending cuts would pose a greater threat to the defense industry, a sector the party has traditionally championed.

Half of the $1.2 trillion in cuts will come from the defense budget.

As a result, the pressure is on Republican members of the committee to strike a deal, said Steve Bell, a former Republican staff director of the Senate Budget Committee who now works at the Bipartisan Policy Center, an independent Washington-based think tank.

"If a sequestration were to occur, in my judgment programs that the Republicans have tried to support, especially in national security, would be hurt more profoundly than safety net programs the Democrats have tried to support. Therefore there is much less incentive for most Democrats to give on entitlements or anything fundamental."

Some lobbyists contacted by Reuters agreed that many healthcare officials -- in addition to Democrats generally -- would rather see sequestration, but that actively lobbying for super committee failure was difficult.

"You cannot say to these members, 'don't do a deal,'" one lobbyist said on condition of anonymity. "But you can say that 2% is enough, this is how I would like the 2% to be cut.

"If you lobby the committee, your message is that we have already given almost $500 billion under President Obama's healthcare reforms. You go to the committee and say we have already given a lot, and more cuts will cause job losses."

Joe Baker, president of the Medicare Rights Center, said lobbyists for the big entitlement programs will be warning the super committee members about the political dangers of cutting Medicare, Medicaid and Social Security.

But he cautioned: "If you don't get a deal, sequestration might be fine for Medicaid, Medicare and Social Security but it deals a heavy blow to discretionary programs, that could include housing, transportation and meals, that many seniors and people with disabilities rely upon."