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COST: Forging Ahead on Affordability

September 28, 2009

As we noted in our wrap up of last week's Senate Finance proceedings, one of the biggest issues for health reform going forward is the question of affordability. Over at the New York Times Prescriptions blog, David Herszenhorn weighs-in:

Democrats proposing an overhaul of the American health care system have gotten themselves locked in a box around the question of affordability.

This is not the question of whether the proposed health care legislation is affordable for taxpayers and the federal government -- an issue that seemed to be answered when the Congressional Budget Office said the Senate Finance Committee's bill would eventually help reduce federal budget deficits.

The affordability question vexing Democrats is whether those with moderate income will be able to afford health insurance, even with the subsidies the legislation would provide and all sorts of new rules aimed at controlling costs.

Herszenhorn suggests that so-called curve bending provisions of the legislation -- the stuff that will lower rates of health care inflation and reduce overall costs -- will take too long, while raising the subsidies would cost too much. He thinks one option available to Democrats is to lower the affordability threshold for the individual mandate so that more individuals and families would be exempted from a requirement to purchase insurance. (Currently, individuals and families would be exempt if the cheapest option available, with subsidies, cost more than 10 percent of their income.)

While Herszenhorn's piece is certainly to attune to the political challenges of health reform, we think his take on the policy options available is a bit too glum.

HEALTH POLITICS: Mark Me Up Buttercup

September 25, 2009

During mark ups of the America's Healthy Future Act in the Senate Finance Committee yesterday afternoon, Senator Chuck Grassley asked Chairman Baucus if he should book a plane ticket home or if they would be their all weekend.

HEALTH REFORM: Checking the Lab Results

September 25, 2009

We talk a lot about how health reform will place a bigger emphasis on preventative care, managing chronic conditions and paying providers based on the quality of care. So much of this means providing necessary medical screenings and diagnostic tests to improve the quality of care. But who will be charged with the task of screening us for cancer? Who will run the CBC (complete blood count) to help a doctor diagnose fatigue or an infection?

HEALTH POLITICS: Feeling Perspicacious in Finance

September 24, 2009

Day three of the Senate Finance Committee mark up of the America's Healthy Future Act is underway.

The Perverse Consequences of a Bankrupt Policy

September 23, 2009

(Editors Note: Today we are running an abridged version of testimony that three major higher education associations have submitted to the U.S. House Judiciary Committee's Subcommittee on Commercial and Administrative Law, which is holding a hearing this afternoon on the treatment of private student loans in bankruptcy. The three groups -- the American Association of Collegiate Registrars and Admissions Officers (AACRAO), the American Association of State Colleges and Universities (AASCU), and the National Association for College Admission Counseling (NACAC) -- argue for a reversal of a federal law that makes it exceedingly difficult for financially distressed borrowers to discharge private student loans in bankruptcy. At Higher Ed Watch, we have long argued that Congress should end this cruel policy, which treats private student loans (those without any government backing) much more harshly than nearly any other form of consumer debt, including credit cards.)


Bankruptcy law has restricted the ability of borrowers to discharge their federal student loans since the mid-1970s. For more than a decade, federal student loans have been non-dischargeable altogether, except for cases of undue hardship. While this exceptional treatment of federal student loans under bankruptcy law is harsh, federal student loans do provide basic consumer protections, their own specific discharge provisions, and flexible repayment options that serve as meaningful alternatives to bankruptcy discharge for borrowers. We therefore do not seek any change to the treatment of federal student loans in bankruptcy.

Our concerns focus on the treatment of private educational loans in bankruptcy. Beginning in the early 1990s, for reasons that were never articulated or debated, Congress began to extend the bankruptcy code's exceptionally harsh treatment of federal loans to private educational loans. Until the 2005 bankruptcy reform act, this identical treatment was limited to private loans that were funded or guaranteed by states or nonprofits. This ill-advised expansion rendered a large number of non-federal loans non-dischargeable in bankruptcy, even if they had none of the important attributes that justified that treatment for federal loans.

In making this change, Congress appears to have assumed that states and non-profits would voluntarily configure their educational loan offerings in a manner that would eliminate the need for bankruptcy discharge for their borrowers. It should come as no surprise to any observer of the student lending industry that the exact opposite occurred. Nondischargeability of educational loans provided eligible lenders with a carte blanche to impose ever harsher conditions on borrowers. Many of these borrowers were unaware that unlike with federal loans, the promissory notes they were signing would obligate them to repay the loans even in cases of school fraud, school closure, or total and permanent disability.

On to the Senate...

September 22, 2009

Legislation that the U.S. House of Representatives approved last week would make landmark changes to the federal student loan programs -- changes that we have advocated at Higher Ed Watch for the last three years.

We can not overstate the significance of this achievement. Despite fierce opposition from the deep-pocketed student loan industry and their allies on Capitol Hill, the House moved forward with a bill that would eliminate unnecessary middlemen from the process of originating and guaranteeing federal student loans, and would have the government make all federal student loans directly. If this change is enacted into law, it will overwhelmingly simplify the federal student loan program and redirect a massive amount of federal funds out of the pockets of lenders and into the hands of the students who need the help the most.

Having said that, the House bill is far from perfect. The measure contains one provision that we believe is extremely misguided and will, if enacted, harm the cause of student loan reform, and another that would gut a key consumer protection provision in federal law that aims to safeguard students from unscrupulous trade schools. It also has other provisions that are well-intentioned but, as written, are unlikely to achieve the lofty goals the bill's authors have set for them.

Attention will soon shift to the Senate, where the leaders of the Health, Education, Labor and Pensions (HELP) Committee are expected to release their own version of the student loan reform legislation shortly. While the Senate committee will likely stick to the same broad outlines as the House, it could make a few key changes that would significantly strengthen the measure.

HEALTH REFORM: Banking On Our Fiscal Future

September 16, 2009

The New Republic (hat tip: Alex Etra) has an excellent article by Noam Schieber examining Sino-American relations in light of the economic crisis and growing U.S. debt.

The Loan Industry’s Talking Points

September 16, 2009

With the U.S. House of Representatives poised to take up legislation that would eliminate the Federal Family Education Loan (FFEL) program and provide all federal student loans directly from the government, lawmakers opposed to the plan are coming armed with talking points straight from the student loan industry. Unfortunately for these legislators, many of the lenders' arguments against the Direct Loan program just don't stand up to scrutiny.

At Higher Ed Watch, we have expended a lot of ink (or at least a lot of blog space) over the last six months analyzing and critiquing the loan industry's arguments. In preparation for House floor action on the legislation, we thought it would be a good time to revisit some of the lenders' most dubious claims and to run excerpts from previous posts that responded to them.

Here are some of the arguments you're likely to hear and our take on them:

Argument: By proposing to provide federal student loans entirely through the Direct Lending (DL) program, the Obama administration and Democratic Congressional leaders are trying to "nationalize" or impose a "government takeover" of the federal student loan program.

Our Response: "We have news for the lenders: it is impossible to nationalize a government program. By definition, the FFEL program is already a nationalized program because it is a government program, just like direct lending...Sorry, lenders; it's a little late to complain about nationalization. Lyndon Johnson settled that fight a long time ago." (Can You Nationalize a Government Program?)

House Republicans Confused on Student Loan Debate

September 15, 2009

How many employees does it take to run a government program? Conservative ideology teaches that the correct answer is, "as few as possible." Can the federal government create jobs? Conservative ideology teaches that the correct answer is, "No, because the federal government must first tax someone, thereby destroying jobs, to generate the revenue that will pay the salaries of government employees." Great conservative politicians and legislators of the past, such as Barry Goldwater (pictured at far right), had these basic tenets running through their veins. Yet these principles appear to be all but lost on today's Republican party when it comes to the issue of federal student loan policy.

Republicans on Capitol Hill are grasping for good public policy arguments to fight legislation now under consideration in the House of Representatives that would eliminate the Federal Family Education Loan program (FFEL), which subsidizes private lenders to make government-backed loans, and replace it with an expansion of the Direct Loan program. But a recent memo on the student loan reform bill from the House Republican Conference (a sort of GOP messaging machine) reveals a party deeply confused about its core principles -- and about how the federal student loan program works. The memo tells House Republicans to oppose a move to 100 percent direct lending because it "kills jobs and greatly expands the federal government's control of the education loan market." Come again?

HEALTH POLITICS: What Bipartisanship Really Means

September 11, 2009

During his campaign, President Obama called on our nation to work together to solve great challenges. But was the president's health reform speech in Congress this week partisan, as some critics charge? Or did he leave the door open for bipartisan compromise?

Certainly the president "called out" those who distort the truth. Who can blame him? But he was not partisan. I am more sensitive to partisanship than most. In 2006 I watched my boss, former Sen. Lincoln Chafee (R-RI), fall to his Democrat challenger. Sen. Chafee voted against the war in Iraq, against drilling in the Arctic National Wildlife Refuge, and against amendments to ban gay marriage. He did not vote for President George W. Bush in 2004. Yet, Democrats ran countless ads linking the Senator to President Bush and his policies, particularly the Iraq war. Smart campaigning or not, it was partisan politics.

In contrast, President Obama did not cast aspersions in his address. He did not portray positions inaccurately. None of that. President Obama in his speech drew only one line in the sand. It was a very big and very nonpartisan line: we are going to address our health care coverage problems and we are not going to add to the deficit to do it. He made clear he is looking to solve our nation's health care crisis with anyone -- Republican, Democrat, or Independent -- who wants to solve it with him. He was also unambiguous, however, that he will not stand silent while people perpetuate misinformation to score political points.

Bipartisanship does not require silence in the face of unfounded rhetoric. The president was right when he said Congress already agrees on about 80 percent of his plan. Exchanges, insurance market reforms, subsidies, deficit neutrality, and tackling waste, fraud, and abuse are all initiatives that enjoy broad bipartisan support. In addition, President Obama left the door open for bipartisanship on more contentious aspects of reform:

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