In the USA...United Surveillance America
World prepares for U.S. debt default
By Phillip Inman, The Guardian
Saturday, October 12, 2013 22:40 EDT
Without a budget in place, the US government has run out of the cash needed to pay thousands of government workers in Washington and keep national parks open. But this week an even more critical issue comes to the fore. On Thursday, the country will be forced to default on its $16.8 trillion in borrowings if it does not secure a rise in the debt ceiling.
Republican leaders, aware that their intransigence over the budget has hit the party’s popularity, last week proposed a six-week postponement of the deadline. John Boehner, leader of the Republicans in the House of Representatives, has dropped a previous demand that talks could only take place following a Democrat concession to review President Barack Obama’s Affordable Care Act – or “Obamacare” – although a format for discussions has yet to be agreed.
How did we get here?
The road towards a default that would risk plunging the world economy into recession began last year in the wake of Obama’s return to the White House. The radical Tea Party wing of the Republicans decided that the only way to block Obamacare, which for them exemplifies hated “big government”, was to hold up the president’s entire budget plan.
Why has Washington suffered a shutdown?
A six-month fight over the budget between the two houses of government – the Republican lower house and the Democrat-controlled Senate – has meant no formal funding has been agreed and left government departments struggling to pay their bills. For the first time in 17 years, parts of government spending have been shut down. Some 800,000 government workers were initially sent home – equivalent to the combined workforces of Exxon Mobil, General Motors, Google and giant US retailer Target.
Even the Pentagon sent home 350,000 staff in that initial wave, though it later called them back when funds were made available. National parks remain closed and applications for most permits and licences are being badly delayed. Schools are open and hospitals are unaffected, though health research has been disrupted.
What is the debt ceiling?
This is the government borrowing limit set by Congress. The government actually bumped up against the $16.7 trillion limit five months ago as the budget dispute got under way. Ever since, the treasury department has taken a series of “extraordinary measures” to raise an extra $303 billion. But that money will not last much longer.
Why is October 17 significant?
US treasury secretary Jack Lew has warned that this is when the treasury will exhaust those extraordinary measures. Without the means to pay both multibillion-dollar interest payments and social security bills, it will default.
What are the implications?
Nobody knows what a default would mean in practice. Investors around the world have lent the US money by buying its treasury bonds. In theory, a failure to pay a single interest payment on a tranche of debt will trigger a demand from all bondholders for their money back. In practice this is unlikely.
What will happen to the US economy?
American businesses with public-sector contracts will suffer a delay in payments and could go bust – unemployment has already risen as a result of the shutdown. More broadly, the US economy has been the main driver of global growth. Should the government be forced to default, it could trigger an estimated 4.5% fall in GDP and the rest of the world would fall back into recession.
The extent of nerves in the markets was shown when the news of a possible six-week extension of the borrowing limit sent the Dow Jones index of leading shares soaring by more than 300 points.
What about the UK?
Britain would be hit hard by a US recession. Many of our exports go to America, especially manufactured goods. Without growth in the US, the UK could see its still-fragile recovery snuffed out. Already, BAE Systems, Britain’s biggest manufacturing employer, is warning of problems ahead should the two-week-old shutdown become a crisis. BAE has half its business in the US and has already frozen the wages of 1,200 staff in Washington. Fellow arms firm Chemring saw its shares plummet on Friday after it warned the shutdown would affect its profits. Meanwhile, outsourcing firms G4S and Serco have US staff unable to work.
And the rest of the world?
The Chinese are panicked. China’s Xinhua news agency labelled US domestic politicians “dangerously irresponsible” for wrangling over debt. In an editorial, the state-run media organisation said the rest of the world had been “kidnapped” by American politics, which was involved in “a game of chicken”. The Germans are also anxious. Anton Böner, president of the Federal Association for German Wholesalers and Foreign Trade, warned: “If the Americans shoot themselves in the foot right now, it is highly dangerous for the entire global economy, and of course for the German export economy.”
Why are the Republicans proposing a six-week delay to the debt ceiling?
An opinion poll by NBC News and the Wall Street Journal last week gave the Republican party the lowest standing in the history of the poll. It showed that more than twice as many Americans had a negative view of it than a positive one. While 31% held Obama responsible for the shutdown, 53% blamed Republicans. Boehner said he wanted six weeks to debate all aspects of the budget, but White House sources said they were convinced his aim was still to scupper Obamacare.
guardian.co.uk © Guardian News and Media 2013
October 13, 2013
Senate Leaders Seek an End to Debt Crisis
By JEREMY W. PETERS and ASHLEY PARKER
WASHINGTON — Senators Harry Reid and Mitch McConnell say they will continue negotiating on Sunday for a way to reopen the government, lift the debt ceiling — the deadline is on Thursday — and find a way out of a crisis that could have perilous implications for the nation’s economy.
On Capitol Hill, only the Senate is scheduled to be in session, although any solution will require action by both chambers of Congress.
Hope emerged on Saturday as Mr. Reid, the majority leader, and Mr. McConnell, the leader of the Senate Republicans, sat down for the first time since July to begin last-ditch negotiations. Talks between House Republicans and the White House have collapsed, leaving Republicans on Capitol Hill with no easy options.
“I hope that our talking is some solace to the American people and the world,” Mr. Reid said on Saturday. (Not far away, officials meeting in Washington at the annual sessions of the International Monetary Fund and World Bank publicly expressed alarm that the United States might provoke a global debt crisis by Congress’s inaction.)
Mr. Reid was careful not to sound too hopeful. “Senator McConnell and I have been in this body a long time. We’ve done things for a long time together,” he said. “We don’t agree on everything, and that’s, as you know, an understatement.”
The relationship between the two men has been so chilly that it took two other senators, Charles E. Schumer, Democrat of New York, and Lamar Alexander, Republican of Tennessee, to arrange the Saturday meeting.
For Speaker John A. Boehner and House Republicans, the options were much grimmer. If Mr. Boehner compromises, he risks angering the conservatives who dominate his conference. For its part, the White House is sticking with its stance that it will not negotiate until the government is reopened and the debt ceiling is raised.
The White House has no public events planned, although aides did not rule out that President Obama might confer with some lawmakers — as he did with Senate Democrats on Saturday afternoon. Mr. Schumer, who was at that meeting, said: “There’s a will among all three parties — the president, Senate Democrats and Senate Republicans. Now we’ll see if there’s a way.”
Earlier in the day, conservatives left their meeting at the Capitol in a sour mood, with many saying they were outraged that Mr. Obama had refused to meet them halfway.
Representative John Carter of Texas described Mr. Obama as “acting like a royal president.”
“He’s still ‘my way or the highway,’ ” Mr. Carter said.
With concerns growing that global financial markets could be thrown into turmoil if Congress does not agree to raise the debt ceiling, Republicans said they did not know whether Mr. Boehner would have enough support from the most conservative members in his conference to put a Senate plan up for a vote — if the leaders reach a deal.
“The question is: What will Senate Republicans do, what will Senate Democrats do?” said Representative Adam Kinzinger, Republican of Illinois.
Many Republicans said that however frustrated they were that the White House would not negotiate with them, they were just as dismayed with House colleagues who would not back down from their demands that any deal include provisions to chip away at the health care law.
“The problem here is that we don’t have a functioning majority,” said Representative Devin Nunes, Republican of California. “After three weeks of this, they’re still not figuring it out. I don’t know what it takes.”
The proposal House Republicans presented to the White House late last week called for increasing the Treasury Department’s authority to borrow money through Nov. 22, but only if Mr. Obama agreed to more expansive talks about overhauling the budget.
The failure of talks with the White House further strained the relationship between House Republicans and the president. It was the House Republicans’ refusal to approve a spending bill until less it stripped financing from the health care law that shut down the government. And now Republicans in both the Senate and the House are looking for a way out of the crisis.
With the latest developments, Representative Aaron Schock, Republican of Illinois, said there had been “a total breakdown in trust” between House Republicans and the administration.
“You don’t tell the speaker, the majority leader, the majority whip, ‘We’re going to negotiate.’ Then they come and tell our entire conference, ‘We’re going to negotiate,’ ” he said. “And then 24 hours later, you recant.”
Feelings ran so high on the House floor on Saturday morning that there was a brief altercation between Representative Joseph Crowley, a Democrat from New York City, and Chris Vieson, the floor director for Representative Eric Cantor of Virginia, the majority leader. There were conflicting reports about whether the conflict became physical or was confined to words, but both sides said they had apologized.
If Republicans needed any reminder about how outraged their most conservative supporters would be if they committed to a compromise that did not include provisions to weaken the health care law, they needed look no further than out the window. Glenn Beck, the fiery radio personality, was leading a group of Tea Party activists on the National Mall.
There was skepticism that any Senate compromise could pass muster in the Republican-controlled House. Representative Thomas Massie, Republican of Kentucky, said simply: “Senate Republicans don’t run the Senate. So we’re not taking our lead from them.”
And despite encouraging signs from Mr. McConnell and Mr. Reid, senators from both parties said they did not have unrealistic expectations of any quick solution. “Let’s be honest where we are,” said Senator Richard J. Durbin of Illinois, the No. 2 Senate Democrat.
Connecting the Dots
The Radicalization of the GOP is the Most Important Political Story Today
October 10, 2013
By Joshua Holland, Moyers & Company
In this July 10, 2013 file photo, Rep. Peter King, R-N.Y., emerges from a closed-door meeting with House Republicans to work on an approach to immigration reform at the Capitol in Washington. (AP Photo/J. Scott Applewhite, File)
Rep. Peter King (R-NY) once claimed that “80 to 85 percent of mosques in this country are controlled by Islamic fundamentalists” and called those who worship in them “an enemy living amongst us.” He held McCarthyesque hearings into the supposed “radicalization of American Muslims,” parading a line of prominent bigots through the House Homeland Security Committee.
He’s an outspoken advocate of the war on terror – The New York Times called him “the Patriot Act’s most fervent supporter” – and has been a leading figure politicizing the attacks on our consular office and CIA station in Benghazi. King was a fierce opponent of George W. Bush’s efforts to reform the immigration system. He railed against the Occupy movement, and opposed both the 2009 stimulus package and the Lilly Ledbetter Fair Pay Act. He called for the prosecution of journalist Glenn Greenwald for reporting Edward Snowden’s NSA leaks. He has a 100 percent rating from the National Right to Life Committee and a zero percent rating from NARAL Pro-Choice America. The Drum Major Institute gave him a seven percent rating for his votes on issues of importance to the middle class last year.
In the past few weeks, dozens of political journalists have dubbed him a moderate. In fact, he’s been anointed a leader among the Republican moderates. He earned that label because, like other New York pols, he doesn’t blindly support the National Rifle Association, and because he opposes shutting down the government and threatening to unleash a potential economic catastrophe in a hopeless quest to defund Obamacare. That’s it. That’s how low the bar of moderation in the Republican Party now falls.
Arguably, the most important political story of our time – one necessary to understanding the last five years of so-called “gridlock” in Washington, DC – is one that journalists wedded to the idea that ‘both sides do it’ are uncomfortable reporting: the wildly asymmetric polarization of our two major political parties as Democrats inched to the left and Republicans lurched to the right.
This week, Dan Balz, senior correspondent for The Washington Post, took a deep dive into the roots of the latest crisis. He attributes it to “a deepening red-blue divide in America [that] has made this era of politics the most polarized in more than a century.”
The bonds that once helped produce political consensus have gradually eroded, replaced by competing camps that live in parallel universes, have sharply divergent worldviews and express more distrust of opponents than they did decades ago. Many activists describe the stakes in apocalyptic terms.
Balz covers a lot of ground, noting that red districts have become redder and blue districts bluer. He points out that there are fewer districts in which one party won the congressional vote while the other party got more votes in the last presidential election and notes that conservative Democrats or liberal Republicans no longer exist in Congress. He talks about the role gerrymandering has playedin this and the even greater impact of natural migration patterns that concentrated Democrats into tightly packed urban districts while Republicans got the advantage in suburban and rural areas.
But, he didn’t discuss the most important political trend of our time. Only toward the end of the piece, on the fifth and final page, did he offer a throwaway observation that, “Republicans have shifted more to the right than Democrats have shifted to the left,” before adding, “but on both sides passions are stronger than they were two decades ago.”
This anodyne statement glosses over the radicalization of the Republican Party since the 1980s. That shift isn’t merely a matter of opinion. Political scientists Keith Poole and Howard Rosenthal developed a statistical measure of lawmakers’ voting records that allows scholars to study the dynamics in Congress empirically. The system, known as DW-NOMINATE, ranks legislators according to how far they veer from the midline of congressional votes.
Yale political scientist Jacob Hacker used this data for his 2006 book, Off Center, in which he noted that since 1975, Senate Republicans have moved twice as far to the right as their Democratic counterparts have moved to the left. Of course, this shutdown is being driven by the Republican-controlled House, and in the lower chamber Hacker found that Republicans had shifted six times further to the right than their Democratic counterparts went to the left.
On the DW-Nominate scale, -1.000 represents the position of the most liberal vote, while +1.000 is that of the most conservative. The bigger a lawmaker’s number, the further his or her record is from Congress’s center. In the 100th Congress (1987-1989), only around four percent of Republicans had a score over 0.600, but by the last Congress almost a quarter of the Republican caucus fell into that group. The same dynamic wasn’t apparent on the Democratic side of the aisle: The share of Democrats who scored between -0.600 and -1.000 rose from slightly less than six percent of the caucus in 1989 to just over nine percent in the last Congress.
But that’s not the whole story. DW-Nominate scores don’t measure lawmakers’ liberalism or conservatism. They measure how far their votes are from other votes in the same Congress. As such, it doesn’t factor in shifts in the ideological center itself. That center has shifted dramatically to the right over the last 30 years.
In a 2012 article for The New Yorker, Ryan Lizza quoted Thomas Mann, of the Brookings Institution, and Norman Ornstein, of the conservative American Enterprise Institute, from their book, It’s Even Worse Than It Looks:
One of our two major parties, the Republicans, has become an insurgent outlier—ideologically extreme, contemptuous of the inherited social and economic policy regime, scornful of compromise, unpersuaded by conventional understanding of facts, evidence and science, and dismissive of the legitimacy of its political opposition.
There is no doubt that at the root of this crisis is a deeply polarized public. But, the key aspect of this story is that the Republican Party veered toward the extreme of its ideological orientation just as the country was becoming more diverse and tolerant – and as the most progressive generation in 70 years was coming of age – and that dissonance has driven them to cast off the legislative norms that have traditionally made our divided government work.
House Democrats Pull an End Around To Try To Overthrow Boehner and Reopen Government
By: Sarah Jones
Saturday, October 12th, 2013, 3:03 pm
Remember when I wrote that Democrats were planning to use Republican’s own bill against them in order to fund the government? They signed the petition today. Democrats are trying to bypass Speaker Boehner in order to allow a quick vote on a bill to reopen the government.
So far, 186 Democrats have signed a petition to demand a vote as soon as October 14th to reopen government. This discharge petition only needs a majority of House members; it doesn’t rely upon Republican leadership.
Take a look at Democrats lining up to sign the petition:
The method of using discharge petitions to bring legislation for consideration is not unprecedented.
According to a Congressional Research Service study cited by Democrats, “seven discharge petitions have received 218 signatures over the last 30 years. And in all seven cases, the majority party agreed to bring the measure to the House floor.”
But then, they weren’t dealing with these Republicans.
“The only thing standing between this Congress and an open government is Speaker Boehner’s refusal to allow a vote on a clean continuing resolution,” said Congressman Chris Van Hollen (D-Md.). “This measure can remove the Speaker’s undemocratic roadblock and finally allow a clean vote in the House of Representatives to open the government.”
What Democrats are trying to do here is reestablish the rule of the majority, thereby bypassing the Tea Party strangle hold on GOP leadership. This CR would fund the government at levels set by the Senate if a majority of House Members sign onto a discharge petition. Click here to read what Democrats filed on the 4th to allow the signing of the petition today.
If Democrats can get to 218, the remaining two steps would be 1) Discharge the resolution from the Rules Committee for immediate House consideration. 2) Then debate a CR with the House and Senate agreed spending levels. This would be a substitute to H.R. 1164 – a Republican bill introduced more than 30 days ago. Then, they’d take an up or down vote.
The bill would then need to be passed by the much saner Senate.
“There is a growing number of Republicans who want the opportunity to work with us to end this crisis. We have seen it in press reports. And I have heard it in my own private conversations with my Republican colleagues,” said Rep. George Miller (D-Calif.). “Today, we are offering my Republican friends, and the American people, a way forward.”
We’ll see if any of the House Republicans who have indicated that they want to end this shutdown have the courage to sign the petition.
If they don’t, this is a perfect example of why we can’t trust even moderate Republican lawmakers in the current GOP. If Republicans try to shut down this attempt at democracy, the people must demand a vote.
The Koch Brothers Seditious Shutdown Conspiracy Should Get Them 20 Years in Prison
Saturday, October 12th, 2013, 4:37 pm
There is a saying in the entertainment industry that any publicity is good publicity, and although it is primarily true for entertainers, it is not the case for politicians. For the dark money and puppeteers behind conservative politicians, anonymity is the preferred state and any publicity is inherently bad regardless if they fund extremist politicians or schemes to shut down the government. After news broke that the billionaire oil magnates the Koch brothers funded the culprits behind the still-ongoing government shut down, they finally spoke out in a letter to Senators claiming their innocence and denying they had any part in teabagger and Republican machinations to hold the government hostage in exchange for killing the Affordable Care Act.
The Koch brothers’ letter claimed they had no part or took no position “on the legislative tactic of tying the continuing resolution to defunding ObamaCare nor have we lobbied on legislative provisions defunding ObamaCare,” but like their Republican lackeys; they are filthy liars. The Koch-funded FreedomWorks issued a letter in February that said, “Conservatives should not approve a CR unless it defunds Obamacare. This includes Obamacare’s unworkable exchanges, unsustainable Medicaid expansion, and attack on life and religious liberty.” If paying a surrogate to demand Republicans and teabaggers tie defunding the Affordable Care Act to keeping the government operating is not taking a position on the government shutdown and the continuing resolution, then the Sun rises in the West and the Earth orbits the moon.
Obviously the bad publicity frightens the Koch brothers and doubtless they are legitimately concerned they will lose influence with their right wing conservative base who are taking a beating in the public sphere for their fervent support of the government shutdown. Likely, the Koch’s are not happy their reputation could be further sullied for backing the extremist wing of the Republican Party led by Michele Bachmann, Ted Cruz, and Steve King who championed the government shutdown strategy to eliminate the health law. It is also likely they did not miss Senate Majority Leader Harry Reid’s accusations they were behind the shutdown, or the articles, petitions and calls for the Justice Department to investigate them for sedition that never had a snowball’s chance in Hell of touching the Kochs.
However, there is a statute in the U.S. Code that does apply to the Koch brothers and every other conservative that spent the past three years attempting to prohibit implementation of the Affordable Care Act and it is a legitimate and actionable offense the DOJ can prosecute with extreme prejudice. In 18 USC § 2384 – Seditious conspiracy, it plainly says; “If two or more persons in any State or Territory, or in any place subject to the jurisdiction of the United States, conspires to oppose by force the authority of, or prevent, hinder, or delay the execution of any law of the United States, they shall each be fined under this title or imprisoned not more than twenty years, or both.” For the Americans affected by the government shut down, and those who live in Republican states that rejected free Medicaid expansion written in the Affordable Care Act, it is highly likely they would support fining and imprisoning the Koch brothers for twenty years.
The U.S. Code says “if two or more persons” are involved in a conspiracy to oppose the authority of, prevent, hinder, or delay any law they shall be punished and that means that every single Republican, teabagger, conservative media, and libertarian belief tank is in line to be prosecuted for seditious conspiracy by the Department of Justice. Every Republican in the House that voted to tie defunding the Affordable Care Act is part of the conspiracy, and that also applies to Republicans who voted in lockstep to prevent the law’s implementation by tying defunding the law to passing a continuing resolution to open the government.
Republicans in leadership positions in the House and Senate are particularly culpable for preventing the law’s enactment and not because they wasted taxpayer time and money voting over forty times to repeal the law, but because their propaganda, lies, and misinformation incited hostility in the states to oppose the authority of the law. In states such as Arizona, Alabama, Oklahoma, Texas, Wyoming, and Missouri Republicans refused to enforce the law, and after the general election at least three Republican states voted to arrest any federal official who tried to implement the law making them part of the seditious conspiracy as much as the Koch brothers who paid hundreds-of-millions to hinder the law’s implementation. One former Republican, Joe Walsh (R-IL) actually went so far as to provoke his supporters to “defy and or break the law” if faced with what he called “restrictions” in the federal health law. Three GOP-controlled states openly voted to “nullify” the law in typical Confederate fashion.
The Patient Protection and Affordable Care Act (Obamacare) was signed into law on March 23, 2010 and yet Republicans have never admitted it is the law of the land. It is true that after the 2012 general election Speaker of the House John Boehner had a moment of clarity and said “Obamacare is the law of the land,” but he, and his fellow conservatives treat the law as if it is a piece of legislation still up for debate and negotiation. Since the law is over three-and-a-half years old, every Republican, teabagger, conservative think tank, and even conservative media is guilty of conspiring to oppose the authority of, or prevent, hinder, or delay the ACA and it is incumbent on the Department of Justice to charge every last one of them with seditious conspiracy under U.S. Code 18 USC § 2384, but especially Charles and David Koch.
The DOJ will have an easy time prosecuting and convicting the Kochs and their conspirators because there are money trails leading directly to PACs whose primary purpose was inciting opposition to the established law. There are also videos, angry screeds, and floor speeches from Republicans in the House and Senate demanding the ACA be defunded and delayed that would give any prosecutor an easy task of proving seditious conspiracy.
Americans have put up with criminal sedition from the Kochs and Republicans for too long and they cannot be held to a different standard or above the law because they are rich and powerful. In fact, their violation of the U.S. Code may well be the easiest, and only, means of stopping their continued assault on America’s representative democracy. Obviously the Koch brothers were rattled by charges they were behind the government shutdown through their funding efforts to hold the government hostage in exchange for eliminating the ACA or they would not have written a letter lying about their involvement. But they, their think tanks, PACs, and cohort in Congress and the states cannot deny they are guilty of seditious conspiracy to “oppose the authority of, or prevent, hinder, or delay the execution of any law of the United States” and no American should be satisfied until they are fined or imprisoned for twenty years. If there is any justice left in this corrupt nation, they will get both.
The fact that states voted to arrest federal officials attempting to enforce the health law, coupled with the growing threats of armed violence against the government due to the health law’s enactment meets the definition of “by force” originally omitted in the U.S. Code’s description. By definition, a conspiracy means the planners, inciters, and funders are guilty the same as Osama bin Laden was guilty for recruiting, planning, and funding al Qaeda terrorists who flew commercial airliners into American buildings.
October 12, 2013
From the Start, Signs of Trouble at Health Portal
By ROBERT PEAR, SHARON LaFRANIERE and IAN AUSTEN.
WASHINGTON — In March, Henry Chao, the chief digital architect for the Obama administration’s new online insurance marketplace, told industry executives that he was deeply worried about the Web site’s debut. “Let’s just make sure it’s not a third-world experience,” he told them.
Two weeks after the rollout, few would say his hopes were realized.
For the past 12 days, a system costing more than $400 million and billed as a one-stop click-and-go hub for citizens seeking health insurance has thwarted the efforts of millions to simply log in. The growing national outcry has deeply embarrassed the White House, which has refused to say how many people have enrolled through the federal exchange.
Even some supporters of the Affordable Care Act worry that the flaws in the system, if not quickly fixed, could threaten the fiscal health of the insurance initiative, which depends on throngs of customers to spread the risk and keep prices low.
“These are not glitches,” said an insurance executive who has participated in many conference calls on the federal exchange. Like many people interviewed for this article, the executive spoke on the condition of anonymity, saying he did not wish to alienate the federal officials with whom he works. “The extent of the problems is pretty enormous. At the end of our calls, people say, ‘It’s awful, just awful.’ ”
Interviews with two dozen contractors, current and former government officials, insurance executives and consumer advocates, as well as an examination of confidential administration documents, point to a series of missteps — financial, technical and managerial — that led to the troubles.
Politics made things worse. To avoid giving ammunition to Republicans opposed to the project, the administration put off issuing several major rules until after last November’s elections. The Republican-controlled House blocked funds. More than 30 states refused to set up their own exchanges, requiring the federal government to vastly expand its project in unexpected ways.
The stakes rose even higher when Congressional opponents forced a government shutdown in the latest fight over the health care law, which will require most Americans to have health insurance. Administration officials dug in their heels, repeatedly insisting that the project was on track despite evidence to the contrary.
Dr. Donald M. Berwick, the administrator of the federal Centers for Medicare and Medicaid Services in 2010 and 2011, said the time and budgetary pressures were a constant worry. “The staff was heroic and dedicated, but we did not have enough money, and we all knew that,” he said in an interview on Friday.
Administration officials have said there is plenty of time to resolve the problems before the mid-December deadline to sign up for coverage that begins Jan. 1 and the March 31 deadline for coverage that starts later. A round-the-clock effort is under way, with the government leaning more heavily on the major contractors, including the United States subsidiary of the Montreal-based CGI Group and Booz Allen Hamilton.
One person familiar with the system’s development said that the project was now roughly 70 percent of the way toward operating properly, but that predictions varied on when the remaining 30 percent would be done. “I’ve heard as little as two weeks or as much as a couple of months,” that person said. Others warned that the fixes themselves were creating new problems, and said that the full extent of the problems might not be known because so many consumers had been stymied at the first step in the application process.
Confidential progress reports from the Health and Human Services Department show that senior officials repeatedly expressed doubts that the computer systems for the federal exchange would be ready on time, blaming delayed regulations, a lack of resources and other factors.
Deadline after deadline was missed. The biggest contractor, CGI Federal, was awarded its $94 million contract in December 2011. But the government was so slow in issuing specifications that the firm did not start writing software code until this spring, according to people familiar with the process. As late as the last week of September, officials were still changing features of the Web site, HealthCare.gov, and debating whether consumers should be required to register and create password-protected accounts before they could shop for health plans.
One highly unusual decision, reached early in the project, proved critical: the Medicare and Medicaid agency assumed the role of project quarterback, responsible for making sure each separately designed database and piece of software worked with the others, instead of assigning that task to a lead contractor.
Some people intimately involved in the project seriously doubted that the agency had the in-house capability to handle such a mammoth technical task of software engineering while simultaneously supervising 55 contractors. An internal government progress report in September 2011 identified a lack of employees “to manage the multiple activities and contractors happening concurrently” as a “major risk” to the whole project.
While some branches of the military have large software engineering departments capable of acting as the so-called system integrator, often on medium-size weapons projects, the rest of the federal government typically does not, said Stan Soloway, the president and chief executive of the Professional Services Council, which represents 350 government contractors. CGI officials have publicly said that while their company created the system’s overall software framework, the Medicare and Medicaid agency was responsible for integrating and testing all the combined components.
By early this year, people inside and outside the federal bureaucracy were raising red flags. “We foresee a train wreck,” an insurance executive working on information technology said in a February interview. “We don’t have the I.T. specifications. The level of angst in health plans is growing by leaps and bounds. The political people in the administration do not understand how far behind they are.”
The Government Accountability Office, an investigative arm of Congress, warned in June that many challenges had to be overcome before the Oct. 1 rollout.
“So much testing of the new system was so far behind schedule, I was not confident it would work well,” Richard S. Foster, who retired in January as chief actuary of the Medicare program, said in an interview last week.
But Mr. Chao’s superiors at the Department of Health and Human Services told him, in effect, that failure was not an option, according to people who have spoken with him. Nor was rolling out the system in stages or on a smaller scale, as companies like Google typically do so that problems can more easily and quietly be fixed. Former government officials say the White House, which was calling the shots, feared that any backtracking would further embolden Republican critics who were trying to repeal the health care law.
Marilyn B. Tavenner, the administrator of the Centers for Medicare and Medicaid Services, and Kathleen Sebelius, the secretary of health and human services, both insisted in July that the project was not in trouble. Last month, Gary M. Cohen, the federal official in charge of health insurance exchanges, promised federal legislators that on Oct. 1, “consumers will be able to go online, they’ll be able to get a determination of what tax subsidies they are eligible for, they’ll be able to see the premium net of subsidy,” and they will be able to sign up.
But just a trickle of the 14.6 million people who have visited the federal exchange so far have managed to enroll in insurance plans, according to executives of major insurance companies who receive enrollment files from the government. And some of those enrollments are marred by mistakes. Insurance executives said the government had sent some enrollment files to the wrong insurer, confusing companies that have similar names but are in different states. Other files were unusable because crucial information was missing, they said.
Many users of the federal exchange were stuck at square one. A New York Times researcher, for instance, managed to register at 6 a.m. on Oct. 1. But despite more than 40 attempts over the next 11 days, she was never able to log in. Her last attempts led her to a blank screen.
Neither Ms. Tavenner nor other agency officials would answer questions about the exchange or its performance last week.
Worried about their reputations, contractors are now publicly distancing themselves from the troubled parts of the federally run project. Eric Gundersen, the president of Development Seed, emphasized that his company had built the home page of HealthCare.gov but had nothing to do with what happened after a user hit the “Apply Now” button.
Senior executives at Oracle, a subcontractor based in California that provided identity management software used in the registration process that has frustrated so many users, defended the company’s work. “Our software is running properly,” said Deborah Hellinger, Oracle’s vice president for corporate communications. The identical software has been widely used in complex systems, she said.
The serious technical problems threaten to obscure what some see as a nationwide demonstration of a desire for more affordable health insurance. The government has been heavily promoting the HeathCare.gov site as the best source of information on health insurance. An August government e-mail said: “35 days to open enrollment.” A September e-mail followed: “5 days to open enrollment. Don’t wait another minute.”
The response was huge. Insurance companies report much higher traffic on their Web sites and many more callers to their phone lines than predicted.
That made the flawed opening all the more disappointing to supporters of the health plan, including Timothy S. Jost, a law professor and a consumer representative to the National Association of Insurance Commissioners.
“Even if a fix happens quickly, I remain very disappointed that the Department of Health and Human Services was not better prepared for the rollout,” he said.
Robert Pear reported from Washington, Sharon LaFraniere from New York and Ian Austen from Ottawa. Quentin Hardy contributed reporting from San Francisco, and Kitty Bennett contributed research.
October 12, 2013
The Soaring Cost of a Simple Breath
By ELISABETH ROSENTHAL
OAKLAND, Calif. — The kitchen counter in the home of the Hayes family is scattered with the inhalers, sprays and bottles of pills that have allowed Hannah, 13, and her sister, Abby, 10, to excel at dance and gymnastics despite a horrific pollen season that has set off asthma attacks, leaving the girls struggling to breathe.
Asthma — the most common chronic disease that affects Americans of all ages, about 40 million people — can usually be well controlled with drugs. But being able to afford prescription medications in the United States often requires top-notch insurance or plenty of disposable income, and time to hunt for deals and bargains.
The arsenal of medicines in the Hayeses’ kitchen helps explain why. Pulmicort, a steroid inhaler, generally retails for over $175 in the United States, while pharmacists in Britain buy the identical product for about $20 and dispense it free of charge to asthma patients. Albuterol, one of the oldest asthma medicines, typically costs $50 to $100 per inhaler in the United States, but it was less than $15 a decade ago, before it was repatented.
“The one that really blew my mind was the nasal spray,” said Robin Levi, Hannah and Abby’s mother, referring to her $80 co-payment for Rhinocort Aqua, a prescription drug that was selling for more than $250 a month in Oakland pharmacies last year but costs under $7 in Europe, where it is available over the counter.
The Centers for Disease Control and Prevention puts the annual cost of asthma in the United States at more than $56 billion, including millions of potentially avoidable hospital visits and more than 3,300 deaths, many involving patients who skimped on medicines or did without.
“The thing is that asthma is so fixable,” said Dr. Elaine Davenport, who works in Oakland’s Breathmobile, a mobile asthma clinic whose patients often cannot afford high prescription costs. “All people need is medicine and education.”
With its high prescription prices, the United States spends far more per capita on medicines than other developed countries. Drugs account for 10 percent of the country’s $2.7 trillion annual health bill, even though the average American takes fewer prescription medicines than people in France or Canada, said Gerard Anderson, who studies medical pricing at the Bloomberg School of Public Health at Johns Hopkins University.
Americans also use more generic medications than patients in any other developed country. The growth of generics has led to cheap pharmacy specials — under $7 a month — for some treatments for high cholesterol and high blood pressure, as well as the popular sleeping pill Ambien.
But many generics are still expensive, even if insurers are paying the bulk of the bill. Generic Augmentin, one of the most common antibiotics, retails for $80 to $120 for a 10-day prescription ($400 for the brand-name version). Generic Concerta, a mainstay of treating attention deficit disorder, retails for $75 to $150 per month, even with pharmacy discount coupons. For some conditions, including asthma, there are few generics available.
While the United States is famous for break-the-bank cancer drugs, the high price of many commonly used medications contributes heavily to health care costs and certainly causes more widespread anguish, since many insurance policies offer only partial coverage for medicines.
In 2012, generics increased in price an average of 5.3 percent, and brand-name medicines by more than 25 percent, according to a recent study by the Health Care Cost Institute, reflecting the sky-high prices of some newer drugs for cancer and immune diseases.
While prescription drug spending fell slightly last year, in part because of the recession, it is expected to rise sharply as the economy recovers and as millions of Americans become insured under the Affordable Care Act, said Murray Aitken, the executive director of IMS Health, a leading tracker of pharmaceutical trends.
Unlike other countries, where the government directly or indirectly sets an allowed national wholesale price for each drug, the United States leaves prices to market competition among pharmaceutical companies, including generic drug makers. But competition is often a mirage in today’s health care arena — a surprising number of lifesaving drugs are made by only one manufacturer — and businesses often successfully blunt market forces.
Asthma inhalers, for example, are protected by strings of patents — for pumps, delivery systems and production processes — that are hard to skirt to make generic alternatives, even when the medicines they contain are old, as they almost all are.
The repatenting of older drugs like some birth control pills, insulin and colchicine, the primary treatment for gout, has rendered medicines that once cost pennies many times more expensive.
“The increases are stunning, and it’s very injurious to patients,” said Dr. Robert Morrow, a family practitioner in the Bronx. “Colchicine is a drug you could find in Egyptian mummies.”
Pharmaceutical companies also buttress high prices by choosing to sell a medicine by prescription, rather than over the counter, so that insurers cover a price tag that would be unacceptable to consumers paying full freight. They even pay generic drug makers not to produce cut-rate competitors in a controversial scheme called pay for delay.
Thanks in part to the $250 million last year spent on lobbying for pharmaceutical and health products — more than even the defense industry — the government allows such practices. Lawmakers in Washington have forbidden Medicare, the largest government purchaser of health care, to negotiate drug prices. Unlike its counterparts in other countries, the United States Patient-Centered Outcomes Research Institute, which evaluates treatments for coverage by federal programs, is not allowed to consider cost comparisons or cost-effectiveness in its recommendations. And importation of prescription medicines from abroad is illegal, even personal purchases from mail-order pharmacies.
“Our regulatory and approval system seems constructed to achieve high-priced outcomes,” said Dr. Peter Bach, the director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center. “We don’t give any reason for drug makers to charge less.”
And taxpayers and patients bear the consequences.
California’s Medicaid program spent $61 million on asthma medicines last year, paying more than $200 — not far from full retail price — for many inhalers. At the Breathmobile clinic in Oakland, the parents of Bella Buyanurt, 7, fretted about how they would buy her medications since the family lost Medicaid coverage. Barbara Wolf, 73, a retired Oakland school administrator covered by Medicare, said she used her inhaler sparingly, adding, “I minimize puffs to minimize cost.”
‘A Frustrating Saga’
Hannah and Abby Hayes were admitted to the hospital on separate occasions in 2005 with severe shortness of breath. Oakland, a city subject to pollution from its freeways and a busy seaport, has four times the hospital admission rate for asthma as elsewhere in California.
The asthma rate nationwide among African-Americans and people of mixed racial backgrounds is about 20 percent higher than the average.
Robin Levi, a Stanford-trained lawyer who works for Students Rising Above, a group that helps low-income students attend college, is black. Her husband, John Hayes, an economist, is white. Their daughters have allergic asthma that is set off by animals, grass and weeds, but they also get wheezy when they have a cold.
“That first year, I had to take a lot of time from my job to deal with the asthma drugs, the prices, arguing with insurers — it was a frustrating saga,” Ms. Levi said.
For decades, the backbone of treatment for asthma has centered on inhaled medicines. The first step is a bronchodilator, which relaxes the muscles surrounding small airways to open them. For people who use this type of rescue inhaler frequently, doctors add an inhaled steroid as a maintenance drug to prevent inflammation and ward off attacks. The two medicines are often mixed in a single combination inhaler for adults, and these products are especially pricey. In addition, many patients, particularly children, take pills as well as nasal sprays that calm allergies that set off the condition.
While on medication, neither Hayes girl has been in the hospital since her initial diagnosis. Their mother tweaks dosing, adding extra medicine if they have a cold or plan to ride horses.
For most patients, asthma medicines are life-changing. In economic terms, that means demand for the medicines is inelastic. Unlike a treatment for acne that a patient might drop if the price became too high, asthma patients will go to great lengths to obtain their drugs.
For pharmaceutical companies, that has made these respiratory medicines blockbusters: the two best-selling combination inhalers, Advair and Symbicort, had global sales of $8 billion and $3 billion last year. Each inhaler, typically lasting a month, retails for $250 to $350 in the United States.
Asked to explain the high price of inhalers, the two major manufacturers say the calculus is complicated.
“Our pricing is competitive with other asthma treatments currently on the market,” Michele Meixell, the United States spokeswoman for AstraZeneca, which makes Symbicort and other asthma drugs, said in an e-mail. She added that low-income patients without insurance could apply for free drugs from the company.
Juan Carlos Molina, the director of external communication for GlaxoSmithKline, which makes Advair, said in an e-mail that the price of medicines was “closely linked to this country’s model for delivery of care,” which assumes that health insurance will pick up a significant part of the cost. An average co-payment for Advair for commercially insured patients is $30 to $45 a month, he added.
Even with good insurance, the Hayeses expect to spend nearly $1,000 this year on their daughters’ asthma medicines; their insurer spent much more than that. The total would have been more than $4,000 if the insurer had paid retail prices in Oakland, but the final tally is not clear because the insurer contracts with Medco, a prescription benefits company that negotiates with drug makers for undisclosed discounts.
Dr. Dana Goldman, the director of the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California, said: “Producing these drugs is cheap. And yet we are paying very high prices.” He added that because inhalers were so effective at keeping patients out of hospitals, most national health systems made sure they were free or inexpensive.
But in the United States, even people with insurance coverage struggle. Lisa Solod, 57, a freelance writer in Georgia, uses her inhaler once a day, instead of twice, as usually prescribed, since her insurance does not cover her asthma medicines. John Aravosis, 49, a political blogger in Washington, buys a few Advair inhalers at $45 each during vacations in Paris, since his insurance caps prescription coverage at $1,500 per year. Sharon Bondroff, 68, an antiques dealer in Maine on Medicare, scrounges samples of Advair from local doctors. Ms. Bondroff remembers a time, not so long ago, when inhalers “were really cheap.” The sticker shock for asthma patients began several years back when the federal government announced that it would require manufacturers of spray products to remove chlorofluorocarbon propellants because they harmed the environment. That meant new inhaler designs. And new patents. And skyrocketing prices.
“That decision bumped out the generics,” said Dr. Peter Norman, a pharmaceutical consultant based in Britain who specializes in respiratory drugs. “Suddenly sales of the branded products went right back up, and since then it has not been a very competitive market.”
The chlorofluorocarbon ban even eliminated Primatene Mist inhalers, a cheap over-the-counter spray of epinephrine that had many unpleasant side effects but was at least an effective remedy for those who could not afford prescription treatments.
As drugs age and lose patent protection, the costs of treatment can fall significantly because of generic competition — particularly if a pill has only one active ingredient and is simple to replicate. When Singulair, a pill the Hayes girls take daily to block allergic reactions in the lungs, lost its patent protection last year, generics rapidly entered the market. The price of the drug has already dropped from $180 per month to as low as $15 to $20 with pharmacy coupons.
But sprays, creams, patches, gels and combination medicines are more difficult to copy exactly to make a generic that meets Food and Drug Administration standards. Each time a molecule is put in a new inhaler or combined with another medicine, the amount delivered into the lungs or through the skin may change, even though that often has an imperceptible effect on patients.
“Drug companies can switch devices and use different combinations, and it becomes quite difficult to demonstrate equivalence,” Dr. Norman said, adding that inhaler makers have exploited such barriers to increase sales of medicines long after the scientific novelty has passed.
Obstacles for Generics
A result is that there are no generic asthma inhalers available in the United States. But they are available in Europe, where health regulators have been more flexible about mixing drugs and devices and where courts have been quicker to overturn drug patent protection.
“The high prices in the U.S. are because the F.D.A. has set the bar so high that there is no clear pathway for generics,” said Lisa Urquhart of EvaluatePharma, a consulting firm based in London that provides drug and biotech analysis. “I’m sure the brands are thrilled.”
The F.D.A. acknowledges that the lack of inhaled generic medicines, as well as topical creams, has been costly for patients, but it attributes that to “difficult, longstanding scientific challenges,” since measuring drug activity deep into the lung is complicated, said Sandy Walsh, a spokeswoman for the agency. Dr. Robert Lionberger, the agency’s acting deputy director in the office of generic drugs, said that research into the development of generic inhaled medicines was the agency’s highest priority but that the effort had been stalled because of budget cuts imposed by Congress.
Even so, experts say, a significant problem is that none of the agencies that determine whether medicines come to market in the United States are required to consider patient access, affordability or need.
The Food and Drug Administration has handed out patents to reward drug makers for conducting formal safety and efficacy studies on old drugs that had not been so scrutinized. That transformed cheap mainstays of treatment like colchicine for gout and intravenous hydroxyprogesterone for preterm labor into high-priced branded products, costing $5 a pill and $1,500 per dose.
For its part, the United States patent office grants new protections for tweaks to drugs without weighing the financial impact on patients.
For example, with the patent for the older oral contraceptive Loestrin 24Fe about to expire, the company Warner Chilcott stopped making the pill this year and introduced a chewable version — with a new patent and an expensive promotional campaign urging patients and doctors to switch. While many insurance plans covered the popular older drug with little or no co-payment, they often exclude the new pills, leaving patients covering the full monthly cost of about $100. Patients complained that the new pills tasted awful and were confused about whether they could just be swallowed.
“Drug patents are easy to get, and the patent office is deluged,” said Dr. Aaron Kesselheim, a pharmaceutical policy expert at Harvard Medical School. “The F.D.A. approves based on safety and efficacy. It doesn’t see its role as policing this process.”
For asthma patients in the United States, the best the market has yielded are a few faux generics that are often only marginally cheaper than the brand-name versions. AstraZeneca, for example, has an agreement with Teva Pharmaceuticals, a generic manufacturer, to make an approved generic version of its Pulmicort Respules, an asthma medicine for home inhalation treatments. Teva paid AstraZeneca more than $250 million last year in royalties to make a generic, which sells for about $200 for a typical monthly dose, compared with close to $300 for the branded product.
Research vs. Marketing
There are good reasons drug companies are feeling threatened. In the last several years, some best-selling medicines, like Lipitor for high cholesterol and Plavix for blood thinning, have been largely replaced by cheap generics in a very competitive market. In 2012, that led to $29 billion in savings for patients, said Mr. Aitken of IMS, or $29 billion in lost revenues for drug makers. Eighty-four percent of prescriptions dispensed last year were for generic medications.
While drug companies generally remain highly profitable, recent trends have meant tough times for some companies, including Merck, whose profits crashed 50 percent this year primarily because the patent expired on its best-selling asthma pill, Singulair.
So AstraZeneca has recently spent millions of dollars in court pursuing several small drug companies for patent infringement after they announced a plan to make a true cheap generic version of Pulmicort Respules. Though a New Jersey judge sided with the generic manufacturers this spring, legal appeals by AstraZeneca will keep the generics off the market for the near future.
As insurance policies require patients to contribute more out of pocket for medicines, public pressure to curb prices has grown. This year, more than 100 top cancer specialists protested the rising prices of cancer treatments.
Drug companies have long argued that pharmaceutical pricing reflects the cost of developing and testing innovative new drugs, many of which do not pan out or make it to market.
“When there’s a really innovative product, you might be able to justify the price,” Dr. Kesselheim said. “But this is not generally the case.”
Critics counter that drug companies spend far more on marketing and sales than the 15 percent and 20 percent of their revenues that they devote to research and development.
In the United States, one of the few Western countries that allows advertising of prescription drugs to consumers, GlaxoSmithKline spent $99 million in advertising for Advair in 2012. Despite its financial woes, Merck spent $46.3 million to advertise its steroid spray, Nasonex, according to fiercepharma.com, a Web site that tracks the industry’s advertising.
Also, the focus of much pharmaceutical research in recent years has shifted from simple drugs for common diseases that would have widespread use to complicated molecules that would most likely benefit fewer patients but carry far higher price tags, in the realm of tens of thousands of dollars.
The newest offering for asthma is Novartis’s Xolair, which is given by injection in a doctor’s office every two weeks at a cost of up to $1,500, depending on the dose. Because the drug is so expensive and was deemed to have little or no benefit over inhalers for a vast majority of patients, the British government last year announced that it would not make it available through the National Health Service. It relented this year, agreeing to stock it for limited use, after the manufacturer offered a confidential discount.
In all other developed countries, governments similarly use a variety of tools to make sure that drug manufacturers sell their products at affordable prices. In Germany, regulators set drug wholesale and retail prices. Across Europe, national health authorities refuse to pay more than their neighbors for any drug. In Japan, the price of a drug must go down every two years.
Drug prices in the United States are instead set in hundreds of negotiations by hospitals, insurers and pharmacies with drug manufacturers, with deals often brokered by powerful middlemen called group purchasing organizations and pharmacy benefit managers, who leverage their huge size to demand discounts. The process can get nasty; if mediators offer too little for a given product, manufacturers may decide not to produce it or permanently drop out of the market, reducing competition.
With such jockeying determining supply, products can simply disappear and prices for vital medicines can fluctuate far more than they do for a carton of milk. After the price of Abby Hayes’s Rhinocort Aqua nasal spray rose abruptly, it was unavailable for many months. That sent her family scrambling to find other prescription sprays, each with a price tag over $150.
This year the price of Advair dropped 10 percent in France, but in pharmacies in the Bronx, it has doubled in the last two years.
In Georgia, Ms. Solod, the freelance writer, found the same thing. “Every time I get Advair, the price is different,” she said. “And the price always goes up. It never comes down.”
Twenty years ago, drugs that could safely be sold directly to patients typically moved off the prescription model as their patent life ended. That brought valuable medicines like nondrowsy antihistamines and acid reducers to drugstore shelves. But with profitable prescription products now selling for $100 per tiny bottle, there is little incentive to make the switch, since over-the-counter drugs rarely succeed if they cost more than $20.
As a result, a number of products that are sold directly to patients in other countries remain available only by prescription in the United States. That includes a version of the popular but expensive steroid nasal spray used by Abby Hayes, which is available over the counter in London for under $15 at the Boots pharmacy chain.
“Not only is the cost cheaper, but it doesn’t require a doctor’s visit to get it,” said Dr. Jan Lotvall, a professor of allergy and immunology at the University of Gothenburg in Sweden, where steroid nasal sprays are also available over the counter.