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Baucus’ proposal proves no consensus on key reform issues

Max Baucus will be a key player in the health care debate the next two years. As chairman of the Senate Finance Committee he has jurisdiction on many of the key issues including Medicare and provider payment reform.

He is also a leader in the true bipartisan spirit–something crucial to actually getting reform done.

Last week, he released a 98-page white paper, "Call to Action–Health Reform 2009."

Reading the executive summary, which given the news stories I have read is about all the press has looked at, the Baucus outline is pretty much Barack Obama’s health reform plan. Obama’s campaign health plan is 18 pages long and Baucus has tried to take it a distance further with 80 more pages.

The Baucus Health Plan includes:

  • Basing the system on existing private and public health plans—employer-provided, Medicare, Medicaid, and SCHIP.
  • Insurance exchanges – Creating a system of one or more Insurance Exchanges for individuals and small business to buy their coverage from complete with a management board to run it—very similar to the Massachusetts Connector and the Connector Board.
  • Premium subsidies – His subsidy proposal is vague. The Insurance Exchange Board would determine a schedule of coverage affordability based on available health plans, their costs, and income levels. A tax credit would be available to subsidize those deemed not to be able to afford part or all of the cost. This is identical to the process the Massachusetts Connector Board follows.
  • Medicare buy-in – Before the Insurance Exchange is up and running and its plans available to consumers, Baucus would allow those age 55-64 to buy-into Medicare.
  • Insurance regulation – Insurers could offer health plans through the exchange but would have to comply with benefit and plan option requirements and would be subject to guarantee issue requirements. The health plans could rate around restricted age, sex, and lifestyle issues.
  • A government-run plan for the under-65 market – After the Insurance Exchange is running Baucus would create a government-run option for consumers to choose. It would not look like Medicare but would have benefit options like the private plans offered in the Exchange.
  • Traditional insurance distribution – Insurers could also market outside the exchange using the traditional direct and intermediary distribution systems.
  • Medicaid expansion – Medicaid would be expanded to cover all of those below 100% of poverty who were uninsured.
  • SCHIP expansion – SCHIP would be expanded to cover all of those below 250% of poverty who were uninsured.
  • An individual mandate – Baucus’ plan does differ with the Obama Health Plan in that his plan has an individual mandate to buy health insurance – “Once affordable, high quality, and meaningful health insurance options are available to all Americans, through their employers or through the Exchange, would have a responsibility to have health coverage.”
  • An employer mandate – All but the smallest employers would be required to offer and pay for coverage or pay into a government pool—“pay or play.”
  • Incremental cost containment "lite" – The plan’s cost containment features are vague and embrace many of the same incremental items both Republicans and Democrats have listed—all “cost containment lite” features. Baucus’ list includes the elimination of fraud waste and abuse, increased price and cost transparency, wellness initiatives, and health information technology.
  • Medical malpractice reform – He explores a number of medical malpractice reform ideas around the theme of no fault health courts but makes no specific proposal.
  • Physician payment reform – He spends a great deal of time on the issue of physician payment reform calling for better payments for primary care, reforming the Sustainable Growth Rate formula, and pay-for-performance and quality. However, he never deals directly with the issue of specialist payments and never draws a specific conclusion on how he would proceed.
  • But no cost estimates or plan to pay for it – What is remarkable about he Baucus Health Plan is that he offers no cost estimates or mentions how he would pay for it! The Obama Health Plan would cost at least $100 billion a year and the Baucus plan is very similar—almost identical at the outline level.

I read one press report that suggested the similarity to the Obama health plan and the Massachusetts health law must mean that the Congress is coming close to a consensus on how to proceed with health care reform.

My advice to the reporter is to spend some time reading the document. It is not so much a plan for specific action as a recounting of the many broad possibilities we could take on key issues such as physician payment reform and medical malpractice reform. There is no detail for just what the most expensive and important element–individual subsidies–would be. It is notable that physician payment reform is an unavoidable issue for the Finance Committee given the pending 21% physician fee cut and he clearly has no specific plan there. There is no cost estimate or plan to pay for it.

Baucus is so vague on key elements because there is no consensus, particularly from the key relevant stakeholders to any of these issues, on just how to proceed. There is no cost estimate because the plan is so vague in structure and timetable. There is no source for funding because there isn’t a source for the likely $100 billion this would cost in the first year.

If you read just the executive summary you might see proof of consensus on what health reform might look like.

If you read all 98 pages it is clear there is no consensus on many of the key details, what health reform would cost, the timetable for implementation, or the source for paying for it.

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Matthew HoltDeron S.Barry CarolcharlieMike M Recent comment authors
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Mike M
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Mike M

Charlie- Sorry I have been busy in my practice. NEJM 2003 produced the most quoted literature regarding administrative cost difference between Medicare and Private Health care. That is where I got the 30% administrative cost figures. CMA leadership has told me that Blue Cross of California adminsitrative costs (profit and overhead) are near 40%. If all insurance companies were as responsible as your non profit group, health care would be a whole lot more affordable. Unfortunately that is not the case and the greed of insurers will probably tip the balance in favor of Universal Health Care. For example- last… Read more »

Deron S.
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Peter – Your question about why the RVU system isn’t being adjusted without government intervention is quite possibly the single most important question out there right now. The group involved in setting the RVUs is tied to the Medicare system and is not completely private. They have allowed lobbyists to influence their decision-making for quite some time. The primary care contingent has not been well represented in recent years and it shows. Procedural specialists are making it big at the expense of PCPs. If we can get things back in balance, we will see significant results because we will prevent… Read more »

Peter
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Peter

“but it can be fixed simply by reallocating the RVU system to shift reimbursement away from expensive procedures and into more “cognitive” work performed by PCPs.” Then why is that not being done now without government? “Has anyone calculated the cost of what it would take to buy-out the shareholders of the publicly traded insurance companies?” It is an important question but I think we need a whole new thread about how to transition from multi-payer private to single-pay government. Will it be due to crisis or will it be done while not under duress. If the financial and U.S.… Read more »

Deron S.
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Peter – I actually brought up the taxing fast food because I remembered you mentioning it previously and I think it’s a great idea. We probably agree on more things than we realize. You and I both know that the single-pay vs. no single-pay argument could go on forever. I want to make one point though and I hope to get your thoughts, and anyone else’s thoughts who has watched things play out over the last few months. Single-payer started out as an alternative financing mechanism with the purpose of reducing administrative costs. Over time, things have been added to… Read more »

Peter
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Peter

“Let’s tax fast food.” Haven’t I said that before? How about transferring subsidies from corn, wheat, soyabeans to fresh fruits and vegetables, preferably organic. How about banning sugery food ads to children. How about enforcing and strengthening pollution control laws. How about paying for better school lunches. How about putting physical education and recess back into education. How about setting up single-pay where primary care is reimbursed to attract qualified and committed practioners so that patients aren’t rationed out by cost. Just a start that won’t be addressed by industry, but by responsible government. Not necessarily the government we have,… Read more »

Deron S.
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Peter – That’s exactly my point. America is getting sicker and obese rates are going up. Physicians can address it until they’re blue in the face, but it continues. Any reform plan that doesn’t at least acknowledge the role citizens are playing in driving up our per capita costs in falling far short. Our group is GIVING AWAY free nutritionist services to our patients to help tackle the problem. What is everyone else doing? Let’s tax fast food. Let’s have penalties if patients don’t get their scheduled checkups or they don’t comply with their treatment plans. If we’re going to… Read more »

Peter
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Peter

Deron, how many times do the docs in your group say to their patients; “You’re just fat, get out of my office and get some personal responsibility first.”

Matthew Holt
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But Charlie, think how much bigger your bonus would be and how much more your shareholders would make if you did take 40% in costs off the top! (as do several in the individual market! Yes Mega, I mean you!) What? You got no shareholders at HP? How can you possibly be running an efficient market-based health plan? What’s that you say? You’ve been voted the best health plan in the country most of the last decade? Now I really don’t understand capitalism. To be serious for a second, on the other hand, if Harvard Pilgrim’s admin rate is about… Read more »

Deron S.
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I got excited when I saw that he devoted a section to “individual responsibility” then I read the section and was quickly reminded that he is just another politician. The individual responsibility we need has less to do with obtaining health coverage and more to do with living healthy lifestyles. When I read that nearly 50% of the population has at least one chronic illness, and that the average Medicare beneficiary has 16 prescriptions and sees 8 different providers each year, I get discouraged. Where is his plan for increasing real personal responsibility? He doesn’t address it because he feels… Read more »

Barry Carol
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Barry Carol

“I don’t know where this 30-40 percent administrative cost number comes from, but I’ve heard it before. Can you shed some light on it for me?” Charlie and Mike M, Charlie’s numbers are of course, correct. I think it’s quite likely that a CEO knows his own company’s costs and has a good feel for those of his regional competitors as well. I think the 30%-40% number may have some validity in the individual insurance market where only about 20 million people or so in the entire country get their insurance. I’ve referenced it before, but the best paper I’ve… Read more »

charlie
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charlie

Mike M. – I run a decent-sized non-profit health plan in Massachusetts. Our administrative expenses (including profit and overhead) are 11-12% of premiums. My costs are pretty consistent with the administrative expenses of my competitors. Overall, we spend about 87-88 cents of every dollar we collect on health care services. The for-profit industry varies from the non-profits, but probably spends between 80-85 cents of every premium dollar on health care services. I don’t know much about Switzerland, but I know enough about government cost accounting to know that the 4% Medicare number doesn’t include expenses that aren’t directly in Medicare’s… Read more »

Mike M
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Mike M

I agree entirely that the plan is overreaching in one sense and thus not economically feasible. On the other hand it ignores the fundamental concept of cost containment through control of administrative costs. I find it extraordinarily hard to comprehend let alone support any plan that does not address reformation of the health insurance industry. When administrative costs(profit and overhead) are 30 – 40% in the private sector compared to 5-6 % in Switzerland and 4% in medicare. True movement toward a single payor system will be a battle. Reforming the health insurance industry to a highly regulated or a… Read more »

Peter
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Peter

Ok, so what if we manage to expel every illegal, won’t we need citizens to take those jobs. And if we do get citizens to fill the jobs then will they be paid at a level that enables them to buy health insurance? I don’t think so, we’ll still have too many people, with too little pay, and too high healthcare costs. Don’t forget that illegals are able to work here because Americans hire and pay them. Ask the agriculture and construction industries if they could survive without illegals. Illegals also contribute to the local ecomony; sales taxes, gas taxes,… Read more »

tcoyote
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tcoyote

Great comments, Laura L. A rare voice from real world. You’ve already tipped the answer: Baucus’ plan is completely oblivious to these three concerns, particularly # 1, a particularly important point if the feds grab disproportionate share payments to help fund their plan. You’ll still have 11 million illegals (perhaps less because of sunbelt construction collapse) and no fed subsidies. Massachusetts didn’t have a lot of illegals- California, Texas and Florida have many millions. Community health centers and overwhelmed urban public hospitals are the lifelines in all three places.

Laura L.
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Laura L.

I currently work in healthcare as an IT analyst but have also worked in the finance dept so I have seen my fair share of how the numbers fall out. Three points need to be made in response to the Bauchus Plan. 1)Does his coverage include non-citizens? Because in our mid-west hospital (and I know its worse elsewhere) we have a disproportinate share of non-citizen patients that we care for and are not enrolled in any health care coverage. Do we just continue to ignore this problem or do we provide a second national healthcare coverage system for those who… Read more »