The Federated Health System of America

6a00d8341c909d53ef0120a520865d970b-800wi After a spy plane confirmed the Soviet Union was building launch platforms for first-strike ballistic missiles in Cuba in October, 1962, President John F. Kennedy convened his Joint Chiefs of Staff and cabinet members to help him decide how to respond.

Kennedy managed the diverse input he received, including surreal, saber-rattling rants from Air Force General Curtis Lemay, and eventually resolved the crisis. It was the closest we ever came to nuclear war.

But the consensus-based, inclusive leadership style JFK used to resolve the Cuban Missile Crisis doesn’t seem to be working as well for President Obama as his Health Reform Express barrels towards an unknown final destination.

Take the latest cockamamie plans for the public option, for example. As the House and Senate struggle to cobble together some semblance of a bill, we hear that the end result is likely to contain a public option along with a rider that allows states to opt out of it if they so choose.This ridiculous compromise is the byproduct President Obama’s decision to let Congressional group-think generate a legislative package that (a)could pass Congress and (b)he could sign. In making this decision, Obama sacrificed his principles before the altar of political success.

The problem with the plan, and the leadership style that produced it, is that it will light 50 legislative fires in 50 states. The results of these dogfights are guaranteed to produce a hodgepodge, loosely federated health care system that fails to meet the most fundamental issues Obama set out to solve.

The impact will be most notable for those who lack health coverage today. Their ability to secure insurance, and the quality of the coverage they receive, will be exquisitely dependent upon the state they happen to
live in.

The opt-out provision, some say, is required to guarantee Blue Dog support for the bill in the Senate. But the Senate legislation delegates much more than just the opt-out decision to the states. It also punts issues like what benefits should be offered to low-income families, and when to allow private insurance companies to raise premiums.

And in lieu of establishing a national marketplace for insurance, the Senate version permits states to establish their own exchanges and select insurers that can participate. Heck, states could even bag the exchanges altogether and use other means to expand coverage, through Medicaid for example.

Problem is, many states simply don’t have the administrative and analytical firepower to handle these newly delegated responsibilities. In fact, the states with lax insurance regulations and disorganized Medicaid programs are the same ones that feature large populations of uninsured people to begin with.

In Texas for example, a third of all working adults lack health insurance. Texas Medicaid currently covers 2 million children but only 125,000 of their parents. The program is notorious for administrative hassles and lengthy enrollment delays as it is. It simply cannot handle the flood of a million new applicants which is what would happen if the Lone Star state is left to its own devices.

The irony in all this, of course, is that a bona fide (that is, national) public option—which Republicans have made the poster child for all it sees to be wrong with Health Reform—would likely play a tiny role in the drive to expand health care coverage, according to the non-partisan Congressional Budget Office.

At best, 6 million of the nation’s 45 million uninsured people would enroll in a public option according to the CBO, and that’s assuming no states opt-out.

The CBO’s surprising conclusion is based on the assumption that the public option, as it is currently conceived, wouldn’t be able to offer a price advantage, a crippling blow resulting from a House compromise which calls for any government-backed insurer to negotiate reimbursement with providers rather than setting them unilaterally as Medicare and Medicaid currently do.

Six million people works out to a measly 120,000 residents per state. The number would be much smaller than that in some states, perhaps just a few tens of thousands.

Then again, imagine state lawmakers trying to convince their constituents that their state should opt out of a public option when the Feds plan to tax them regardless in order to pay for it.

Russian trawlers carrying nuclear-tipped SS-4s had a better chance of reaching Havana half a century ago.

Glenn Laffel is a physician with a PhD in Health Policy from MIT and serves as Practice Fusion’s Senior VP, Clinical Affairs.  He is a frequent writer for EHR Bloggers, where this post first appeared.

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4 replies »

  1. “…. a public health insurance company won’t be in any better position to offer cheap insurance to the uninsured.”
    David, I would have to disagree, or at least question this assertion. In view of the “inconsistencies” Sen. Rockefeller keeps unearthing regarding private insurers’ reported MLRs ( http://tinyurl.com/yjckyfg – check the PDF documents at the bottom of the press release), it seems to me that a public plan could offer much cheaper insurance, and not only to the uninsured.
    A public plan would have neither the incentive nor the ability to engage in this sort of practice.

  2. You appear to be placing great faith in the capacity of “The Public Option” to solve major problems in our health care system. I don’t see it, as I’ve written about before in this blog. However, now I’ll refer you instead to a deeper discussion of the public option and its lack of teeth by Timothy Jost: http://healthaffairs.org/blog/2009/10/30/the-public-option-and-insurance-exchange-in-the-house-bill/.
    Mr. Jost lays out the key problem: Any new public health plan that truly competes without subsidies will need to do so within the same irrationally structured market that now guides existing health plans, whether public or private. Within these markets providers have the upper hand, so also a public health insurance company won’t be in any better position to offer cheap insurance to the uninsured. That is it can’t without huge infusions of subsidies, and if such subsidies were available, private and not-for-profit plans would be plenty happy and able to expand coverage to the same uninsured.
    Adding just one more health plan will never make much of a competitive impact. If there’s only one currently in an area, going from a monopoly to a duopoly won’t help much. Going from 4 to 5 helps at the margin even less. Were the level of health plan competition truly the underlying problem in our system–it isn’t, but let’s pretend for now–then you’d want policy steps that lower the barriers to new firm entry into markets for all insured. These barriers are three: difficulties of negotiating competitive rates from providers, costs of marketing and sales to groups, and the potential for adverse selection in entering a new market (the groups that switch first have the least healthy members). Each are amendable to policy tools, but for the most part these aren’t part of the current debate.
    In sum: The public option is highly expendable as a political chip, because it is more noise than true impact. Should Obama be willing to give up a weak policy tool, the public option, in return for getting a bill that puts us on a pate that 1) insures 94% of Americans and 2) puts in place significant and under-reported delivery payment reforms, both of which will bend the cost curve? You bet.
    If I’m wrong and you’re right, remember that there will be path adjustments later. The important thing for the country is to take a major step now.

  3. Glenn:
    Sorry to be categorical, but JFK did not use a “consensus-based process” in the Cuban Missile Crisis. That is just flat-out wrong by any and every account. He overruled his generals repeatedly; making up your own mind after listening to everyone is not at all the same thing as consensus.
    And, indeed, in health care reform, the Republicans declared early that their goal was to defeat Obama, not produce a consensus document (as Clinton could have done, for example, had he been willing to listen and compromise). The Republican wonks talked compromise; the Republican political leadership did not. Any more than Gen. Curtis LeMay was willing to compromise with Castro.
    Oh, wait. Cuba has universal health care. Kennedy was a Democrat. Obama is a Democrat. Therefore….well, you can see what kind of debate we’re getting today.

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