Tag: Public Option

Health Reform and Medicare: Part I

Here’s a pop quiz on health reform: Which prominent Republican said the following:

And if you don’t [oppose this health care legislation] and if I don’t do it, one of these days you and I are going to spend our sunset years telling our children, and our children’s children, what it once was like in America when men were free.

Johnson Signing Medicare

OK, it’s a trick question: the answer is Ronald Reagan, paid spokesman for the American Medical Association’s Women’s Auxiliary, speaking in 1961 against the bill that ultimately emerged as Medicare. (A recording of his “coffee klatch” talk, “Ronald Reagan Speaks Out Against Socialized Medicine,” is here.

Although what political scientist Jonathan Oberlander has termed “a politics of consensus” lasted for some thirty years after Medicare’s enactment, bipartisanship broke down in 1995 when Newt Gingrich targeted Medicare for cuts of 30% and urged privatization using managed care. By the lights of conservative Republicans, severe cuts in traditional Medicare would encourage flight to managed care alternatives, so that, in the famous phrase of Newt Gingrich, Medicare would “wither on the vine.” (1 St. Louis U.J. Health L. & Pol’y 5-43 (2007), Abstract). Although President Clinton used the Republicans’ Medicare reform to his own benefit (polls showed that his defense of Medicare helped him secure re-election), ultimately much of the Republicans’ agenda for reform was adopted in 2003. Since then Republicans have not relented in their criticism of the program– with some in leadership positions even questioning the government’s role in health care for seniors. (See Rachel Maddow’s cable television show featuring a parade of video clips of Republicans bashing Medicare, including former Speaker DeLay –echoed by Representative Roy Blunt–asserting that “Medicare shouldn’t be a government program”).

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CBO: HELP Bill’s Public Plan Not Much Help on Costs

The green-eyeshade meanies in the Congressional Budget Office took another whack at the public plan today, at least the one contained in the health reform bill passed by the Senate Health Education Labor and Pensions committee last June. Responding to queries from ranking member Michael Enzi (R-WY), CBO chief Doug Elmendorf noted on his blog that “premiums for the public plan would typically be comparable to the average premiums of private plans offered in the insurance exchanges.”

The reason given was the HELP bill emasculated the public plan’s ability to piggyback on the administrative efficiencies of Medicare and required it to be “financially self-sufficient.”Continue reading…

Public Still Backs the Public Plan

The Wall Street Journal reports this morning that President Obama in his speech tonight will renew his support for including a public plan option in health care reform. He will also endorse an individual mandate, which could cost uncurrently uninsured families as much as $3,800 a year for health insurance.

Meanwhile, recent polling suggests the public is still in the president’s corner on the public plan. This from today’s New York Times:

After weeks filled with seemingly ominous portents for Mr. Obama’s ambitions, there is evidence that public opinion remains basically supportive of him. Despite intense controversy over the “public option,” a government-backed insurance plan that would compete with the private sector, a CBS poll at the end of August found that 60 percent of Americans still support the idea, down from 66 percent in July. And half the respondents to the poll said Mr. Obama had better ideas on health care than Republicans, down from 55 percent.

Happy Trails, Trigger

Okay, my apologies to Roy Rogers, but I was pleased to see in the New York Times that the idea of a public plan trigger is finally getting serious consideration by the White House and by Senate Finance Committee members.

I proposed the trigger concept in a piece that ran in THCB back in March. It was clear then that a nationwide public plan faced very considerable political obstacles, and I suggested that a more acceptable approach might be to establish a public plan option that would be implemented only where and when private plans failed to meet predetermined cost control targets.

Senator Olympia Snowe proposed the trigger approach to fellow members of Senate Finance some weeks ago, and the NYT reports that the White House—desperate for at least one Republican vote in the Senate—is now analyzing its political feasibility and practicality.

Senator Snowe’s approach, reflecting the situation in her home state of Maine, where the market is dominated by a single insurer, would tie the trigger to affordability, rather than to cost control. This approach has political advantages, but could be labeled as unfair, since it includes a factor that private plans cannot control—individual incomes—in the trigger comparison.  It also has the disadvantage of focusing on individuals who are just above the Medicaid income threshold. To achieve affordability for this lower-income group could mean a public plan network virtually identical to that of Medicaid, raising the question: why not just allow this group to buy-in to Medicaid?

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Health Reform Bills Would Be Great For the Business Of Health Care

Editors Note:  This piece by veteran THCB contributor, Robert Laszewski, first appeared on Kaiser Health News. The piece is republished here with permission.

Democrats-cap-and-trade-bill-house-renewable Have you noticed how none of the big health care business special
interests is running any negative health care reform ads? Why should
they when each is poised to gain billions of dollars from it?

President Barack Obama has said many times, any health care bill that
costs about $1 trillion would be paid for, roughly half and half, with
savings in the health care system and new revenues (taxes).

told, health care providers will likely get hit by $500 billion in
federal payment reductions over 10 years from what they would have
received otherwise. This is their "savings" contribution to help pay
for the overhaul effort. It amounts to no more than a couple of
percentage points less than they would have received anyway.

more importantly, the Congress is getting ready to spend $1 trillion
over the same 10 years mostly to expand Medicaid and provide subsidies
to the uninsured to help them purchase private health insurance and be
able to pay their medical bills. The health industry, by giving up $500
billion, gets millions more patients armed with public and private
health insurance cards. Not a bad deal—particularly when the other $500
billion needed to finance the bill comes from new levies on taxpayers,
not bigger industry cuts.

The details show an even prettier picture for the business of health care.

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Neither Quick Nor Easy

Thomas Greaney

The idea of establishing regional cooperatives, advanced as an alternative to President Obama’s public plan option, has attracted attention as a means of assuring that health reform legislation contains some means to improve competition among health plans around the nation. But the proposal, which may have superficial appeal as a “middle ground” between a public plan option and an unchecked private market, is ill-equipped to fix the key problems a public plan would address. In addition, recent experience teaches that timely and effective entry by such plans is unlikely.

The first issue is whether a cooperative, organized by consumers or other groups, can effectively deal with the shortcomings of the existing delivery system and insurance market. Thus far, the proposal advanced by Senator Conrad is pretty sketchy, but are grounds for skepticism. A central reason for having government sponsored plans is to allow the efficiencies of Medicare’s well-established administrative structure and innovative payment experiments to carry over to the private sector. Coops provide no such advantage. A second advantage of public plans is that they would likely achieve some bargaining leverage by virtue of their probable role as insurer for people representing higher risks whom private insurers find some methods to avoid. Hospitals and physicians will be hard pressed to bypass such a significant presence in the market and the public plan can thereby exert market-wide pressure to keep provider and pharmaceutical costs down. Whether co-ops will be willing to undertake the role of covering such individuals or able to sponsor innovative delivery systems to treat them is far from certain.

In any event, it is hard to envision numerous regional coops gathering the necessary data, experience and reputation to serve as a benchmark or counterweight to dominant hospitals and provider groups across the country. Further, there is a serious question regarding the independence and mission of coops. It is a mistake to assume that nonprofit entities will necessarily work to the advantage of the public. Unfortunately, our experience with nonprofit hospitals and HMOs suggest that they can easily be persuaded to play along with other providers and may not always vigorously pursue their charitable mission. Keeping cooperatives’ eye on the ball would require close attention to the control and governance of such entities.

The second objection is based on timing and practical considerations. There is ample evidence from our experience with health insurance markets that developing effective coop-sponsored plans will not come easily or quickly. It is clear that new entrants into health insurance markets face a host of obstacles. The prevalence and magnitude of entry barriers is evidenced by the dominance and profitability of existing insurance plans. One or a handful of companies dominate most health insurance markets around the country and these firms have enjoyed consistent and robust profits. Economic theory would suggest that such profit opportunities should have invited entry by rivals eager to capture some of the profits available in those markets.

Additional proof of the obstacles to entry are found in the investigations by insurance commissioners into proposed mergers in their states. In Pennsylvania for example, the proposed merger of Highmark and Independence Blue Cross would have combined the dominant insurers in two large distinct geographic regions of the state. Evidence provided to the State indicated that numerous attempts by regional and national firms such as Aetna and Coventry to enter both markets had proved unsuccessful over the years. Expert studies suggested that a variety of factors including brand loyalty, difficulties in securing physician and hospital network contracts, regulatory and information gathering costs, and obstacles created by the contracting practices of incumbent providers, thwarted entry. Newly formed coops needing to acquire expertise and develop networks will surely face enormous difficulties penetrating markets.

Professor Greaney’s is a nationally recognized expert on health care law and the Chester A. Myers Professor of Law and the Director, Center for Health Law Studies, St. Louis University School of Law.  Thomas Greaney has spent the last two decades examining the evolution of the health care industry. He is also a frequent contributor at Health Reform Watch where this post first appeared.  His recent testimony to the Senate on “Competition in the Health Care Marketplace” may be found here.

Are Cooperatives a Reasonable Alternative to a Public Plan?

JosttFirst, a word about history. We have tried cooperatives before.
During the 1930s and 1940s, the heyday of the cooperative movement in
the United States, the Farm Security Administration encouraged the
development of health cooperatives. At one point, 600,000 mainly
low-income rural Americans belonged to health cooperatives. The
movement failed. The cooperatives were small and undercapitalized.
Physicians opposed the cooperative movement and boycotted cooperatives.
When the FSA removed support in 1947, the movement collapsed. Only the
Group Health Cooperative of Puget Sound survived. Over time, moreover,
even Group Health, though nominally a cooperative, has become
indistinguishable from commercial insurers-it underwrites based on
health status, pays high executive salaries, and accumulates large
surpluses rather than lower its rates.

The Blue Cross/Blue Shield movement, which also began in the 1930s,
shared some of the characteristics of cooperatives. Although the Blue
Cross plans were initiated and long-dominated by the hospitals and the
Blue Shield plans by physicians, they did have a goal of community
service. The plans were established under special state legislation
independent from commercial plans. They were non-profit and, in many
states, exempt from premium taxes. They were exempt from reserve
requirements in some states because they were service-benefit rather
than indemnity plans and because the hospitals and physicians stood
behind the plans. They were exempt from federal income tax until the
1980s. In turn, they initially offered community-rated plans and
offered services to the community, such as health fairs. In some states
their premiums were regulated and they were generally regarded as the
insurer of last resort for the individual market.

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Ditching the Public Option

6a00d8341c909d53ef01157023e340970b-pi It looks to me like the popular objections to a health care bill being expressed by voters this month are concentrated in two primary areas:  

  1. A concern about “government control of the health care system”—mostly around the public plan option.
  2. The trillion-dollar cost of a health care bill at a time deficits are swelling and worries about who will really end up paying for it.

As a result of the first concern, we are getting the first indications that some Democratic leaders are ready to ditch the robust Medicare-like public option and are beginning the process of talking the party out of demanding it be included in a health care bill.

This from Politico today:

After the toughest week yet for health reform, leading Democrats are warning that the party likely will have to accept major compromises to get a bill passed this year – perhaps even dropping a proposal to create a government-run plan that is almost an article of faith among some liberals…"Trying to hold the president's feet to the fire is fine, but first we have to win the big argument," former President Bill Clinton said Thursday at the Netroots Nation convention, a gathering of liberal activists and bloggers who will prove most difficult to convince. "I am pleading with you. It is OK with me if you want to keep everybody honest. . . .But try to keep this thing in the lane of getting something done. We need to pass a bill and move this thing forward."

It has been clear to me for months, and I have been saying so on this blog, that the public option has not had the votes even among Democrats to make the finals. With all the heat “a government takeover” of health care has attracted from those at the town hall meetings either the Democrats ditch it or get used to the idea they have no chance of passing health care reform.

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The Master and I agree on the goals

Writing in his blog in the NY Times, Uwe Reinhardt sets out three overarching goals of health reform

1. Financial barriers should not stand between Americans and preventive or acute health care that they sincerely believe will address concerns over a troubling medical condition, in a timely manner, before that condition grows into a critically serious illness.

2. Having received needed health care, no American family should be so financially devastated by medical bills that it cannot meet routine daily living expenses — for example, make utility or mortgage payments on time or finance the education of the family’s children.

3. The future growth in national health spending should be constrained to fall significantly below currently projected spending growth, which has the United States devoting about 40 percent of its G.D.P. to health care by mid-century.

All other goals are subordinate to these three overarching goals, as are the means to reach them.

Last week I posted a very similar Two rules by which to judge a health reform bill.

Rule 1 A health care reform bill needs to guarantee that no one should find themselves unable to get care simply because they cannot afford it. Neither should anyone find themselves financially compromised (or worse) because they have received care.

Rule 2 A health care reform bill needs to limit the amount of GDP that is going to health care to its current level, with an overall aim of reducing the share of health care going to GDP.

Uwe is a touch more eloquent in his goals 1 and 2 which split apart my Rule 1, and he’s a touch less aggressive in his goal 3, which is my Rule 2. But other than that these are the same.

Unfortunately in his column of the previous week Uwe created a list of 8 (but it could have been 20) completely contradictory statements about the completely “confused state” of what Americans seem to demand from health reform.

And right now the confusion seems to be winning.

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Dumb and Dumber

I can’t say that I’ve been fantastically impressed by the Democrats’ choice of this year to go after health reform, or their explanation of what it is. And I understand that the only interest of the Republicans is to destroy any political win in the hope that they get a repeat of 1994…although it is just possible that despite their confidence the voters also remember the 2000–2008 period which will also precede the 2010 election.

However, the amount of crap emanating from the right about what’s in the health bills and the evidence of that by what’s showing up in the “tea parties” now invading Democrat congressional members’ town halls is quite extraordinary and does require at least some notice.

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