For Better or Worse, Senate Makes Health Care Reform History

What ultimately prevailed was the realization it was now or never. The Senate passed health care reform legislation – a package that few considered ideal, but that Democrats determined was better than the status quo. This was a historical vote – the first time both the House and Senate have passed comprehensive, near-universal health care reform bill. Nonetheless,  Senator Majority Leader Harry Reid summed up the meaning of the event saying “This morning isn’t the end of the process, it’s merely the beginning. We’ll continue to build on this success to improve our health system even more. But the process cannot begin unless we start today … there may not be a next time.”

The legislation has come a long way since earlier in the year when the Senate Health, Education, Labor and Pensions Committee approved far more liberal legislation. As anticipated, moderate Democrats forced a host of changes to the health care reform bill, much to the chagrin of liberals. Now a conference committee will be tasked with merging the Senate version of reform with legislation passed by the House in November.

While the House and Senate bills have much in commons, there are some controversial differences. (For those seeking a more thorough comparison of the two bills I recommend the Kaiser Family Foundation Side-by-Side Comparison).  Given that these differences touch on issues such as taxes, abortion and a government-run health plan, there will be plenty of fodder the cable news networks can use to prevent their commercials from jamming together.

Whatever health care reform bill ultimately emerges from the conference committee it will a product of the Democratic party. Republicans were unanimous in their opposition to HR 3590, the Patient Protection and Affordable Care Act. That is unlikely to change moving forward. This reflects both ideology and a political calculation. While Democrats reached the high water mark of their majority in the 2008 election (meaning they were going to lose seats in 2010 regardless of what happened with health care reform), whether the GOP’s political calculation pays off in the long run will be determined by how independent, moderate voters perceive the health care reform package not in 2010, but in 2012 and beyond. For that verdict we’ll have to wait. In the meantime, for better or for worse, history was made this morning in the United States Senate.

Countdown to the Real Work on Health Care Reform

With a commitment of 60 votes, Senate Majority Leader Harry Reid unveiled the manager’s mark of the Patient Protection and Affordable Care Act or, as it is better known, the Senate’s health care reform bill. After day long negotiations over abortion and other issues, Senator Ben Nelson agreed to vote in favor of bringing the bill to the Senate floor.

The manager’s mark of HR 3590 identifies the changes made to the  original Senate health care reform legislation (in other words, if you want to read the bill you have to read both the original and the most recent document). As has been widely reported, there are some provisions of the legislation specifically aimed at securing the support of Senator Ben Nelson of Nebraska. For example, the health care reform bill will increase state spending on Medicaid. The Senate bill reimburses states for this extra cost until 2017 at which time the federal matching funds are phased out. Except for Nebraska where the federal government would pay for Medicaid expansion forever. (Or, to be realistic, until Congress takes the subsidy away).

There’s a host of other provisions of interest. A government-run health plan is out of the bill, much to the frustration and dismay of liberals. Carriers would be required to maintain a medical loss ratio of 80 percent for small group and individual products while meeting a minimum 85 percent MLR for their large group block of business. Rating differences based on age would be limited to a 3-to-1 ratio. However, states could increase the minimum medical loss ratios or narrow the age-based rating difference. There’s new language concerning abortions, one of the inducements to get Senator Nelson’s vote, although this language is apparently not strong enough for anti-abortion Democrats in the House.

The Office of Personnel Management would create a copy of the Federal Employee Health Benefit Plan featuring private carriers. (It appears both for-profit and non-profit plans could participate in this new program, but I may be reading it wrong and only non-profits are permitted). There’s a host of preventive/wellness programs, pilot projects and other provisions aimed at addressing costs. And it would allow carriers meeting certain federal standards to offer coverage in other states through state exchanges.

(I received an email from a conservative broker blasting this provision as removing the ability for “the Citizens of a State having a say on State Laws and Mandates!” Which is pretty funny considering it’s at the center of Republican reform proposals, was a part of Senator John McCain’s health care reform platform when he ran for president, and is not much different than the Associated Health Plans advocated by conservatives for over a decade. Sometimes it seems to be less about the underlying public policy and more about who makes a proposal that drives the reaction.)

The bottom line is that Senator Reid did what he needed to do to cobble together 60 votes in the Senate. What, in the words of former Majority Leader Tom Daschle, is the equivalent of shoveling 60 frogs into a wheelbarrow.)  As a result, the Senate will pass health care reform.

And that’s when the fun begins. There are substantial differences between the House and Senate versions of health care reform. Perhaps Speaker Nancy Pelosi, recognizing the greater challenge Senator Reid has in rounding up votes, will instruct House negotiators to quickly adopt the Senate version of health care reform. This could result in a bill passing Congress in very early January.

More likely, however, House and Senate negotiators will struggle to refine the legislation. The result will be closer to the Senate version than what passed the House, but it would not be the same HR 3590 that will pass the Senate. This process will take significantly longer, perhaps most of January. While unlikely, the conference committee has the power to start with a blank piece of paper and write a brand new bill.

My guess is Speaker Pelosi will focus on a few key modifications to the Senate bill. So long as it doesn’t cause one of Senator Reid’s frogs to jump out of the wheelbarrow these will be accepted. The result will a relatively short conference committee leading to a final vote on health care reform by mid-January.

What’s significant is that the playoff season is almost over. The World Series (that would be the conference committee) is about to begin. Which means the real work of writing health care reform legislation is about to begin.

Added December 21, 2009: Memorandum from the Congressional Budget Office to Senator Harry Reid summarizing their analysis of the Patient Protection and Affordable Care Act and to a blog posting by CBO Director  Douglas Elmendorf concerning a correction to the calculation of federal reductions beyond 2019.

Why Liberals Won’t Kill Health Care Reform

For those opposed to the current versions of health care reform moving through Congress it might be enjoyable to see the Democrat versus Democrat circus currently underway in Washington. Both parties are susceptible to the joys of circular firing squads, but the Democrats are embracing the concept with exceptional glee of late as liberals and moderates in the Democratic caucus brawl over the shape of health care reform legislation. But at the end of the day there’s several reasons why it’s highly likely all 60 members of the Democratic caucus will vote to move the bill forward.

1. The Senate is not voting on a final health care bill. Yes, passage of health care reform by the U.S. Senate would be a historic milestone, but just a milestone. What emerges from the Senate will go to a conference committee where the final health care reform bill will be drafted. This makes it easier for Senate Majority Leader Harry Reid to muster the necessary votes. For example, Senator Ben Nelson who is threatening to vote against allowing a vote on the legislation unless it’s abortion language is modified, can make it clear he’ll vote “aye” now to keep the health care bill alive, but he’ll vote against it if the conference committee doesn’t address his concerns. The liberals who are claiming the legislation is a bail-out of the insurance industry can make the same claim: “I’ll vote for it now, but it needs to get better in conference.”
2. Liberals opposing the bill don’t vote. With the exception of Senator Bernie Sanders, an Independent who caucuses with the Democrats, most of the complaints have come from liberals outside of the Senate. Former Governor Howard Dean was the first well-known liberal to call for defeating the Senate health care reform bill. he was soon joined by Keith Olbermann of MSNBC and folks at the Daily Kos blog. The AFL-CIO and SEIU are also making noises about killing the bill and starting over. But killing the bill would require liberals to tell millions of Americans that preventing health insurance companies from denying them coverage isn’t adequately progressive. Or that preventing carriers from dropping insureds when they get sick isn’t sufficiently liberal. Or that eliminating annual and lifetime caps on insurance coverage is unimportant to liberals. Or that making health insurance accessible and affordable (through subsidies) for millions of the currently uninsured fails to meet the definition of “good enough.” Liberals will complain. They’ll whine and threaten. At the end of the day, however, it’s unlikely any liberal wants to go down in history as the vote that postponed health care reform for a generation (see reason #4, below). Mr. Olbermann gets paid to talk so the commercials on his Countdown show don’t run together. He doesn’t have vote in Congress. Neither does Governor Dean. What they say matters only within the bubble known as cable news. Having a vote in Congress is a responsibility the pundits lack, but lawmakers take very seriously – seriously enough to keep health care reform legislation moving forward.
3. Liberals are upset over more than just the public option. While dropping a “robust” public option from the Senate health care bill is generating the most recent complaints from the left, threats to defeat the bill result from several disappointments. Many liberals support a single payer system and see a government-run health plan as a compromise. They look at the requirement for everyone to purchase health insurance and ask a reasonable question: what is to stop carriers from gouging the public? (Hence proposals for requiring high medical loss ratios). Then there’s efforts by anti-abortion groups to use health care reform to insert language that goes beyond the current status quo embodied by the Hyde amendment. Some progressives also are upset pure community rating is absent from the bill and the fact Health Savings Accounts will survive the reform effort. As the end game approaches, it’s not surprising that passions rise and frustration bubbles over. Especially for liberals about to vote for what they consider disappointing legislation, venting their displeasure is to be expected. Venting displeasure, however, is not the same as blocking health care reform.
4. Liberals won’t get a better bill any time soon. Progressives were understandably delighted by the 2008 election results. President Barack Obama had a demonstrably liberal voting record and still won in what can legitimately be called a landslide. Democrats had substantial majorities in both houses of Congress. What was overlooked is that the Democratic Party (and the president) is more centrist than true liberals like to believe. In fact, nearly one-third of the Democratic Caucus are also members of the Senate Moderate Dems Working Group. Anyone not trying to sell Viagra and auto insurance (which leaves out Mr. Olbermann) has known for months that health care reform would be shaped by these moderate Democrats Senators. And if liberals think they’ll be replacing these moderates with more liberal Democrats they’re spending too much time in a different space-time continuum than the rest of us. The chances of liberals taking the seats of Senators Blanche Lincoln and Mark Pryor (Arkansas), Evan Bayh (Indiana), Ben Nelson (Nebraska), Mary Landrieu (Louisiana), Kay Hagan (North Carolina), or Clare McCaskill (Missouri) any time soon are extremely slight. The reality is that Republicans are likely to pick up several seats in the Senate and House in 2010. Historically, the mid-term elections go poorly for the party in the White House. What this means is that for liberals, the current Congress is as good as it gets. Starting over would likely result in reforms even more moderate than what’s being considered today. That’s why Republicans are doing everything they can to slow down the health care reform process. They know the longer the process takes the more likely health care reform is likely to fail and that future attempts will be more to their liking. Liberals in the Senate know this. The Governor Deans of the world can ignore this fact, but lawmakers have to deal with reality, not the fantasies of ideologues.
5. There’s always tomorrow. To think that whatever health care reform legislation President Barack signs into law health care reform legislation early next year will end debate on the issue for the rest of his Administration is naive. As Republicans gain strength they’ll seek to modify whatever is enacted. Democrats will attempt to expand reforms through more targeted legislation. Whatever health care reform bill emerges from Congress this session should be viewed as a foundation for future political fights, not the end of them.

Could health care reform fail because of attacks from both the left and the right? Yes. Is it likely to fail because liberals join Republicans in torpedoing health care reform? Not really. I don’t envy Senate Majority Leader Reid his task, but my guess is he’ll soon have the 60 votes needed to bring health care reform legislation to the floor of the Senate. Then if some of the liberals want to make a symbolic vote against the reform package they can go right ahead. Once the bill is brought before the Senate It only take 51 votes to move the legislation forward to the conference committee.

Of course, whether whatever health care reform legislation the conference committee can draft will secure enough votes is still very uncertain. But we will have the chance to find out.

Health Care Reform Makes It Clear: Howard Dean is No Ted Kennedy

Dr. Howard Dean was governor of Vermont for 12 years. He was a front runner briefly during the 2004 presidential campaign. He became chair of the Democratic National Committee. And now he is demonstrating why he failed for Governor and why Democrat are better off having him as the “former” chair of their party.

As Democrats in the Senate struggle to cobble together a super-majority in support of health care reform, Governor Dean is busy throwing bricks into the room. Upset that the legislation likely to emerge from the Senate will contain neither a government-run health plan nor the ability for 55-to-64 year olds to buy-in to Medicare, Governor Dean is urging defeat of the bill. The reason, according to a report by the Associated Press, the Senate health care reform bill is “an insurance company’s dream.” Which is malarkey. I don’t know any insurance carriers happy with the direction of health care reform in Washington. As the AP reports White House spokesman Robert Gibbs putting it, “If this is an insurance company’s dream, I don’t think the insurance companies have gotten the memo.”

Governor Dean asserts that “You will be forced to buy insurance. If you don’t you’ll pay a fine.” True enough, although in the Senate bill the fine is $750, far less than the cost of coverage. Then he goes on to assert that insurance companies would not be prohibited from denying coverage for preexisting conditions. And that older Americans would pay more than their younger neighbors for coverage.

Let’s look at the substance of the Governor’s complaints. Does he seriously believe that whatever health care reform bill emerges from Congress will allow health insurance companies to deny applicants for coverage? If so, he’s the only pundit in the country who does. Even Republicans support guarantee issue of health insurance coverage.

As for older people paying more for coverage than younger people, he’s right. Both legislation passed by the House and being considered in the Senate allow carriers some flexibility in setting rates by age. But both bills substantially reduce the differential that exists today. In California, for example, a 64 year old can expect to pay six times more than a 19 year old for the same coverage. (Anthem Blue Cross offers a $3500 deductible PPO that costs a single 19 year old in Los Angeles $110 per month and his 64 year old neighbor $664 a month). Under the legislation being considered in the Senate, the ratio would could be no more than 3-to-1. The House bill limits the differential to 2-to-1. Governor Dean never complained about this premium spread before. Now that the public option is likely to be cut from the Senate bill, a 3-to-1 limit on premiums becomes a decisive factor for him?

Governor Dean’s attack on the Senate bill is a loud reminder of how much Senator Edward Kennedy is missed in Washington. Senator Kennedy was as liberal, if not more liberal, than Governor Dean. The difference is that Senator Kennedy accomplished a great many things on the national stage. Governor Dean has accomplished nothing nationally. Senator Kennedy was successful in large part because he recognized the need to seize progress when and where he could. He knew there would be future opportunities. Even more importantly, he understood that, in broad terms, America becomes more progressive over time. Consider: it wasn’t that long ago that the fight was over whether the government should provide a medical safety net for older citizens. Republicans called Medicare socialism. Now they defend the program.

There’s a lot in the current health care reform bill I don’t like. There’s a lot about the status quo I don’t like either. What is infuriating about Governor Dean’s attack on the bill is that it is as nonsensical as those of the right. His “insurance company dream” is to the left what former-Governor Sarah Palin’s “death panels” are to the right – ideology masquerading as dire warnings.

Liberals in Congress will probably come around to supporting what they consider a watered down, insufficient health care reform bill. Liberals outside of Congress, like the former Governor from Vermont, will call on them to defeat the bill and start over. Underlying their logic is apparantly the belief that it’s possible to pass an even more liberal Congress.

What liberals like Governor Dean need to realize is that moderate Senators like Ben Nelson and Blanche Lincoln are just a part of the party as liberals like Senators Jay Rockefeller and Charles Schumer. I suppose Governor Dean could recruit liberals to run for the Senate in Nebraska, Arkansas, Indiana, Louisiana and other states from which moderate Democrats hail. There’s only one problem. Liberals don’t get elected to the Senate from those states. Not in 2010.

Members of Congress understand the need for compromise. They may not like it, but they accept that their less-than-liberal colleagues represent their constituencies. Those on the sidelines have the freedom to ignore such realities and to throw bricks with abandon. These ideologues won’t solve many problems, but I guess the brick throwing makes them feel better.

Senator Kennedy understood the need to work with those less liberal than himself, to keep issues alive by passing significant reforms that may not be all he wanted to achieve, but laid the groundwork for future efforts. Governor Dean is blind to this approach. But then, Howard Dean is no Ted Kennedy. Never was. Never will be.

Mandated Medical Loss Ratios’ Unintended Consequence

The health care reform package currently being negotiated in the Senate contemplates requiring health insurance companies to spend at least 90 percent of premiums on medical claims. But the Congressional Budget Office is warning lawmakers mandating such a high Medical Loss Ratio would be overreaching – unless their goal is to takeover those health insurance carriers. Which, as Megan McArdle notes on The Atlantic’s site, means the 90 percent mandated medical loss ratio would turn “the operations of the nation’s health insurers [into a part of] the financial statements of the United States government.”

Lawmakers could ignore the CBO memo, but are unlikely to do so. The credibility of the CBO is simply too high. This means the chances of a 90 percent medical loss ratio (“MLR”) requirement making it into the final health care reform bill has dropped from “well, maybe” to “not a chance” – or lower.

The CBO memorandum reasons that requiring carriers to meet a 90 percent medical loss ratio could drive carriers out of business, reduce plan offerings and take other actions limiting choice in the marketplace. The key to determining the impact of MLR requirements is to look at the percentage of health insurance carriers impacted by the requirement. “A policy that affected a majority of issuers would be likely to substantially reduce flexibility in terms of the types, prices and number of private sellers of health insurance,” the CBO memo states.

The CBO won’t say precisely when a required medical loss ratio crosses the line and becomes a government takeover of the industry. But it did give a hint, saying an MLR requirement “at 80 percent or lower for the individual and small-group markets or at 85 percent or lower for the large-group market would not cause CBO to consider transactions in those markets as part of the federal budget.”

Moving health insurance transactions isn’t what proponents of a mandated MLR had in mind when the put forward the idea. But unintended consequences are, well, just that: unintended. There are a lot of reasons why mandating medical loss ratios is bad public policy. The CBO has added another to the long list, a reason that even it’s most ardent advocates are unlikely to be able to overcome.

Senate Likely to Move Forward with Health Care Reform Absent a Public Option

Liberal Democratic Senators appear to be sliding down a slippery slope, but one that will likely move health care reform to a conference committee.

In the beginning was a robust public option: a government-run health care program to compete with private carriers that would pay doctors, hospitals and other providers a small percentage above Medicare’s reimbursement levels (which for many services are below those medical providers’ actual cost). Moderate and conservative Democrats balked, claiming a public option paying Medicare-like rates would decimate the private market.

So liberal Democrats offered a compromise: the public health insurance plan would negotiate with medical providers as private carriers do. Never mind that this approach undermines the rationale for a public option – driving down health care costs. At least it preserved a government-run plan. Still no love. Moderate and conservative Democrats balked, claiming the government-plan would still have an unfair competitive advantage in the market, driving private health plans out of business.

So a group of Senators negotiated another health care reform compromise. The Gang of 10 (five liberals and five moderates) proposed turning to the Office of Personnel Management to administer a health care program involving private carriers in a manner modeled after the Federal Employee Health Benefit Plan (which is the program that covers members of Congress). They also proposed allowing individuals 55 through 64 to buy into the Medicare program. At first the Gang of 10’s compromise seemed to have some wind at its back. But Senator Joe Lieberman announced his opposition to the Medicare buy-in concept (a proposal he previously had supported). And on Monday, after a caucus of Democratic Senators concluded, the party’s leadership in the chamber all but announced the Gang of 10’s compromise proposal was off the table. Which means liberals face an uncomfortable choice: see health care reform fail or remove the public option and push legislation through the Senate – then hope they can improve it in the conference committee.

While this result was far from certain, it isn’t much of surprise either. The fate of health care reform has long been in the hands of moderate and conservative Democratic Senators. Republicans have been united and vocal in their opposition. Announcing early in the debate that they could never support any health care reform plan that contained provisions core to the Democratic platform is not a high percentage approach to being invited to negotiate on the legislation. So their 40 votes have long been off the table. That meant that the discussion would take place exclusively among the 58 Democrats and the two Independent Senators who caucus with them.

And that’s what’s happening. And that’s why the Senate is likely to pass a health care reform bill before Christmas leaving it up to a House-Senate conference committee to come up with the final version of the reform bill. Liberals won’t be happy with the process. There will be a lot of complaining by their supporters that Democrats are failing to deliver on meaningful reform. But the reality is that moderates like Senators Tom Carper and Blanche Lincoln are as much a part of the Democratic party as Senators Jay Rockefeller and Charles Schumer. Whatever emerges from Congress will need to be acceptable to all Democrats. not just the most liberal. Or the loudest.

What all this also means is that the real work of drafting comprehensive health care reform legislation is about to get underway. It’s been a long strange trip, but that’s American politics in 2009 – and 2010, too.

Medicare Buy-in Compromise Unraveling?

Nothing lasts forever … not even health care reform compromises. The Congressional Budget Office is expected to come out with its analysis of the latest proposal – replacing a the creation of a new government-run health plan (the controversial “public option”) with a program in which Americans 55-64 could buy Medicare coverage. However, it’s looking like even if the CBO determines the idea makes financial sense, the votes to go forward with the proposal there doesn’t seem to be enough votes around for it to move forward. Which means the public option remains the big make-or-break element of health care reform in the Senate.

Only a few days ago, along with the idea of empowering the Office of Personnel Management to organize a coverage program, the Medicare buy-in compromise  seemed to be the solution to breaking the public option impasse. Now the idea seems to be losing steam.

First, doctors and hospital groups came out in opposition to the Medicare buy-in compromise, with the Washington Post reporting them as claiming the approach “would be financially untenable and would jeopardize access to health-care services for millions of Americans.”  The medical and hospital groups are concerned, according to the Washington Post, “because the program pays providers at much lower rates than private insurers, and because older Americans are the greatest consumers of health-care services.”

And then two conservative members of the Democratic caucus indicated their disapproval of the Medicare buy-in. According to the Associated Press, Senator Joe Lieberman, who had originally sounded open to the idea, now considers it “a bad deal for taxpayers and the deficit.” And the AP quotes Senator Ben Nelson as saying “I’m concerned that it’s the forerunner of single-payer, maybe even more directly than the public option.”

So while, as the Washington Post and others are reporting, the President Barack Obama and many Democrats are praising the compromise, the fact is, the Democrat’s need 100 percent buy-in by their caucus to pass any bill. (Yes, it’s possible Senators Olympia Snowe and Susan Collins might cross party lines and vote for a bill, but it’s hard to see how these Republican Senators could support any legislation conservative Democrats like Senators Lieberman and Nelson could not).

Democrats are trying to dodge a nasty choice: dropping the public option from health care reform. Liberals have made inclusion of a public option their litmus test for meaningful reform. As the liberal blog Daily Kos put it this past summer, the public option is the compromise progressives are willing to make between a single payer system and the status quo.

In the end, however, liberals will need to decide whether the absence of a public option is enough to get them to walk away from reform. Because there does not seem to be any way they will obtain 60 votes in the Senate for a bill that includes a new government-run health plan. My guess? Liberals will complain bitterly, but ultimately vote for a bill without a public option. Health care reform has been on their agenda for decades and they have moved the issue further through Congress  than ever before. To abandon it now would set back health care reform for at least a decade if not longer. Failure would hand Republicans a huge stick to use against them in the 2010 elections.

Passing reform, even reform liberals perceive as too weak, provides a foundation for future efforts. This might seem like a hollow victory for many progressives, but it would be a victory for them nonetheless. And I just don’t see them trading even a hollow victory for a hard defeat.

Devil Dwells in the Details of Health Care Reform Compromise

A critical health care reform compromise seems to have emerged from negotiations between five liberal and five moderate Democratic Senators (the so-called “Gang of 10”). They are putting forward a compromise that eliminates (or at least postpones) the creation of a government-run health plan while allowing Americans 55 through 64 years of age to purchase Medicare and tasking the Office of Personnel management to administer a program offering coverage through non-profit, private health plans. Of course, as with anything as complicated as health care reform, a solution or compromise on one issue creates new ones elsewhere – think of trying to flatten a partially inflated balloon. Push down on one part and the air pops up in another.

As I noted the other day, expanding Medicare is an idea that appeals to both liberals and conservative Democrats. For example, former Governor Howard Dean, a leading and vocal advocate for a government-run health plan called the compromise “a positive step forward” on the CBS’ “The Early Show.” Meanwhile, Senator Joe Lieberman, who had threatened to support a filibuster of any health care reform plan containing a public option signaled the compromise might be acceptable. According to MSNBC Senator Lieberman said he was “’open- minded’ about the deal” and indicated he was encouraged by what he’s heard so far about the compromise. In other words, he’s pretty much on board.

Senator Reid will be submitting the Gang of 10’s compromise to the Congressional Budget Office where its financial impact will be determined. In the interim, it’s worthwhile asking some questions about the impact of elements of the health care reform compromise as it is in the details that the devil likes to linger.

For example, how will allowing 55 through 64 years old enroll in Medicare impact private health insurance premiums?  It is widely accepted that Medicare often pays doctors, hospitals and other providers less than the actual cost of the care they provide. For example, “payment levels for hospital services under Medicare are equal to only about 71 percent of what is paid by private health plans for the same service,” according to a study by the Lewin Group. Medical care providers make up for the Medicare reimbursement shortfall by charging more to their insured patients. This cost shifting is reflected in higher health insurance premiums.

To the extent the 55-through-64 year olds signing up for Medicare previously were insured by private carriers the amount of dollars being shifted to private insurance will increase and the number of privately insured consumers absorbing this cost will decrease. The result, upward pressure on health insurance premiums.

However, to the extent that these new enrollees were previously uninsured it will reduce the cost of private coverage. Right now virtually all the costs incurred by the uninsured are shifted to private carriers. If Medicare pays for 71 percent of these expenses that’s 71 percent less in losses providers need to shift to their insured patients. How these two consequences balance out is as yet unknown – and may not be knowable until after the fact. But lawmakers should be aware of these consequences.

There’s another detail of the compromise potentially offering affordable housing to the devil.  Alison, a regular reader of this blog, pointed out a provision that would require private carriers to spend at least 90 percent of premiums on medical care. Forcing carriers to spend a high percentage of premiums on medical costs is one of those proposals that: 1) sounds great; and 2) emerges with the regularity of ground hogs in Pennsylvania in February. And it’s a seriously flawed proposal.

Consider: requiring carriers to maintain a specified medical loss ratio (as the percentage of premium spent on claims is called) could reduce the availability of low cost plans. It costs just as much to process claims for a plan costing $300 per month as it does for one with a monthly cost of $100. If these fixed costs amount to $15, they represent 15 percent of the lower cost plan’s premium, but only 5 percent of the premiums for the more expensive plan. Need to get your medical loss ratio (as the percentage of premium spent on claims is called) to 10 percent? Raise your premiums. It’s counter-intuitive, but do the math and you’ll see the danger.

There are several other potential dangers from requiring a high and specific medical loss ratio. Economic swings or flu outbreaks (or the lack of expected flue outbreaks) can greatly alter the percentage spent on claims. So can government-imposed mandates to cover certain conditions. Private carriers pay taxes and need lawyers to deal with government regulation. These costs are beyond their control, but they tend not to increase over time (taxes and regulations have a nasty habit of piling up), meaning these uncontrollable costs are likely to absorb funds needed for truly administrative costs – like answering the phone. Answering the phone, of course, speaks to customer service, a likely victim of mandated loss ratios.

And setting the medical loss ratio at 90 percent would certainly eliminate broker commissions. Brokers would either need to charge fees directly to clients (if that’s permitted) or go away, leaving consumers bereft of independent advocates and counselors.

The good news is that just because a provision is in the compromise doesn’t mean it will be part of the final legislation. Or that it can’t be improved upon before reaching President Obama’s desk. When California Governor Arnold Schwarzenegger proposed an 85 percent medical loss ratio in his 1997 health care reform plan, lawmakers recognized the potential pitfalls. The provision was amended to make clear, for example, that taxes and disease management programs would be part of the claims side of the ledger. Eventually a workable compromise was was reached. (The bill did not pass the Legislature, however).

Of course, fixing California’s version of a mandated medical loss ratio didn’t happen of its own accord. Many interested parties, including the California Association of Health Underwriters, expended considerable effort to educate lawmakers about the implications of this provision. An effort of similar magnitude will be required to make sure that the devil is unable to take up residence in the details of the health care reform compromise shaping up in Washington.

Length of Health Care Reform Bills Silliness

It is both amusing and disappointing to see the silliness that surrounds the serious issue of health care reform.  Examples abound: calls for keeping the government out of Medicare (a government-run health plan, for those keeping score at home); claims that a government-run plan will usher in an era of lower medical premiums buying better coverage; promises of death panels; and the list goes on.

The foolishness that seems to crop up most often are criticizing the bill for being too long. Some opponents of the bill have taken to printing out the 2,074 page Senate Health Care Reform bill (even longer than the House health care reform legislation which came in at 1,990 pages) and lugging it around on their shoulder. Or taping the pages together and rolling the result down the Capitol steps. The theory, apparently, is that health care reform is such a simple problem, it should be easy to accomplish in just a few pages.

I wrote about the importance of looking at what the bill does, rather than how long it takes to do it, in a previous post. But now the Associated Press has actually put things into (numerological) perspective. Here’s what the AP reports concerning the literal size of the health care reform bills being considered by Congress.

• The House health care reform legislation, HR 3962, is 319,145 words.
• The Senate health care reform bill, HR 3590, is 318,512
• The No Child Left Behind Act (supported by many of those criticizing the health care reform bills) was over 280,000 words.
• English translations of War and Peace, which some critics has claimed is shorter than the Democratic health care reform bills, are 560,000-to-670,000 words.
• When published in a more normal fashion than formal bills are (single spaced, normal font, regular margins) the bill comes to 209 pages.

Here’s some other meaningless statistics:

The Harry Potter series totaled 1,090,739 words. The longest: Order of the Phoenix at 257,045 words.

The Old Testament has 593,493 words; (No idea which English translation the source used).

How many words would it take to legislate the status quo? Considering the need to create Medicare, Medicaid, Veterans health care, regulate the private market, etc. etc., my guess is we’re talking about reams of paper.

Let’s focus on what matters – what the legislation does – not how many words it takes to do it. There’s plenty of substantive issues to debate. And now’s the time to do it.

Obama Administration Presents State-by-State View of Status Quo and Impact of Health Care Reform

Most readers of this blog understand the benefits and problems of the health care system status quo. And they can make an educated guess at how the various health care reform proposals will impact their world. Most voters (and much of the media, I might add), don’t have as informed a view on these issues.

Into this vacuum comes the Obama Administration with a state-by-state description of the current health care system in the jurisdiction and its view as to the benefits health care reform will deliver to the states’ residents.

Yes, the site is aimed at building support for health care reform. Still, it provides some interesting data and observations. For example, it warns that the “amount of uncompensated care provided will more than double in 45 states” by 2019 as the number of uninsured grows by at least 10 percent in every state and by more than 30 percent in 29 states.

It’s worth spending some time. You may disagree with some of what’s presented. And some of it is inaccurate — it claims, for instance, that health care reform would establish a high risk pool in California, but the state already has one. And it seems to imply that 100% of the individual market would buy through the exchange, something no one is claiming (that I’m aware of). So read it with a handful of salt. However, the reports do provide an interesting, more granular glimpse into health care in America than is usually available. And the more detailed look we all give to reform, the better.