Health Care Reform: A Historic Milestone

History was made today. The Senate Health, Education, Labor and Pensions Committee approved comprehensive health care reform legislation, the first Congressional committee to do so in decades. Never mind that the bill is well to the left of the emerging consensus concerning health care reform. Never mind that it passed on a party line 13-10 vote. What is meaningful is that a congressional committee moved comprehensive health care reform forward. Significantly, three House committees are likely to follow suit within the next three-to-four weeks.

The legislation approved by the Senate HELP Committee, which carriers a $600 billion price tag, would require individuals to obtain coverage, employers to help their workers pay for it, and carriers to accept all applicants regardless of their health conditions. Individuals and families earning up to 400 percent of the Federal Poverty Level ($88,000 for a family of four) would be eligible for subsidies. The Associated Press provides additional information and reaction to the Committees vote, but in my mind, the details are secondary. The vote itself is what is significant. Remember, the Clinton Administration health care reform proposal was never voted upon by any Congressional Committee.

The Senate HELP Committee’s action testifies to the tenaciousness of the Committee’s chair, Senator Edward Kennedy, the political skill of Senator Christopher Dodd (who is leading the Committee while Senator Kennedy battles cancer), the political standing of President Barack Obama, and the widely recognized need for meaningful health care reform. Given that Senator Kennedy has been advocating for universal coverage since the 1960s it is fitting that his Committee was the first to act

No doubt there will be some elements of the Senate HELP Committee’s proposal in whatever legislation, if any, eventually emerges from Congress. However, as noted previously here, the Committee’s version of reform is to a large degree a negotiating position for liberals in the Senate. The proposal being written in the House of Representatives will be even more liberal. It is the Senate Finance Committee, where its Chair, Senator Max Baucus and ranking Republican member, Senator Charles Grassley, are seeking to draft legislation that will earn at least some Republican votes, that the outlines of the ultimate health care reform package is taking place.

There are still numerous contentious issues to work through, any of which could derail health care reform altogether. However, there is a surprising amount of common ground coming into view. The  Robert Wood Johnson Foundation recently released a study, Emerging Common Ground? An Analysis of Health Reform Positions, that describes (perhaps overly optimistically) several of these areas of general agreement. Among them:

1. the nature of private insurance market reforms;
2. the need for, and the structure of, a health insurance exchange;
3. whether and how a government-sponsored “public plan” should be created;
4. how best to leverage Medicaid and/or public programs to expand access;
5. whether an individual mandate is needed;
6. the scope and authority of government involvement in comparative effectiveness research;
7. sequencing and scope of payment reform; and
8. whether to limit the tax exclusion on employer-based coverage as a reform financing mechanism.

I’m not sure I agree that all of these are settled issues, but the study is worth reading nonetheless.

As I’ve written before, I believe health care reform is coming, but that’s no reason to panic. The status quo, while comforting in its familiarity, is unsustainable. History is the story of change. Health care reform history was made today. But in context it’s only a milestone — a significant milestone, but solely a milestone. Consider it one big step in a long journey toward something truly historic.

Health Insurance Exchanges Unlikely to Eliminate Brokers

The idea of connectors, exchanges, gateways and purchasing pools are far more than a fad, they’ve been around far too long. A purchasing pool was central to the Clinton Administration health care reform effort in the 1990s. They have been enacted in several states (although the California version, created in 1993, has since gone out-of-business). And they enjoy strong support across the political spectrum. That something akin to a connector, gateway, exchange or purchasing pool will be a part of whatever health care reform emerges from Congress this year is all but a certainty.

As with most concepts, the devil takes up residence in the details. Connectors, exchanges, gateways and purchasing pools are no exception. And it starts with what they’re called. There are technical differences among them, but for most purposes, especially political purposes, the distinctions are meaningless. So for simplicity sake, we’ll refer to all of them as exchanges.

What they are called, however, is unimportant. What matters is what they do and how they do it. I caused quite a few brokers some heart burn yesterday when, in passing, I wrote of exchanges “depending on how these are structured the only impact they may have is to crush innovation and eliminate brokers from the system.”  Insurance producers, quite reasonably, were concerned to read of this possibility.  So let me be clear: The bad news is that possibility is real. The good is that the possibility is far from certain.

Exchanges mean different things to different people. Some see them as replacing the chaos of an open marketplace with the structure of a regulator, controlled and confined market space. All health insurance products would be sold through the exchange. All health insurance carriers would be required to negotiate with the exchange concerning pricing and benefits. All information would be presented in a standard format with complete transparency being the ultimate goal. Carriers would compete solely on service and pricing. Consumers would come to the exchange to purchase their coverage. If they have questions they call or email an exchange employee. No independent brokers needed or wanted.

This kind of purchasing pool was central to the “managed competition” model of the Clinton Administration health care reforms. Fortunately for consumers and their brokers, this extreme exchange is unlikely to be a part of the final health care reform package.

At the other end of the spectrum is an exchange as an online information source. Think Orbitz, eHealth, Priceline or the like. The exchange does not negotiate with carriers nor does it set prices or benefits. It merely provides information about the benefit plans available in a region in simple, standard language. Consumers come to the site to research their options. If they have questions, and the sites online FAQs don’t suffice, the exchange lists resources local to the consumer – including and, maybe especially, independent brokers.

This kind of info-exchange is the least expensive for the government to maintain and the least disruptive of current distribution channels. There is a chance this is the kind of exchange will be a part of the final reform plan.

Odds are, however, what will be part of the final package will fall somewhere closer to the middle of the spectrum. The ultimate exchange will certainly provide side-by-side comparisons of various plans available in a local area. The insurance carriers have already expressed interest in establishing standard terminology and even common enrollment forms so this function will likely be non-controversial. The broad consensus seems to be that health plans should be available to consumers and employers outside of the exchange so there will be alternatives to the exchange. What’s not clear yet is whether the exchange will be given advantages. For example, Congress could decide premium subsidies will be available only to individuals buying coverage through the exchange.

Thanks in large part to the hard work of Janet Trautwein and her team at the National Association of Health Underwriters, brokers are highly likely to be explicitly permitted to sell products inside the exchange. The Senate Health, Education, Labor and Pensions Committee is refining their legislation which includes a “gateway.” This morning they accepted an amendment offered by Senator Orrin Hatch specifically identifying brokers as eligible to sell products within the gateway. Considering the Senate HELP Committee is staking out the most liberal position in the Senate, this is an important and significant development.

What has been most surprising – and disappointing – is the wide spread belief that the mere existence of an exchange will make it so easy for consumers to select the right health plan for their needs that anyone can assist them. Even conservative Republicans have put forward a proposal that would allow consumers to purchase coverage from their state’s Department of Motor Vehicles.  (The Hatch amendment does require entities selling within the exchange to be “licensed if appropriate.”) This reflects in part a political reality: if exchanges are to be worthwhile they need to reduce the cost of coverage somehow. One way to do that is to reduce the cost of distribution.

While it is true standardizing terminology will make health insurance coverage easier for consumers and employers to understand that doesn’t mean genuine expertise isn’t needed. We’re not talking about books sold on Amazon. You buy the wrong book and you’re out a few bucks and some time. Buy the wrong health insurance and your health and financial security is in jeopardy.

Even in Congress there is an understanding that one size does not fit all consumers. If your health insurance doesn’t fit you can’t take it to a tailor for adjustments. You live with your choices for some time. Orbitz may be a great way to compare the cost of air fare just as an exchange may make comparing the price of health plans easier. Data concerning health care is already easy to come by and an exchange may make it even more accessible. But data is not knowledge. That requires expertise and a deep understanding of the market. Which carrier is having service problems? What specifically does a particular consumer need from their coverage. What factors should be considered to assure the consumer is receiving the highest value for their premium dollars? The clerk at the DMV may be very bright and eager to help, but is unlikely to have the knowledge to provide meaningful advice. Qualified, licensed and professional brokers do.

What does this mean for brokers? First, those who are simply pushing paper, who fail to listen to their clients and provide expertise, who are adding no value to the products they sell will be out of business sooner rather than later. The exchange will see to that.

For brokers who add value, however, there should be a bright future. Their compensation will change, especially if all Americans are required to have basic insurance coverage. Fees may supplant, or at least stand alongside, premium-based commissions. As long as there are real options available to consumers in a competitive market place, there will be a need for advisor, counselors and advocates. There will be a need for expertise. Brokers who play these roles and who perform the alchemy of turning data into knowledge will prosper, even if new distribution channels are created by reform.

The market pays for value. Brokers deliver value. The existence of a health insurance does not, of itself, change this legitimate dynamic. Nor should it. The key will be what kind of exchange is created. It doesn’t matter what it’s called. What matters is what it does – and how it does it.

President Obama Entering Health Care Reform Arena

President Barack Obama’s approach to health care reform has been a bit unusual. Many of his predecessors have taken the Moses approach to major legislation. They descend from the mountain top with legislation chiseled in stone, hand it to Congress and in their best imitation of Charlton Heston (Republicans) or Patrick Stewart (Democrats) instruct them to “Make It So!”

Sometimes the tactic works, other times, not so well. President Bill Clinton and First Lady Hillary Clinton were the last to take the long walk down from the summit. Upon telling Congress to enact their commandments as is they were told in no uncertain terms to take another hike. No Congressional committee even voted on their legislation.

President Obama approach to health care reform is less dramatic, but is likely to be more effective. He articulated three general principals for reform, identified some key elements he’d like to see, guaranteed that the phrase “everything is on the table” would be 2009’s most overused cliché, and told Congress to figure it out the details themselves. The payoff is on the horizon: in the next six weeks several Congressional committees are likely to not just vote on comprehensive health care reform, but actually pass draft legislation. This is historic.

It is also messy – as disorderly and trying as anything the FCC allows to be broadcast on public airwaves during the family hour. Lawmakers are busy building the case for their favorite provision, pundits are busy making clever pronouncements, organizations of all stripes are seeking to create the next “Harry & Louise” advertisement, and voters are consistently demanding all this activity produces something responsible.

Whether voters will get their wish is as yet unknown. There are some hopeful signs and I’m willing to make some broad (and pretty darn easy) predictions:

• cost control will be a major part of any reforms
• the public plan is likely to look nothing like the government-run plan proposed by then candidate Obama and more like a Sunkist (or some other non-profit, non-government cooperative).
• paying for reform will come from a variety of sources, not all of them pleasant, but the price tag will be significantly less than the $1.5 trillion originally identified.
• premiums will be subsidized to make coverage more affordable for millions of Americans
• carriers will no longer be able to exclude applicants due to pre-existing conditions (this may qualify as the safest prediction around)

Of course there are some warning signs, too. Among the open issues of concern:

• politicians of all stripes are convinced exchanges / purchasing pools / gateways or whatever term eventually emerges are the solution to all of the insurance industry’s ills – depending on how these are structured the only impact they may have is to crush innovation and eliminate brokers from the system (then again, they may not – the topic for an upcoming post)
• while carriers will be required to sell coverage, consumers may not be required to purchase coverage, which will lead to skyrocketing premiums – New York and New Jersey take this lopsided approach and the average premium for individual coverage in those states are twice that of California’s.
• what cost controls are put in place may prove inadequate – opposition to creating medical guidelines to tie costs to outcomes may not survive the political process

Whether any of these predictions become reality and how the open issues are resolved will depend in large part on the action Congress takes in the next few weeks. And that’s unknown. As I’ve written before, much of the draft legislation under consideration are better viewed as negotiating positions than representative of a likely final bill. There is an exception, however.

Senator Max Baucus, Chair of the Senate Finance Committee, has been hard at work with Senator Charles Grassley, the ranking Republican member of the committee, to fashion bi-partisan reform (and to be fair, their staffs have been working pretty darn hard, too). The fruits of their labor were to be made public at the end of last month, but it has yet to see the light of day. That’s about to change.

According to the Associated Press, President Obama made it clear during a White House meeting that he wants “health care legislation ready in the Finance Committee by week’s end.” Coupled with his statements while introducing his impressive nominee for U. S. Surgeon General, Dr. Regina Benjamin, it is becoming clear President Obama is about to personally engage in the health care reform sausage making process. “Don’t bet against us,” President Obama said. “We are going to make this happen.”

The President has tremendous political capital, especially with Democrats. If you’re running for election in 2010 you do not want to be branded a hindrance to this Administration, especially if you represent a marginal seat. For now, the conflict over health care reform is an intra-party battle, especially in the House of Representatives. House GOP members are basically spectators, carping from the sidelines. The real contest is being waged between liberal and moderate Democrats. That’s the price of a large majority, but it also means President Obama is well positioned to resolve the differences. And as his recent statements indicate, he’s willing to enter the arena and, merely by showing up, change the dynamics.

As President Obama proved during the election, when he says “Yes we can” it often means “Yes we will.”

Health Care Reform: Getting Ready for Crunch Time

For health care reform, the next few weeks will be critical. Congressional committees are poised to pass legislation (to put this in perspective, this never happened during the Clinton Administration’s reform efforts in 1993-94). President Obama and his aides will become even more engaged concerning the legislative language they would like to see Congress enact. Senate moderates will begin taking sides on critical issues. In short, this is when it all starts coming together. In the next few weeks, it will become clear if Washington will enact health care reform and, if so, what it will look like.

Events will move quickly, so I’m clearing out some short items that have been lingering in my “to blog” folder for awhile. They are a random assortment of items unlikely to become stand-alone posts. Taken as a whole, however, I hope they provide some useful background to the history about to unfold.

1. Health care reform ideas are flying around the Capital in ever increasing numbers. Keeping track of them all can be a challenge. Good thing there’s the Kaiser Family Foundation’s health care reform proposal comparison tool. It makes comparing the entire plan or just particular issues across the various proposals simple.
2. One of the plans we have yet to see details on will be presented in the next few days in the Senate Finance Committee. They are working hard to construct a legitimately bi-partisan proposal, which means it has the greatest likelihood of foreshadowing the legislation likely to emerge from Congress. To get an early taste of the coming debate in that committee, check out the dialogue between Senator Charles Grassley and Senator Charles Schumer on CBS’ “Face the Nation.”
3. I’m a fan of the FiveThirtyEight.com blog. The site applies rigorous math to political topics. Very rigorous math: it’s prediction of election outcomes during the presidential primaries and the general election were eerily accurate. The site has a left-leaning bias on some topics, but overall, its posts are more nerdish than ideological. Recently it did an interesting analysis on how campaign contributions may derail a public option plan. Of course, whether Senators vote a certain way because of the contributions they receive or they receive contributions because of the way they vote is an open issue (which, to his credit, the author acknowledges). But the issue of causality does not change his conclusion: unless the several stars fall into place, a public option is unlikely to be part of the final health care reform package.
4. Need more evidence a government-run health plan is losing momentum? As noted last week, Democrats on the Senate Health, Education, Labor and Pensions Committee feel the need to dress their public plan proposal in moderate clothing. Then there’s White House Chief of Staff Rahm Emanuel making clear today the Administration is willing to accept legislation without a public plan. According to the Wall Street Journal Mr. Emanuel says “’The goal is to have a means and a mechanism to keep the private insurers honest. The goal is non-negotiable; the path is’ negotiable.”  Mr. Emanuel goes on to say creating a public plan only if the private market proves incapable of offering competition would be one acceptable solution.
5. Is a government-run plan even needed for health care reform to be meaningful? Uwe Reinhardt, an economics professor at Princeton, uses the German health care system as evidence it is not. This is not to say that the German system is an appropriate model for the United States, but it does undermine the argument that health care reform will only work if the government is both referee and player.
6. All the health care reform attention is focused on what’s happening in Washington. Some folks think this is a mistake. Instead, the federal government should simply enable states to pass their own reform plans. This would allow solutions to reflect local values and enable the best ideas to emerge over time. I disagree. States lack the levers of power necessary to reform something as complex and critical as health care reform. In a post from 2007 I cited an article by Ezra Klein describing the many failed state health care reform efforts. That doesn’t mean, however, that every health care decision needs to be made at the national level. Meaningful structural change — and the financing required to implement it – requires the federal government. Implementing those changes can be managed and administered at the regional, state or even local level.
7. The status quo is on life support. Health care costs are rising faster than either general inflation or wages. (To see for yourself, check out Tom’s Inflation Calculator). We have the opportunity today to enact responsible, meaningful reform. Without such intervention, the current system will eventually deteriorate until unwise and extreme proposals make sense. Fortunately, what’s likely to emerge from the current debate will be determined by moderates. This doesn’t mean the reforms won’t be flawed, but it does mean that there’s a chance for responsible reform sooner rather than later.
8. The advocates of a single payer system know that the status quo is unsustainable. It is why some of them will oppose whatever moderate reforms emerge from the current health care reform debate. They are like a doctor who sees surgery as the solution to every ailment. If the patient takes medication, and it works, they don’t get to cut. Similarly, if reasonable changes increase access to affordable, quality health care coverage and reduces overall spending, the need for a single payer solution vanishes.
9. Meanwhile, back at FiveThirtyEight, Nate Silver crunches some poll result numbers and points out that moderates are disappointed with President Obama’s handling of health care reform. Whether these results show President Obama needs to get more specific in describing his health care reforms (as Mr. Silver concludes) or whether he needs to focus more on pushing the right health care reform, is something to ponder.

Health Care Reform Common Ground Meets Reality

So much for common ground on health care reform in the United States Senate. It wasn’t that long ago, May 30th to be exact, that Senate Finance Committee Chair Max Baucus and Senate Health Education Labor and Pensions Committee Chair Edward Kennedy issued a joint statement that read, “”For both of us, reforming the nation’s health care system to cut cost, improve quality and provide affordable coverage remains the top priority on our two committees.  We have worked together closely over many months and will continue to do so.  We intend to ensure that our committees report similar and complementary legislation that can be quickly merged into one bill for consideration on the Senate floor before the August recess.”

That was then. This is now: The Associated Press is reporting that the Senate HELP Committee is moving forward with legislation to create a government-run insurance plan to compete with private carriers. This provision, along with one imposing a $750 per worker annual fee on large employers who fail to offer health care coverage to workers, guarantees the legislation will pass through the committee with only Democratic votes. As I described in yesterday’s post, the committee has tried to position their public plan as more innocuous than was originally contemplated. It is not.

Meanwhile the Senate Finance Committee continues to seek a bipartisan health care reform package. The Associated Press story notes that, “As a result, a government-run option for coverage is unlikely to be included. Negotiations are centered on a proposal for a nonprofit cooperative to sell insurance as a competitor to private companies.” Co-ops can be considered public plans, but unlike the version proposed by the Senate HELP Committee, it is far more likely health insurance cooperatives will result in a more fair marketplace. The devil dwells in the details and we have not seen those yet. But if Senator Baucus is sincerely seeking GOP votes, and it appears he is, his committee will avoid a result that would eventually lead to a single, government-run carrier.

(Democrats on the House side of the Capital also pledged to work together — and they are doing so. The three committees with jurisdiction in that chamber are all working from the Tri-Committee Health Reform Draft Proposal. They expect to have their work done by the end of July. Like the Senate HELP Committee, their plan will include a robust government-run health plan.)

What’s significant about the divergence in approaches by the Senate HELP and Senate Finance Committee is that it makes responsible compromise more likely. Senator Kennedy and House Democrats are providing a haven for liberals in the debate. If liberals had 60 votes in the Senate, or even 50 for that matter, their legislative versions would foreshadow the final package. But as I noted yesterday, the fact that the Senate HELP Committee needed to dress their public plan in fig leaves of compromise is evidence they do not have the votes. Moderates will dictate what health care reform legislation passes Congress.

The Senate Finance Committee recognizes this reality. Heck, they are this reality. Which is why what this committee proposes concerning a host of controversial issues — requirements for individuals and/or companies to buy health care coverage, the structure, purpose and powers of an Exchange to present coverage options to individuals and small businesses, cost containment provisions such as turning to comparative effectiveness research for treatment guidelines — is so important.

It is not the common ground between the Senate Finance and Senate HELP committees that matters. It is the compromises reached within Senate Finance that will foreshadow the health care reform bill that winds up on President Barack Obama’s desk for his signature.

Senate Committee’s Revisions More Fig Leaf Than Compromise

The Senate Health, Education, Labor and Pensions Committee worked hard to produce a final draft of its health care reform legislation before Congress adjourned for the July 4th holiday. It made substantial progress, but failed to complete work some key elements, including those related to a government-run health plan and a requirement that employers obtain coverage for their workers. However, the broad outlines of their approach to a public plan are taking shape.

As I posted last month, the Senate HELP Committee and its chair, Senator Edward Kennedy, seemed intent on anchoring the left on several provisions, including a public health insurance plan. When first proposed, the government-run plan would be permitted to limit doctor and hospital payments to just 10 percent above those paid by Medicare. This would still have resulted in payments less than the providers’ actual costs in many instances, resulting in a cost shift to the private plans. This would create a tremendous premium gap between the private carriers and the public plan with the inevitable result that, eventually, the government plan would be the only carrier remaining.

Republicans and some moderate Democrats have made it clear that this chain of events is unacceptable. The response of the Senate HELP Committee is intriguing. Instead of simply ramming through their initial provision, they seem to be trying to dress it up as more moderate. According to Bloomberg.com  the committee will now call on the  public plan to abide by “the same rules for defining benefits, protecting consumers and setting premiums ‘that are fair and based on local costs.’” Although the government would pay the first three months of [the public plan's] claims, these “would be considered a loan to be repaid over time,” according to Bloomberg. The government-run plan would be empowered to pay providers up to the “local average private rates.”

While this might sound like a retreat from their original position, it’s less movement than it is meant to convey. The public plan may pay up to the average rates paid by private carriers in a community, but it can also pay less. The Secretary of Health and Human Services would negotiate the reimbursement schedule. The Secretary is a political appointment of the President. Regardless of which party controls the White House, does anyone think the Secretary would — or should — seek to settle for the maximize payment amounts? If so, that anyone has not paid attention to what Democratic and Republican Administrations have done to Medicaid and Medicare providers.

Another fig leaf: although the public plan would be expected to pay its own way (after initial seed money) it would also be eligible for “‘risk corridor protections’ to offset or reclaim excessive losses,” reports Bloomberg. In other words, if the artificially low premiums it charges are not enough to pay its bills, a bailout from the federal government is already in place. Maybe I’m missing something, but recipients of bailouts are, by definition, not paying their own way.

What’s matters about all this is not that the Senate HELP Committee’s compromises are insubstantial, but that Democrats on the committee felt the need to compromise at all. It is a clear sign that support for a government-run health plan is waning in the Senate. Continued talk in support of health insurance co-ops as a possible compromise underscores this reality. So does the intensity of public health plan advocates campaigns against moderate Democrats. These campaigns are facing tough going in some states. For example, the Wall Street Journal’s Washington Wire blog reports that Senator Mary Landrieu continues to express reservations about a public option in spite television and radio advertising attacks on her by liberal groups like Move-on.org and Democracy for America. Senator Landrieu, through a spokes person, continues to be “committed to reforming the health care system and ensuring that all Americans are covered … but does not believe that healthcare reform starts with a public option. Senator Landrieu supports a predominantly private system that features a federal backup plan that serves as a safety net.”  Co-ops could serve this safety net function.

There’s a long way to go before the final act and advocates of public health plans will win a few skirmishes between now and then. The need for fig leaves, however, underscores that, for now at least, they are in danger of losing the war.

Obama Administration Showing Flexibility on Public Health Insurance Plan

President Barack Obama wants health care reform. He sincerely believes we need to fix what’s broken in the current system because it is the right thing to do and as a necessary step to get America’s economy moving forward again. He has put forward what elements he wants to see as part of comprehensive reform package, but instead of plopping a finished product in the lap of Congress (as the Clinton Administration did during their botched health care reform effort), he is asking Congress to take the lead in developing legislation (imagine that, letting legislators legislate). He and his allies have made clear they are willing to discuss almost any idea. The mantra they repeat often is that “everything is on the table.”

Almost. President Obama has also repeatedly made clear that acceptable health  care reform must adhere to three core principles. As they are described on his Organizing for Health Care web site, reform must:

• Reduce Costs — Rising health care costs are crushing the budgets of governments, businesses, individuals and families and they must be brought under control
• Guarantee Choice — Americans must have the freedom to keep whatever doctor and health care plan they have, or to select a new doctor or health care plan if they choose
• Ensure Affordable Care for All — All Americans must have quality and affordable health care

Don’t misunderstand. He has clear ideas on how these principles should be achieved, but he is not insisting Congress do things his way, only that they do them.  This approach was clear in President Obama’s Tuesday press conference when he was asked about the health care reform. His response to the first question on health care reform laid out his approach to the issue.

He began by emphasizing the need for reform. “So the notion that somehow we can just keep on doing what we’re doing, and that’s OK, that’s just not true. We have a long-standing critical problem in our health care system that is pulling down our economy. It’s burdening families. It’s burdening businesses. And it is the primary driver of our federal deficits.”

President Obama then focused on the need to control costs. “It means that we look at the kinds of incentives that exist, what our delivery system is like, why it is that some communities are spending 30 percent less than other communities, but getting better health care outcomes, and figuring out how can we make sure that everybody is benefiting from lower costs and better quality by improving practices. It means health  I.T. It means prevention. So all of these things are the starting point, I think, for reform. And I’ve said very clearly, if any bill arrives from Congress that is not controlling costs, that’s not a bill I can support. It’s going to have to control costs. It’s going to have to be paid for.”

President Obama next turned to the need to expand coverage to more Americans. “[W]hile we are in the process of dealing with the cost issue, I think it’s also wise policy and the right thing to do to start providing coverage for people who don’t have health insurance or are underinsured ….”

He then went on to describe the rationale for including a public health plan as one of the health plans available to American consumers. “As one of those options, for us to be able to say, here’s a public option that’s not profit-driven, that can keep down administrative costs, and that provides you good, quality care for a reasonable price as one of the options for you to choose, I think that makes sense.”

The President explicitly rejected the complaints of health insurance carriers who claim a public plan will drive them out of business. “But just conceptually, the notion that all these insurance companies who say they’re giving consumers the best possible deal, if they can’t compete against a public plan as one option, with consumers making the decision what’s the best deal, that defies logic, which is why I think you’ve seen in the polling data overwhelming support for a public plan.”

President Obama’s answer makes sense if the public health plan were just another non-profit competitor. In many parts of America for-profit health insurers compete vigorously with non-profit carriers. Sometimes they win. Sometimes they lose. But the competition between them is fair.

What the president’s answer ignores is the possibility — indeed, the likelihood — that competition between private for-profit and non-profit insurance carriers on one side and a government-run health plan on the other will not be a fair contest. The government, which would both regulates the market and,  under several proposals being promoted in Congress, run the public plan, might tilt the playing field in its own favor (take, for example, the Affordable Health Choices Act introduced by Senator Edward Kennedy and other Democrats on the Senate Health, Education, Labor and Pensions Committee.)

What is nice to see is that President Obama seems to appreciate the balance that must be struck if a public plan is not to undermine the private market. “So there are going to be some ground rules that are going to apply to all insurance companies,” he said. “I take those advocates of the free market to heart when they say that, you know, the free market is innovative and is going to compete on service and is going to compete on, you know, their ability to deliver good care to families. And if that’s the case, then this just becomes one more option.”

Interestingly, the President was not the only Administration member speaking about health care reform on Tuesday. Peter Orszag, the Director of the White House Office of Management and Budget appeared on the Diane Rehm show on National Public Radio. In responding to a question about health insurance profits, he observed that “One of the questions that will be in play during the reform process is whether additional competition, for example, through a public plan option, or a co-op or a non-profit, would be beneficial.”  (For those listening to the podcast, this comments begins at about the 29 minute, 18 second mark). He then goes on to say that co-ops could address a lack of competition in “a growing number of local markets.” (emphasis added).

This is an very significant statement. The health insurance co-ops being discussed in Washington are not government-run. The government provides seed money, either in the form of grants or loans, but once it’s up and running, the co-op is owned and operated by its members. They would be community based and would have to abide by the health insurance laws of their state.  Here is a senior official of the Obama Administration, one of its leading voices on health care reform, describing health insurance co-ops as comparable to a government-run public plan when it comes to providing competition.

Taken together, the President and his OMB Director are saying:

• Competition in the health insurance marketplace should be preserved as it is beneficial.
• The purpose of a public health plan is to increase competition in the health insurance marketplace.
• Health insurance co-ops increase competition as much as a government-run plan.

For those who care about fair competition, please note that it is far more likely co-ops will compete on a level playing field than a government-run plan would — especially if co-ops are concentrated in local markets that need a new competitor.

None of this is to say that a government-run health plan will not be part of the final health care reform package. It does, however, underscore the point I tried to make in my previous post: the final outcome of the health care reform debate is far from settled. The Obama Administration is showing flexibility — and will need to in order to get comprehensive legislation passed. Now is not the time to panic. Now is the time to get involved.

Health Care Reform Is Coming. Don’t Panic.

The legislative process is like Kabuki Theater. Very stylized. Clear-cut characters. Starts off slow, proceeds through several acts, ends fast and furious. The Congressional tussle over health care reform is no exception. We have the champions of the left and right pounding across the stage, striking poses, shouting out their predictable lines, scaring the bejeebies (whatever they are) out of the audience (otherwise known as constituents) and generally creating high drama. This is important work as it gives the 24 hour news stations something to talk about and this, in turn, keeps the commercials from running together in an endless loop of paid messages for help fighting the IRS, encouragement to ask your doctor about the benefits of an unhealthy number of medications, easy ways to get low cost loans and willing buyers of your excess gold jewelry.

At the same time we have numerous audience members who are quickly losing whatever bejeebies they might possess. If you are among the 470,000 Americans employed by the health insurance industry, for instance or among the tens of thousands of health insurance brokers in this country, you might feel like people are out to get you. Good catch because people are out to get you. Don’t feel too bad, though, you’re not alone. They’re also out to get doctors, hospitals, pharmaceutical companies and a host of others. 

Every health care reform idea on the table is scary to someone. Government-run plans, exchanges, mandates to sell coverage, mandates to buy coverage, taxes, cost containment. The list of proposals go on endlessly. Everybody with a stake in health care (which is everybody) has something to lose from some these reforms and someone is out there working hard to make sure these stakeholders lose it. In the health care reform everyone is an archer and everyone is a target.

So as someone with a stake in the system, but who has also spent more time than sane people should involved in politics and the legislative process, I would like to offer some simple advice to my fellow targets:

         Don’t Panic.

Don’t get comfortable, but don’t panic.

The good news is the health care reform most likely to emerge from Congress will be far more moderate than the proposals whipping around the Capital hallways today imply. This is theater — and it’s politics. Everyone in Washington is busy staking out negotiating positions, trying to score points, and auditioning for an appearance on CNN, Fox or MSNBC. Which means what they say matters, but not as much as they’d like to think it does.

In negotiations you expect to compromise so you start off asking for more than you expect to get. Every eight year old discussing bed time knows this. So do politicians. What we’re seeing at this point is primarily Democrats and Republicans anchoring their positions. In Kabuki Theater, actors will strike stances that identify their role in the story. In Congressional theater, this role is played by lawmakers. 

Which leads us to the effort of scoring points. Nothing revs up the base like lambasting opponents. The number of people who make a living by keeping a significant portion of the American population seething is significant and appalling. These people (and I use the term loosely) paint the world in terms of good and evil, black and white, us and them. Anyone who disagrees with “us” is a traitor, a fool, a liar or all of the above. They care less about moving the country forward than in adding to their power or their bank account. (Have you ever noticed how often their diatribes are followed by an appeal for cash or an advertisement?) These blowhards replace bombast for thought. They have honed the cheap shot and the stiletto implication into art forms. Fortunately there’s a cozy spot in Hell reserved for them where they’ll have to listen to themselves blather for eternity. Until then, we’re the ones stuck in their noisy hurricanes of malicious hot air. 

The subset of these sub-humans who hold public office will be especially prominent during this portion of the legislative process. Ignore them. Like the extreme positions taken by negotiators, the extreme rhetoric spouting from these Katrinas of politics are designed to rile you up, get your money and generate news clippings, not educate or move the debate forward.

The real action on health care reform is taking place in the nooks and crannies of Washington where moderates dwell. For example, keep your eye on the Senate Finance Committee. They seem to be trying to find solutions the nation can afford and that might actually work. Track the movements of moderates in the Senate, too. Senators Olympia Snow and Susan Collins are the two trendsetters on the amazing-shrinking-group of GOP moderates. On the Democratic side of the Senate moderates gather weekly in a self-described  Working Group. (Insert your own snide comment here).

The fact is, in Washington moderates win. The system is designed this way. It may not seem like it, but that’s the way it usually goes. This is the point articulately made by Jay Cost in his HorseRaceBlog over at RealClearPolitics.com. In two postings (Part 1 and Part 2) he lays out the pivot points in the legislative process and applies them specifically to the current health care reform debate. (My thanks to John Nelson for sending these my way). What he shows is that the true partisans are merely the fodder necessary to get to the number of votes needed to turn legislation into law. These pivot points vary depending on the political context.

Need to overcome a filibuster? The most powerful Senator is not the true believers who immediately vote yes or no, but the Senator who represents the 60th vote for cloture. Only that Senator can move the bill forward. The rest simply set the stage. When it comes to health care reform, watch the moderates. They are the key actors in this play because it is from among their group, along with critical  negotiators like Senators Max Baucus and Charles Grassley, from which the decisive votes will come. 

With 17 votes (maybe 18 now that Senator Arlen Specter is a Democrat) the moderate Democrats in the Senate will determine the final shape of healthcare reform. They are the ones the partisans on both sides are already seeking to persuade or, failing that, threaten (good news for television and radio stations in their states looking to sell advertising time). If these partisans are serious about passing something, however, that something will need to earn the votes of these moderates. Keep in mind, Democrats have a large majority in both chambers of Congress, but they got it by appealing broadly to the electorate. Democrats rarely are genetically incapable of group thought even when there’s just a few of them. Put 60 into one room (say, the floor of the Senate) and the chances of agreement on anything controversial is reduced to a theoretical nil.

What all this means is that the partisan posturing of the current debate is simply sound and fury signifying the hopes and aspirations of sincere partisans and cynical pot stirrers (which is which is sometimes hard to tell, but there is a difference — only the latter are despicable). Eventually the play will reach its final act. At this point the moderates take center stage and with their arrival the odds of disappointed extremists on both sides  increases(disappointing extremists is, after all, what moderates d0).

This doesn’t mean they will come up with the perfect health care reform plan. If you care about the issue you need to make your voice heard. Moderates are capable of making bad policy — and whether the truck that runs you over is driven by a true partisan or a moderate doesn’t really matter, it still hurts. Moderates are more likely, however to produce reforms that are closer to something reasonable than might seem possible appear today.

In the meantime, let the loud and boisterous actors strike their poses. It’s all part of the play.

More Health Care Reform Proposals Added to the Mix

So many health care reform proposals are flying around the nation’s capital it’s nearly time to bring in the air traffic controllers. There are draft bills, option papers, proposals, outlines, and about any other kind of document you can name whirling around like jets over O’Hare.

Michael Johnson of Blue Shield of California and I gave a presentation on health care reform Wednesday to a group of health insurance brokers. We were reading up on one of the latest ideas issued a few hours earlier literally minutes before the panel got underway. It’s only going to get worse as some stake out (somewhat extreme) negotiating positions while others offer up potential compromises.

Here’s some of the more recent health care reform proposals to be launched — or about to be:

1.  The web site The Hill is reporting that moderates in the House of Representatives from both sides of the aisle are meeting in private to fashioning a compromise package. Among those meeting are part of the GOP’s “Tuesday Group,” the New Democratic Coalition and the Democratic Blue Dog Coalition. Fearing retribution from party leaders, neither side is offering the names of participants. The meetings are significant not just because they are likely to produce yet another health care reform package. The negotiations also underscore the reality that while the media tends to portray both Democrats and Republicans as monolithic parties of extreme ideologies, there are a significant number of lawmakers who eschew the hardline ideology of their colleagues and search for pragmatic solutions.
2. Former Senate majority leaders unveiled a health care reform plan they hope will provide a middle ground in debate. The plan was developed by Republican former Senators Howard Baker and Bob Dole along with Democratic former Senators Tom Daschle and George Michell. (Former Senator Mitchell is credited by the Boston Globe with having contributed to the document, although it is signed by only Senators Baker, Daschle and Dole). It weaves around the middle on a number of issues, although it does lean to the left. For example, while the proposal does not call for a creation of a federal government-run health plan it would permit states to create them. It also calls for taxing the value of health plans an employee receives to the extent it exceeds the cost of coverage provided to members of Congress. According to the Boston Globe this would amount about $5,000 for an individual and $13, 000 for a family.
3. The House Republican leadership unveiled their health care reform plan on Wednesday, too. Among other features it would allow states, small businesses and other group to come together into “pools” to offer low cost health plans that, at a minimum, is provided in a majoirty of states. It also would offer lower-income Americans refundable tax credits they could use to purchase coverage and would make individual health insurance premiums tax deductible. It does not require consumers to buy coverage, but the GOP plan would encourage states “to create a Universal Access Program by establishing and/or reforming existing programs to guarantee all Americans, regardless of pre-existing conditions or past illnesses … access to affordable coverage.” Development of the GOP plan was led by Representative Roy Blunt.
4. Last week the Chairs of the three House committees with jurisdiction on health care reform released a framework for reform. The Tri-Committee Health Reform Draft Proposal, put forward by House of Representative Chairs Charles Rangel of the Ways and Means Committee, Henry Waxman of the Energy and Commerce Committee, and George Miller of the Education and Labor Committee outlines the key provisions of a unified Democratic reform package. The framework calls for creation of a government-run health plan to compete with private carriers, requires all Americans to obtain coverage (with exemptions in cases of financial hardship), requires most employers to either provide coverage or pay a fee, and provides subsidies for Americans households with incomes up to 400 percent of the federal poverty level.

There will be many more proposals coming soon. As it is relatively early in the legislative process, most will stake out relatively pure ideological positions. Neither party has an incentive to offer compromise solutions yet. So House Democrats, along with Senator Edward Kennedy and his Health, Education, Labor and Pensions Committee, will anchor the left and the GOP Leadership and conservative Senators will anchor the right. As in most negotiations, the goal is to establish a starting position so far to one extreme or the other that the middle shifts in their direction.  

There will be some pragmatic proposals put forward as well. The most anticipated is that expected to be coming soon from the Senate Finance Committee. It’s Chair, Max Baucus, and its Ranking Member, Charles Grassley, seem to be sincere in their efforts to put forward a bi-partisan solution. In the meantime, President Barack Obama will keep up a drumbeat in support of getting comprehensive health care reform legislation through Congress before the end of the year. Although the White House continues to let Congress take the lead in fashioning the final reform package, the Obama Administration is beginning to get more engaged in the legislative process.

What the final health care reform legislation will look like is, as yet, unknown. It may resemble one of the ideas already put forward. Or perhaps something new to the mix will gain momentum. I’m betting that something will pass this year. The process of getting to one bill will be messy, but eventually, a consensus will form.

Not yet, but eventually.

Dr. Gawande’s Radio Interview

There’s a chicken and egg aspect to health care reform which often frustrates lawmakers and policy makers. To achieve universal coverage the cost of health insurance must be affordable. To make coverage affordable you need universal coverage. So which comes first?

My take is that affordability has to come first. You cannot require people to buy something they cannot afford. When a pen is out of ink, all the regulations in the world won’t fill it again. This means the government has to make coverage affordable, most likely through subsidies of some kind. Subsidies are expensive And the budget, already groaning under the weight of the recession, two wars, an economic stimulus package, existing entitlements, and much, much more. Congress will be hard pressed to find the funds needed to provide the premium support required to get close to universal coverage.

Consequently, affordability needs to come first. This explains, in part, Director of the Office of Management and Budget Peter Orszag’s consistent focus on the as much as $700 billion in medical spending each year that goes towards services which do not improve health outcomes.  He began pushing lawmakers on this issue when he was Director of the Congressional Budget Office and he continues in his new role at the OMB.

The opportunity for health care reform to reign in medical costs received a substantial boost recently with the publication of an article in The New Yorker by Dr. Atul Gawande, a Boston surgeon who is also a staff writer for the magazine. Titled “The Cost Conundrum,” the article described Dr. Gawande’s exploration of medical practices in McAllen, Texas. That community spends more per person on health care than anywhere in the country with the exception of Miami, Florida which has higher labor and other costs. McAllen’s spending is twice that of nearby El Paso, Texas, even though the two areas have similar demographics and similar outcomes. The explanation, Dr. Gawande discovers, is the entrepreneurial culture of the community’s physicians. They maximize their incomes, but fail improving the health of their patients.

The article has been cited by President Barack Obama (who, it is said, has made the piece required reading for his staff), members of Congress, pundits and policy wonks. Few magazine articles have had comparable impact on the health care reform debate.

Those wanting to learn more about what he discovered in McAllen will enjoy an interview with Dr. Gawande  on Public Radio’s Fresh Air. During the nearly 30 minute segment, the doctor expands on his article providing insights from his own practice.

Dr. Gawande has made a valuable contribution to the health care reform debate by shedding light on the correlation between community medical practices, health care costs, and health outcomes. For anyone interested in health care reform, his Fresh Air interview is well worth the investment of time.