The Alan Katz Health Care Reform Blog

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Posts Tagged ‘Jay Rockefeller’

Commissions, Medical Loss Ratio Targets, Brokers and Politics

Posted by Alan on March 16, 2011

Legislation to exempt broker commissions from the medical loss ratio provisions of the Patient Protection and Affordable Care Act is gaining bipartisan steam. Original sponsor Republican Representative Mike Rogers has been joined by Democratic Representative John Barrow. Other House Members from both sides of the aisle are expected to sign on before the legislation is formally introduced – perhaps as soon as next week.

Meanwhile, the National Association of Insurance Commissioner’s Professional Health Insurance Advisors Task Force has posted their draft of a bill to exempt broker commissions from the MLR (a copy of the proposed law is available at the end of this Employee Benefits Adviser’s BenefitNews article). The NAIC is seeking comments on the proposed legislation (which is very similar to that proposed by Representatives Rogers and Barrow) in that it simply removes compensation paid to independent brokers from the medical loss ratio calculation. A hearing on the draft bill will be held on March 27th during the NAIC’s quarterly meeting in Austin, Texas. (Those wishing to add their two cents to the conversation can submit an email to tmullen@naic.org by Monday, March 21st.

This legislation is a top priority of the National Association of Health Underwriters, the National Association of Insurance and Financial Advisors, and the Independent Insurance Agents and Brokers of America. Florida Insurance Commissioner Kevin McCarty, president-elect of the NAIC, has led the organization’s effort to deal with the negative impacts the PPACA has had on brokers.

All this is pretty good news, right? In a few weeks there could bipartisan legislation backed by the NAIC as a whole and its leadership in particular and supported by the grassroots strength of agent organizations. There’s just two problems: opposition from Democratic liberals and political maneuvering from Republicans.

Senator Jay Rockefeller has sent a letter to the NAIC complaining that treating broker compensation as anything other than administrative costs “would allow agents, brokers, and health insurance companies to retain the estimated $1 billion in benefits that American consumers will receive next year thanks to the health care reform law.” Senator Rockefeller overstates his case ($1 billion just from the MLR provision?), but at least he attempts to marshal some arguments behind his concerns. However, in many of these arguments his reasoning is flawed.

He states, for example, that “the proposal would make it more difficult for consumers and small businesses to understand how their premium dollars are used ….” Why? The PPACA already exempts taxes from the MLR formula, yet no one has expressed concern that this will confuse anyone.

He also assumes that if broker compensation is removed from administrative costs that commissions will revert to what they were before the PPACA. He even quotes a statement from me published in Benefits Selling magazine to support this point. In that article I noted that brokers cost of doing business rises at closer to general inflation, not the rate that medical costs drive up insurance premiums. And I predict that commissions will eventually be decoupled from premiums. However, my belief that how broker compensation is calculated is unrelated to health care reform. I’ve been talking about this dynamic for years, long before the start of the Obama Administration. Even were the PPACA to be repealed I believe the method of determining commissions will change. It’s simply too hard to justify tying commissions to medical inflation.

And that’s what Senator Rockefeller is missing. Commissions are set by market dynamics. Carriers, consumers and business owners need independent producers and are willing to pay for the value brokers provide. In setting commissions carriers not only look at what competitors are offering, but at what brokers can earn selling other products like life or disability. In the end it comes down to an economic calculation: does the compensation justify the time and resources brokers commit to make sales and service their clients. Regardless of how it’s calculated, if the answer is yes, brokers will engage with the product; if the answer is no, they won’t.

The medical loss ratio provisions in the PPACA disrupts this formula. By imposing an arbitrary cap on administrative costs and including commissions within this cap, the law threatens to make remaining engaged in the sale of individual products uneconomical for too many brokers. The PPACA shifts the situation where compensation reflects the value brokers bring to consumers and carriers to a mathematical formula driven by the medical loss ratio calculation which ignores value, effort and resources.

Liberal Democrats, however, are not the only hurdle to making changes to the MLR formula. As noted in a thorough and illuminating examination of the issue by Sarah Kliff in Politico, political calculations by Republicans may doom the bill. Republicans, Ms. Kliff points out, “have little to no political incentive to improve” the PPACA. Improving the PPACA simply makes it more palatable and that, in turn, makes the law harder to repeal. Better to leave the legislation’s flaws in place, this reasoning goes, so as to strengthen calls to chuck the entire package. Or as one source cited in the Politico article says, “If it really became a bill with steam and the Republicans started hearing from all those brokers maybe the odds change.” But I can’t get myself past the ‘we aren’t fixing this bill’ hurdle.”

NAHU and its allies are pitching the MLR change as necessary to protect small businesses – specifically the many health insurance agencies around the country. They are gaining potent support. Yes, there is opposition, but still, if approached on the merits, I believe the Rogers/Barrow legislation could pass. The primary reason for this optimism is that exempting broker commissions from the MLR formula doesn’t undermine the purpose of the PPACA’s medical loss ratio provisions.

It would be a shame, but in today’s world not at all surprising, if this helpful fix were derailed because some lawmakers find a greater political advantage to preserving the flaws within the PPACA than fixing them.

Posted in Health Care Reform, Healthcare Reform, Insurance Agents, Patient Protection and Affordable Care Act, Politics, PPACA | Tagged: , , , , , | 3 Comments »

Democrats Now More Likely to Move Health Care Reform Forward On Their Own

Posted by Alan on February 25, 2010

Well, so much for a breakthrough. The health care reform summit was fascinating political science. But it certainly does not seem to have generated a clear direction for anything close to bipartisan health care reform. Which means President Barack Obama and Democratic leaders will put forward a bill for an up-or-down vote, most Democrats will vote for it and no Republicans will. The only questions remaining are: 1) will Democrats invoke a rule that will allow them to move forward with a simple majority or will they permit the GOP to prevent the legislation from coming to a vote; and 2) will Democrats make any changes to the legislative proposal put forward by the President to reflect issues raised by Republicans during today’s health care reform summit. This post addresses the first question; the next one the second.

Reconciliation: My guess is that Democrats will use reconciliation as a means of bringing health care reform legislation to the floor of the Senate for a vote. As NPR has reported, it would not be the first time reconciliation led to substantial changes to America’s health care system. As Sara Rosenbaum, chair of the Department of Health Policy at George Washington University, notes in the NPR story, “In fact, the way in which virtually all of health reform, with very, very limited exceptions, has happened over the past 30 years has been the reconciliation process.”

She’s not just talking about arcane legislation, either. COBRA, the provision that allows workers to continue their coverage after leaving an employer, was passed through reconciliation. In fact, COBRA stands for the bill in which this health insurance extension was included, the Consolidated Omnibus Budget Reconciliation Act of 1985. Reconciliation is the “R” in “COBRA.” In 1997 the Children’s Health Insurance Program, which along with Medicaid now covers one in every three children in the United States, was passed as part of a budget reconciliation bill. As the NPR story reveals, the list literally goes on-and-on. It seems health care reform simply can’t wend its way through the Senate with a super majority. is this because, as the Center for Public Integrity reports, there are eight health care lobbyists for each member of Congress? Whatever the reason, reconciliation is commonly used to pass health care reform.

It’s likely Democrats will keep this streak going. Yes, Republicans will cry foul, but at the end of the day, it’s a perfectly legal process. And while not every provision of the President’s reform package is likely to be eligible for reconciliation, enough will be to enable Democrats to declare victory.

Assuming, of course, they can muster majorities for comprehensive health care reform legislation. The earlier House bill passed with two votes to spare – including one from a Republican who is now saying he’d vote against the bill. And while the Democratic caucus numbers 59 members, there are 18 members of a the Moderate Dems Working Group. Whatever bill comes before the Senate will need to hold onto nine of those moderates – and that’s assuming all other Democrats are willing to go this route. Some liberals, including Senator Jay Rockefeller, have expressed reluctance to to invoke reconciliation. In the end, the President is likely to muster enough support for a bill – he only needs 50 votes in the Senate as Vice President Joe Biden could cast the decisive vote there. The vote will be close in the House, but Speaker Nancy Pelosi has repeatedly demonstrated her ability to muster a majority when needed.

President Obama needs a vote on health care reform. Politically he needs to demonstrate to his base and moderate independents that his commitment to hang tough on the issue – even if it means he’s the captain going down with his ship. If Republicans (and some Democrats) defeat the legislation, he’ll have shown he’ tried. America doesn’t like quitters (former-Governor Sarah Palin being the most prominent exception). They do like fighters. Politically, moving forward on health care reform is a necessity.

It also makes public policy sense. The health care status quo is untenable. Change is needed. Even if his ambitious reforms fail, the effort will set the stage for more modest reforms – modest reforms that could be introduced and voted upon before the November elections.

In an upcoming post I’ll discuss whether the bipartisan health care reform summit makes it more likely the President will moderate his health care reform proposal.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics | Tagged: , , , , , , | 8 Comments »

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

Posted by Alan on December 16, 2009

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.

Posted in Health Care Reform | Tagged: , , , , , , , | 14 Comments »

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

Posted by Alan on December 14, 2009

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.

Posted in Health Care Reform | Tagged: , , , , , , , | 5 Comments »

New Elements Added to Health Care Reform Debate

Posted by Alan on December 7, 2009

I haven’t been writing much of late. The Senate debate has simply been too predictable to merit much comment. The partisan attacks could have been scripted months ago. The votes unsurprising, and the difficulty Democratic Leaders face in fashioning a 60-vote majority is to be expected.

Consider: Republicans charge the Democrats will destroy Medicare. The fact that not long ago it was the GOP wanting to eliminate waste and abuse from the program seems to be forgotten. Democrats, meanwhile, seem incapable of understanding the relationship between medical costs and insurance costs. Listening to their claims that cracking down on evil insurance companies will lower health care spending is disappointing. It would be nice if now and then a Senator would acknowledge that medical costs drives up premiums and not vice versa – a wish not likely to be realized any time soon.  I heard on the radio last week (sorry, not sure what station) a lawmaker complaining that health insurance companies use actuaries, an unfair advantage they wield to the detriment of consumers.

But in the past few days some ideas seem to be gaining traction that could mix things up considerably. One proposal is to allow 55 through 64 year olds to buy into Medicare. The Washington Post’s Ezra Klein seems to be the first blogger to report the Medicare buy-in proposal is “attracting the most interest” as an alternative to creating a new government-run health plan to compete with private carriers. The under 65 cohort would not get basic Medicare coverage for free nor does it look like this approach includes subsidies not already on the table. It simply is a way to create access for some Americans to a public health plan without creating a new public health plan. And as with the public option, participation by 55 year olds would be voluntary.

That the idea of a Medicare buy-in option is gaining traction would seem to indicate that chances for a “true public option” are diminishing. Even liberal bloggers like AntonRobb at Benzinga.com are reaching this conclusion. “… proponents of the public option may be compelled to get behind this plan as an alternative. The severeley (sic) comprised … versions of the public option that have any chance of passing … would probably be worthless and probably do more damage politically to the Dems than good,” he writes.

The other interesting idea to emerge is to, as CBS News describes it, “establish national health insurance options, which would be administered by the Office of Personnel Management (OPM) but operated by private, nonprofit insurers ….” Since the OPM already administers the Federal Employees Health Benefit Program (FEHBP), which insures members of Congress and their staffs among others, this alternative to a public option is being viewed as the equivalent of opening up the FEHBP to non-government workers. (Incidentally, although the CBS reports implies the plans would be administered only by nonprofit carriers, this is far from certain. None of the other news reports mentioned this restriction – and there are for-profit carriers participating in the FEHBP.)

The “what’s good for Congress is good for the public” approach seems to appeal to moderate and conservative Democrats who have been objecting to the creation of a new government-run health plan run by the Department of Health and Human Services. As CBS notes, Senators like Ben Nelson describes this proposal as an alternative to, not a version of, a public option.

The import of these proposals go beyond the fact that new ideas are on the table. It also shows the influence likely to be wielded by the “gang of 10” Senators formed over the weekend. These 10 Senators, five liberals and five moderates, are charged with hammering out a compromise on the public option, according to MSNBC. While focused on the public option, it is likely this group of lawmakers will be called on to bridge the chasm that separates liberal Democratic Senators from their moderate and conservative colleagues. Remember, liberals have long claimed that health care reform without a public option is no reform at all. So if the gang of 10 manages to find a way to remove a government-run health plan from the legislation while still keeping liberals on board, they will position themselves to fashion compromises on other divisive issues as well.

(For those interested, the gang of 10 is comprised of Senators Sherrod Brown, Russ Feingold, Tom Harkin, Jay Rockefeller, and Charles Schumer from the liberal wing of the party and moderate Democratic Senators Tom Carper, Mary Landrieu, Blanche Lincoln, Ben Nelson and Mark Pryor).

As noted above, the momentum building behind the Medicare buy-in and an FEHBP-type proposal is that the public option is not going to make it into the Senate bill. Not with a trigger. Not with an opt-out. Instead it appears the public option won’t be in the legislation at all. This should mollify Senator Joe Lieberman who has promised to vote with Republicans against bringing a health care reform bill to the floor if it contains a public option.

All of this also makes clear the strong desire of Democrats, regardless of their ideology, to pass health care reform. The New York Times reports on various lawmakers’ description of President Barack Obama’s message to Senate Democrats on Sunday. “He reminded us why we are here. He reminded us why we run for office. And he reminded us how many people are counting on us to come through.” “Decades from now this will be the kind of vote you remember. It will be written in the faces of children and families who are relieved of the burden of anxiety and sorrow.”

Democrats consider this a historic moment. While grasping it carries political risk in the upcoming 2010 elections, failing to seize the opportunity poses even greater dangers. And the crushing of a dream many of these lawmakers have held for decades.

There are still controversies that could scuttle health care reform. And there will enough political charges and counter-charges bandied about to satiate even the most verbose pundits. But Senators are serious about finding a path to passage and it is increasingly likely they will pass some version of health care reform before years-end. Of course, this will only set the stage for the real work to begin: the House-Senate Conference Committee likely to convene shortly after New Year’s Day.

Posted in Barack Obama, Healthcare Reform, Politics | Tagged: , , , , , , , , , , , , , | 9 Comments »

Health Insurance Profits May Be Small, But Are An Easy Target

Posted by Alan on October 26, 2009

Profits, it seems, is the eye of the beholder. What to one person seems meager appears to the folks next door immorally exorbitant. When it comes to health care reform there are many who perceive the profit margins of health insurance companies are obscene. The politicians and pundits sharing this belief can be viewed with frequency stating their case. It almost seems that they consider the main goal of health care reform as a means of punishing greedy health insurance companies. (That’s not the case, they care about access and affordability, too, but it sometimes does look that way). These are many of the same folks who forget that health insurance premiums are driven by the underlying cost of medical care. It is, after all, so much easier to just attack villains raking in obscene profits than to discuss complex issues like restraining overall health care spending in the country.

A number of sources are beginning to question the math of these carrier critics. The Associated Press, for example, ran a story Sunday noting that health insurance profit margins “typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance a broad array of industries ….” Among the statistic the Associated Press brings to light:  “Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better — drugs and medical products and services were both in the top 10.”

Of course, last year was a bad year for a lot of industries profits, but some did quite well. Tupperware brands had a profit margin of 7.5 percent, Hershey 6.1 percent, and the folks who own KFC, Pizza Hut, and Taco Bell earned profits of 8.5 percent.

Another reality check raising doubts on how critics evaluate health insurance profits was published recently by PolitiFact.com. Senator Jay Rockefeller in September claimed “Insurance companies have seen their profits soar by more than 400 percent since 2001,” but the award-winning site, sponsored by the St. Petersburg Times, labels Senator Rockefeller’s charge a half-truth — an in my mind, that’s being kind. The problem with Senator Rockefeller’s statistics is the data is flawed. Senator Rockefeller’s statistics are based on an analysis conducted by Health Care for America Now. They examined profits between 2000 and 2008 of just 10 companies. (Interestingly, Senator Rockefeller cites just the change in profits from 2001-to-2007; if he had used 2008 the rise would have been 249 percent, not the 400 percent he claims).

In analyzing the profits of the big 10 carriers, however, the study ignored increases in profits resulting from carrier consolidation. “When big companies absorb smaller ones, the net effect may be to enlarge the profits of the biggest companies … even as the total size of the health insurance industry — the broader entity that Rockefeller seemed to be referring to — stays roughly the same.” This is more than a little problem as not all those smaller companies are truly “small”  (consider WellPoint’s merger with Anthem). This flaw alone makes any conclusions based on this study open to question.

Some will argue that, when it comes to health care, any profits is immoral. Yet profit exists throughout the system: doctors, nurses, hospitals, pharmaceutical companies, device manufacturers, and others all make a profit (or at least earn a living) from the medical services and products they provide. There’s nothing special or unique about carrier profits. Except that people like doctors and nurses and don’t like health insurance companies.

Instead of focusing on insurance carrier profits, industry critics would make a more significant contribution to the debate by broadening their inquiry to carriers’ administrative costs. This would lead to a more nuanced discussion on the value of expenses such as disease management, marketing, customer service, technology investments, taxes, regulatory compliance costs and, yes, profits, among other expenses. And it would require a discussion of what is an appropriate level for these non-claim costs. Here, I would suggest, the true measure of excessive costs is a carrier’s ability to bring health plans to the market that consumers buy. Carriers unable to control their administrative costs are unlikely to be able to compete long-term — another, more efficient carrier is likely to emerge and capture market share. (Yes, I know that in some states there simply isn’t enough competition among health insurance carriers for competition to work its magic, but in many states there are — and solutions can be found for where it is inadequate).

My point is not that anyone should feel sorry for the relatively low profit margins earned by health plans. Nor am I suggesting that it is unfair to question how insurance companies operate as part of the health care reform debate.

What I’m asking for is a broader examination into all contributors to the cost of health care in America, including looking at how the dominant fee-for-service method of reimbursing doctors and other medical providers, the  near monopolies enjoyed by some hospital chains in many regions of the country, the disparity between prices drug companies charge in the United States versus oversees, and the how medical malpractice and government regulations add to the cost of health care.

Because at the end of the day health care reform will be judged not by its impact on health insurance company profits, but on whether Americans can afford their health insurance coverage.

Posted in Health Care Reform, Healthcare Reform, Politics | Tagged: , | 9 Comments »

Senate Finance Committee Rejects Government-run Health Insurance Plan

Posted by Alan on September 29, 2009

The Senate Finance Committee continues to refine its health care reform legislation. Today it broke ranks with other Congressional committees with jurisdiction over health care reform by defeating amendments to create a government-run health plan. The debate was passionate, but ultimately enough Democrats joined with Republican Senators to defeat two attempts by the panel’s more liberal members to insert public option language into the bill.

Keeping the public option out of the bill was a major victory for Senator Max Baucus, chair of the Finance Committee. While acknowledging that a public option would “hold insurance companies’ feet to the fire,” his opposition was based on the goal of enacting health care reform this year. According to ABC News Senator Baucus believes health care reform including a government-run program cannot pass the Senate.

Senator Jay Rockefeller insisted, however, that a public health insurance plan was absolutely essential to meaningful reform. Failure to to create a public, non-profit plan to compete with private carriers, the Associated Press reports the West Virginia Democrat as saying, “was a virtual invitation to insurance companies to continue placing profits over people, and he predicted they would raise their premiums substantially once the legislation went into effect.”

Senator Baucus countered that the legislation being developed by the Senate Finance Committee includes numerous consumer protections, including a provision to prevent insurance companies denying coverage based on pre-existing conditions. None of the lawmakers on either side of the aisle spent much effort in defending the behavior of private insurance companies. Senator Baucus said he agreed with the intent of the Rockefeller Amendment to “hold the insurance industry’s feet to the fire,” according to the Washington Post. The Associated Press quotes Senator Jim Bunning as observing that “the private sector is not doing exactly what it should do with medical services.”

Republican members of the committee were unanimous in their opposition to public options. The Washington Post quotes the ranking GOP member of the panel, Senator Charles Grassley, as warning that a government plan “will ultimately force private insurers out of business” and that “The government is not a fair competitor. It’s a predator.”

The first public option amendment, offered by Senator Rockefeller, would have permitted the government-run plan to set reimbursements to medical providers at levels paid by Medicare for the first two years. (After that period, I believe the Senators proposal would have permitted the public medical plan to, like Medicare, impose rates on providers). It should be noted, Medicare often pays doctors and hospitals less than the cost they incur providing services. The five Democrats joining with Republican committee members to defeat this amendment were Senators Baucus, Thomas Carper, Kent Conrad, Blanche Lincoln, and Bill Nelson.

Senator Charles Schumer then proposed an amendment that would have required the public plan to negotiate reimbursement rates with providers, much as private carriers do today. Three Democrats – Senators Baucus, Conrad and Lincoln – voted against accepting this amendment.

I’ve maintained for some time that a government-run health plan was unlikely to be part the health care reform plan passed by Congress. The Senate Finance Committee’s rejection of this provision increases the likelihood of this outcome, but the debate will continue. Senator Schumer, for one, pledged to continue the fight. 

"’The present system is broken’" the Washington Post reports him as saying. “He said he was pushing for a public option not for ideological or symbolic reasons but because ‘costs are going through the roof.’ And he expressed confidence that, ‘with some work and some compromise,’  proponents of the provision eventually could get 60 votes on the Senate floor. ‘We are going to get at this, and at this, and at this, until we succeed, because we believe in it so strongly.’"

With polls showing 65 percent of the public support a government-run health plan operating like Medicare to compete with private health insurance plans, President Barack Obama continuing to argue for a public option, and Speaker Nancy Pelosi claiming the House was unlikely the House would pass health care reform that did not include a public option, this debate is far from over. Assuming the Senate Finance Committee moves forward a reform package this week, the next step will be for it to be integrated into the bill passed by the Senate Health, Education and Pensions Committee – legislation that does include a public option.

Getting health care reform is a long hike. Today’s vote in the Senate Finance Committee is a step along the way – albeit a very significant step indeed.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics | Tagged: , , , , , , , , , , , , | 13 Comments »

Baucus Introduces America’s Healthy Future Act of 2009

Posted by Alan on September 16, 2009

Senate Finance Committee Chair Max Baucus has unveiled his health care reform proposal, the “America’s Healthy Future Act of 2009” in the form of a “Chairman’s Mark.”  This means instead of publishing legislative language, the plan is presented in a “here’s the current law and here’s how we should it” format. While specific legislative language would be nice, there’s enough detail in the 223 page document to get a good understanding of what Senator Baucus proposes. And we won’t have long to wait for the legislative language: the Committee will begin debating the bill on September 22, 2009.

No Republican members of the Senate Finance Committee have signed onto the plan, but I don’t think the lack of GOP support at this point dooms the Baucus proposal. As noted in my previous post, at least one of the three Republicans who has been negotiating with Senator Baucus towards a bi-partisan bill, Senator Olympia Snowe, has indicated she’s waiting to see how the bill is amended in committee before committing her vote. Further, the audience Senator Baucus is directing his health care reform plan to are moderate Democrats.

By directing his plan at moderates, Senator Baucus, not surprisingly, infuriates liberal Democrats. Senator Jay Rockefeller has already announced his opposition to the Chairman’s Mark and claims four-to-six other Democrats on the Finance Committee share his views. There are 23 members of the Senate Finance Committee: 13 Democrats and 10 Republicans. So Senator Baucus can afford to lose only one Democrat and still move his proposal out of the committee in the face of unanimous GOP opposition.

My expectation, however, is that neither President Barack Obama nor Senate Majority Leader Harry Reid will let liberals bottle-up the bill in the Finance Committee. If needed, they’ll arrange for some progressive Democrats to speak against the bill, while voting to move it out of committee in order to “let the process proceed.” Of course, if Senator Snowe or any of the other Republicans on the committee vote for the amended bill, fewer Democrats will be needed.

A quick review of the Chairman’s Mark indicates there have been no substantive changes from what was expected. There’s no government-run health plan, it requires individuals to purchase coverage, it establishes state health insurance exchanges. What has been firmed up is it’s price tag: $856 billion over 10 years.

I hope to post more detailed analysis of the America’s Healthy Future Act of 2009 over the next few days, but in the meantime, below are a few articles that summarize the proposal. Senator Baucus describes his proposal in an opinion piece published in the Wall Street Journal today. In reading these keep in mind that what Senator Baucus introduced today is only the beginning. On September 22nd the Senate Finance Committee will convene to debate and amend the bill. The mark-up, as it’s called, will be civil but robust. What emerges from the committee will be different than the Chairman’s Mark.

And that’s just the beginning. The Senate will need to reconcile the Senate Finance Committee’s bill with the legislation put forward by the Senate Health, Education, Labor and Pensions Committee. The result of that mash-up will then need to be reconciled with whatever health care reform legislation the House approves by a conference committee made up Senators and House members. Then both chambers must approve the resulting compromise legislation.

In other words, there’s a long journey ahead for health care reform. There will be plenty of noise and controversy along the way. The path to reform will be subjected to a multitude of twists and turns. We won’t know how it turns out for another two-to-three months. But with the introduction of the America’s Healthy Future Act of 2009, the health care reform debate takes a big step forward.

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Here’s some articles describing Senator Baucus’ health care reform proposal:

Baucus Unveils $856 Billion Health-Care Legislation” from the Wall Street Journal.

Baucus unveils health care bill” from the Boston Globe.

Baucus Offers Health Plan With No Republican Backing” from Bloomberg.com

“Baucus Introduces $856 Billion Health Care Bill” from the Washington Post.

Baucus Puts Bill In Play” from National Underwriter (my thanks to Dwight Mazonne for identifying this article)

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics | Tagged: , , , , , | 5 Comments »

Out-of-Network Scandal is a Good Thing

Posted by Alan on March 28, 2009

As they said in the 60s, “you’re either on the bus or off the bus.” Were Ken Kesey talking in a more modern medical context he might have said “you’re either in the network or out of the network.” And being out of the network can be costly.

Unlike HMOs, which are closed systems — your health plan covers treatment within their network or, with few exceptions,  doesn’t cover the service at all — PPOs are more open. You get a higher reimbursement for seeing providers within the health plan’s network or you get reduced coverage for services from non-network physicians. The benefits to all concerned are rather straightforward: the physicians and other providers offer the health plan lower rates in exchange for the health plan encouraging patients to see those providers. The health plan pays less so can offer their coverage at a lower cost, increasing their market share. Consumers pay less out-of-pocket when they use one of these preferred providers. Yet, if the consumer does seek medical care from a provider outside the network, the health plan pays a significant portion of the bill.

In theory, what the carrier pays for out-of-network services is a percentage of the usual, reasonable and customary (“UCR”) charges imposed by most providers in that community. That sounds fair: if a consumer chooses to engage a doctor who is more expensive than the norm, the consumer should pay for excess cost.

The problem is that few people know what the UCR cost is for any given treatment. Heck, physicians rarely know what the UCR is for their community for a particular service. When the carrier notifies the patient that their doctor charged more than what is typical it’s too late for the patient to do much about it. The result: angry patients, frustrated doctors and another deposit of ill-will in the industry’s karma account.

At the heart of the problem is defining “usual, reasonable and customary.” In the end, despite all the surveys and actuarial work, a high level of subjectivity is involved. How is it measured? Who determines if the costs are “reasonable” even if they are usual and customary. There’s a lot of wiggle room in the data base.

For years, the “decider,” as a past president would put it, for the nation’s largest health plans has been a company called Ingenix. Ingenix is owned by UnitedHealth Group, Inc., which also owns the health plan United HealthCare. Even though Ingenix is owned by a competitor, most of the major health plans in the country relied on its billing information for determining what out-of-network charges they would pay.

Not for long. New York Attorney General Andrew Cuomo went after Ingenix and UnitedHealth for manipulating reimbursement rates and defrauding consumers. As a result of Attorney General Cuomo’s actions, Ingenix will exit the billing database business and UnitedHealth will pay $50 million to help create a non-profit assigned to maintain a new, independent database.

While the New York legal action is no doubt painful to some carriers, most notably UnitedHealth, it could work to the industry’s benefit. It replaces a point of intense friction with an objective, common definition. It’s not that the definition of UCR put out by the non-profit won’t still be significantly subjective — it will be. But it will be the definition of the non-profit.  And it’s not that consumers won’t blame the health plans when they disagree with the non-profit’s definition of UCR — they will. But the carriers will be able to refer their members to the non-profit.

Given the low regard the industry is held in by the public, any action which stems that flow of ill will deposits is a good thing.

Of course, this being America, the path to better karma is not an easy one. The industry will first need to go through the political gauntlet of law suits and public hearings. Next in line: The Senate Commerce, Science and Transportation Committee.  It’s Chair, Senator Jay Rockefeller, is holding a hearing Tuesday in which executives from United HealthGroup and Ingenix will be the star witnesses. As reported by the Associated Press, Senator Rockefeller claims, UnitedHealth and Ingenix are “lowballing deliberately. They deliberately cut the numbers so the consumer as to pay more of the cost. … It’s scamming. It’s fraud.”

In that UnitedHealth has already paid $350 million to settle a suit on the matter brought by the American Medical Association, albeit without admitting guilt, the accusations are hardly surprising. And while UnitedHealth would like to put the UCR scandal behind them, there’s a script to these things and they tend to run through Washington. So this is just something they need to do. And it’s something they should do.

Because the UCR situation wasn’t fair to consumers. And if the industry needs to pay a price as part of fixing it, so be it. At the end of the day, there will be a more fair way of defining what out-of-network charges should be. And that’s a good thing for consumers, providers and health plans.

Posted in Health Care Reform, Health Insurance, Health Plans, Healthcare Reform, Politics | Tagged: , , , , , | 2 Comments »

 
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