Senate Finance Committee Rejects Government-run Health Insurance Plan

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.

Rationing and Other Realities of America’s Health Care System

Later this week the Senate Finance Committee will likely vote out a health care reform bill. With this action, all five committees of jurisdiction in the House and Senate. Speaker Nancy Pelosi and her leadership colleagues will begin the arduous process of combining the various flavor of reforms pass by three House committees into a single package the full House can consider. Senate Majority Leader Harry Reid and his colleagues will be doing something similar with the two reform bills passed by Senate committees. This process will unfold as an even greater storm of bombast and hyperbole is unleashed than the public has already been forced to endure.  Before the debate gets too loud, I thought it might be helpful to put a few of the issues in perspective.

Rationing:

Health care in America is rationed. yes, rationed. This being America, it looks different than the rationing available in Canada, Great Britain, and elsewhere. In America, rationing is based primarily on ability to pay. If you have money and/or insurance coverage, you have more options concerning what health care you get, when you get it and where you get your health care than if don’t. Anyone who says otherwise is trying to sell you something.

Because we ration health care in America, it does not follow that anyone goes without some coverage. We have a safety net. But the quality, timeliness and convenience of your care in America depends on your ability to pay for the cost of the care you receive – or to have a third party (i.e., an insurance company or government health plan) pay the cost for you. Sharon Begley, a Senior Editor at Newsweek makes this same point, calling the rationing debate “ignorant and duplicitous.” Every health care system in the world rations care in some way. (Another recent Newsweek story describes how a country’s health care system – and approach to rationing – reflects the countries’ culture). America is no exception. And it won’t be after reform is passed.

Someone is Always Between You and Your Doctor:

Apparently, in heaven or somewhere nearby, the health care you receive is determined solely and exclusively by your wise, cost-effective physician. No outside factors intervene. And certainly, no one is looking over doctors’ shoulders, second guessing decisions or, heaven (or somewhere nearby) forbid, denying coverage. That this is not the way it works in America’s health care system today – or the way it will work tomorrow regardless of what reforms are enacted – does not stop lawmakers from declaring this heavenly dream is their goal.

Liberals and conservatives are united in their defense of keeping the space between doctors and their patients interference-free. The only difference between ideologues is who they accuse of intruding. Liberals claim insurance company bean counters are the culprit; conservatives warn against granny-killing, unfeeling government bureaucrats getting in the way. The fact is someone always has been, and always will be, between patients and doctors.

Both are correct to a point. Both carriers and the government come between you and your doctor. A tragic case that became political fodder for former Senator John Edwards brought this reality to light. An insurer denied a liver transplant for a California teenager because the procedure was considered experimental given her circumstances. Without assurance they would be paid, medical providers would not perform the transplant. After intense public pressure the carrier relented, but before the operation could take place the patient died. As I said, a tragic story used by Senator Edwards to castigate the insurance industry. What he never mentioned it, but the Sacramento Bee did, it that Medicare and Medicaid – public health programs – would also have denied the treatment as experimental. Not every treatment, procedure, service or medication requested is safe, necessary or effective. There will always be an umpire determining what care is responsible and what is not, reform or no reform.

Not all umpiring is bad, however. Nor does applying comparative effectiveness research to medical care (and, consequently, eliminating waste and unnecessary treatment) require handcuffing doctors or forcing them to treat patients from a menu. The experience of the Geisinger Health System in Pennsylvania, among others, has demonstrated that sharing knowledge concerning effective protocols for treating conditions can lower costs while still allowing doctors to determine appropriate care.

Increasing Medical Costs Cause Increasing Premiums

Health insurance premiums increase far faster than general inflation or wages. As USA Today reported recently, since 1999, health insurance premiums for families rose 131 percent. Inflation during that time increased by just 28 percent.

Many politicians and pundits place the blame for this disparity at the feet of greedy health insurance executives. Never mind that profits and administrative costs, as a percentage of premium have remained roughly constant over time. Apparently health insurance premiums are set by stock brokers, not actuaries.

The reality is medical costs drive health insurance costs. And unless Congress address this dynamic with more than rhetoric, their reforms – whatever they may be – will flounder. What can Congress do about it? There’s no shortage of ideas.

Kaiser Permanent CEO George Halvorson, wrote a book “Health Care Reform Now!” that examines the elements of medical care costs and what can be done to restrain them.  Among Mr. Halvorson’s recommendations: create a medical care delivery system that allows for quality measurements, an appropriate approach for the treatment of the five chronic diseases that account for more than 50 percent of medical spending in the country; and change the motivation for medical providers to provide more care rather than the right care.

Similar recommendations for reducing medical inflation are offered by Dr. Albert Waxman, a CEO of a venture capital firm focusing on health care related enterprises. In a guest blog posting on CNBC.com, Dr. Waxman calls for replacing “fee for service” payment models with performance-based reimbursement and providing incentives for healthier lifestyles. (Full disclosure: Dr. Waxman’s VC firm is funding a client of my consulting firm).

The challenge in cutting costs in medical care is that opponents of reform – or of the reformer – will claim such changes will lead to rationing and put government (or the insurance companies) between doctors and their patients. When listening to these charges, however, it might be useful to remember: it’s not whether there will be rationing of medical care in America, but how we will ration care. And it’s not whether someone will evaluate whether the treatment our doctors recommend or not, it’s what this evaluation will be based upon and how it is applied.

We can have health care reform that reduces costs and increases access. Doing so will require facing facts concerning the status quo, not ignoring them.

If You Could Ask Just Three Questions …

And now for something completely different: Imagine you’re a health insurance broker on a plane to somewhere. It’s not until the captain announces you’re approaching your destination that that you realize the person sitting next to you is a key player in the health care reform debate. Maybe she’s a lawmaker, an analyst at the Congressional Budget Office, a deputy in the White House, or a prominent policy wonk. Numerous questions occur to you, but you only have time to ask just three.

You realize a lot of people are talking about the details of health care reform (What legislation is likely to pass? When will its provisions take effect?). What very few discuss pertains to distribution (Do you see value in the services of brokers in today’s system? What role should brokers in a reformed health care system? That kind of thing). This is your chance to ask. What would your three questions be?

Between now and September 26th (Saturday for those keeping track) please list your three questions by adding a comment to this post. Starting on Sunday and at least through Monday (September 27th and September 28th) I’ll post a survey allowing visitors to this blog to vote on the questions submitted. Then we’ll see if we can’t provide answers tor some of the more popular questions.

Every reader of this blog is invited to participate in this exercise regardless of whether or not you’re a broker. If you can, please try to keep the questions focused on distribution (I know, with everything going on, that could be tough).

The plane is descending. You’ve got time for three questions. Ask away.

Senator Baucus Reaches Out to Liberals and Moderates on Health Care Reform

The Senate Finance Committee has embarked on its long journey to amend and refine the Chairman’s Mark of America’s Healthy Future Act of 2009. While there’s a lot of attention being given to the fact that committee members have submitted over 500 amendments that number is less impressive than it may seem. Many of these proposed changes are technical in nature while others are duplicative. Besides, it’s not the number of amendments that matter, it’s the substance of them that determines the scope of the task facing the committee.

The task is great. Three ideologies are at play on the committee: conservative, moderate and liberal. While conservatives will have their say and no doubt get a few of their proposals added to the bill, it is moderates and conservatives – most all of them Democrats – who will truly shape the final outcome. Most Republicans have made it clear they will vote against any bill that resembles the Chairman’s Mark. This effectively removes them from the mix, leaving the shaping of the legislation to a tug-of-war between moderates and liberals.

Senator Max Baucus modified his Chairman’s Mark to address criticism from liberals and to reach out to some moderates.

For example, Senator Baucus’ health care reform plan requires all individuals to obtain medical insurance and provides a premium subsidy to help make the coverage affordable for lower-income households. Originally, those subsidies were designed to cap premium costs at three percent of a household income for those making 100 percent of the Federal Poverty Level rising to thirteen percent of household income for those households earning 300 percent of the FPL. Senator Baucus modified his original proposal to “lower the maximum amount of income that families would contribute to their health insurance premiums to two percent of income for those at 100 percent of the Federal Poverty Level …” He also increased the number of Americans eligible for those subsidies to households earning 400 percent of the FPL ($43,320 for an individual; $88,200 for a family of four) and capped their premium costs at 12 percent of income — $10,584 for a family at 400 percent of FPL. (Page 6 of the Modifications to the Chairman’s Mark). To illustrate how the subsidies under various health care reform bills work, including the modified version of Senator Baucus’ proposal, take a look at the nifty subsidy calculator on Kaiser Family Foundation site.

Senator Baucus also reduced out-of-pocket maximums for households between 200 and 300 of the poverty level to two-thirds of the HSA out-of-pocket limit ($3,987 for an individual; $7,073 for a family in 2010). (Page 6 of the Modifications).

A change requested by Senator Olympia Snowe, the Republican most likely to support the bill in committee, was accepted by Senator Baucus. It would require small employers to provide a plan with a deductible of no more than $2,000 for individuals and $4,000 for families unless higher amounts are offset by HSAs, HRAs or the like. (This requirement would not impact the “young invincible” catastrophic coverage medical plan (that also cover preventive care) available to those 25 years old and younger. (Page 6 of the Modifications).

Speaking of the young invincible bill, Senator Baucus accepted another proposal by Senator Snow, opening up eligibility for these plans to those who would otherwise have been eligible for a hardship exemption from the requirement to obtain coverage. The exemption was available to those for whom premiums exceed 10 percent of their income. (Page 6 of the Modifications).

As originally proposed, workers receiving coverage from their employers that met certain conditions would be ineligible to receive tax credits to enable them to purchase coverage on their own through a health insurance exchange. Senator Baucus accepted yet another amendment from Senator Snowe that lowers this threshold, permitting employees whose share of premiums through their employer-sponsored coverage exceeds 10 percent of their income to qualify for the tax credit. (Page 7 of the Modifications).

There are other significant changes, too. For example, the threshold for plans on which insurance companies would be subject to a tax (so-called “Cadillac plans) had not been indexed to inflation in the original proposal. Over time this meant these plans (costing $8,000 for individual coverage and $21,000 for family coverage in 2013) would likely look more like Chevrolets. Senator Baucus now indexes the threshold for these plans. He also increased the excise tax from 35 percent to 40 percent.

The amendments accepted by Senator Baucus without a debate highlights his desire to placate Senator Snowe and other moderates on one hand while addressing some of the concerns of liberals on the other. The political calculus is simple: the more these Senators can claim that they improved the bill, the greater their political cover to vote for it.

Put another way, it is unlikely any of the changes accepted by Senator Baucus reduces the chances of the bills passage and many increase its chances. With hours of debate and dozens of sustentative changes to consider, this journey is far from over.

Affordability and America’s Healthy Future Act

In yesterday’s post answering questions about Senator Max Baucus’ health care reform proposal, I inadvertently overlooked a question posed by JimK. He points out the proposed health care reform legislation provides a tax credit to those earning up to 300% of the Federal Poverty Level (FPL), but questions whether the Chairman’s Mark mandates people pay 13 percent of their income in premium as alleged on Countdown with Keith Olbermann.  Here’s how (I think) Mr. Olbermann’s math works.

Under the America’s Healthy Future Act every citizen would be required to purchase health insurance coverage. As JimK notes, subsidies would be available to help those earning less than 300 percent of the Federal Poverty Level  purchased coverage through the exchange. (Subsidies are apparently not available to those purchasing coverage in the traditional market). These premium subsidies are available on a sliding scale. Those households at the poverty level would be required to contribute three percent of the income toward their health insurance premiums; households at 300 percent of the poverty level would contribute 13 percent. (Chairman’s Mark page 21, page 24 of the PDF)

The FPL is adjusted annually. In 2009 the federal poverty level is $10,830 for an individual and $22,050 for a family of four. If the Baucus health care reform plan was in-force today, individuals earning 100 percent of the FPL would pay $325 toward their medical premium; a family of four with household income of 100 percent of the FPL would pay $662. Individuals at 300% of the Federal Poverty Level ($32,490) could pay $4,224 for medical coverage while our hypothetical family of four (earning $66,150 annually),could pay as much as $8,600.

There are two things to keep in mind concerning this aspect of the Senate Finance reform plan. First, these are preimum subsidies. Consumers could pay thousands of additional dollars — and a greater percentage of their income —  for out-of-pocket expenses.

Second, once household income exceeds 300 percent of the FPL no premium subsidy is provided. In 2009, according to a Kaiser Family Foundation study, “average annual (health insurance) premiums for employer-sponsored health insurance are $4,824 for single coverage and $13,375 for family coverage.” Granted, coverage obtained through the work place is usually much more expensive than insurance purchased on one’s own. Finding an average price for policies purchased on one’s own is a bit harder. eHealthinsurance, based on the carriers they represent and consumers purchasing through their site, found the median premium for individual health insurance was $1,584; for families it was $3,948 (the numerical averages were higher: $1,932 and $4,596 respectively). eHealthinsurance reports the average deductible for the individual plans it sold was $2,326 while it was $3,129 for family coverage)

For an individual earning $35,000 (323 percent of the Federal Poverty Level) and ineligible for a subsidy, the median premium ($1,584) represent 4.5 percent of household income; the average premium ($1,932) comes to 5.5 percent. For a family of four earning $70,000 (317 percent of FPL) their $3,948 median premium amounts to slightly more than 5.5 percent of household income; the average premium ($4,596) represents 6.6 percent of their income.  Again, this is before any out-of-pocket medical expenses are paid.

Which raises the question: assuming the eHealthinsurance rates are roughly equivalent to the cost of coverage available after health care reform, will coverage be affordable? If Americans must purchase health insurance it’s only fair that the cost for this coverage is within their means.

It’s likely Senator Baucus set the subsidy levels based on what the cost of this premium support would be on the federal budget. He determined this is the level of support the country can afford to provide consumers. But can consumers afford these costs? For a family of four with income of $70,000, paying nearly $4,000 in premium plus potentially several thousand more in out-of-pocket medical expenses is a significant burden. The problem is, going without coverage could be much more damaging to their finances — and to their health.

Balancing personal responsibility with the cost of coverage to families and impact of premium support on the federal budget is both a financial and a moral challenge. It requires lawmakers — and voters — to make tough choices. It also shows that the effort to restrain medical costs must be pursued just as rigorously, if not more so, than increasing access. Otherwise health care reform could result in insurance coverage and financial hardship for all.

Senator Baucus Health Care Reform Bill: Q&A

The Senate Finance Committee will be taking up the Chairman’s Mark of America’s Health Future Act of 2009 this week. Several readers have asked questions about the Senator Baucus’ proposal and thought I’d try to address them.

Two caveats before we start, however. First, while I’ve done my best to answer the questions accurately I may have missed the mark. I hope folks who disagree with my analysis will post comments and I urge everyone to read those comments. Second, the Senate Finance Committee will begin marking up the legislation on Tuesday (to “mark-up” a bill is simply to amend it). So what emerges after the Committee’s deliberations is likely to be significantly different than the version we have today. Consequently, some of what’s provided here may be out-of-date in a few days.

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1. Will the federal government define what plan designs are available?

The Baucus Proposal requires all policies issued in the individual or small group market (other than grandfathered plans) to fall into one of five benefit categories. (These benefit designs are defined on page 21 of the Chairman’s mark). The four general categories are:

• Bronze: 65% actuarial value
• Silver: 70% actuarial value
• Gold: 80% actuarial value
• Platinum: 90% actuarial value

The fifth option is available only to those 25 years or younger. This catastrophic plan would “be set at the HSA current law limit, but prevention benefits would be exempt from the deductible.”

The proposal limits out-of-pocket expenses to that permitted for HSAs ($5, 950 for individuals and $11,900 for family coverage in 2010) indexed to the “per capita growth in premiums for the insured market.” There are some other restrictions, but within these out-of-pocket guidelines, any plan design is permitted so long as it’s actuarial value is at least 65 percent.

Which begs the question: what does Senator Baucus mean by “actuarial value.” His Chairman’s Mark doesn’t define the term. However, the Congressional Budget Office describes actuarial value as a statistic that “measures the share of health care spending for a given population that would be covered by each plan and thus reflects both covered services and cost-sharing requirements.” The CBO notes, however, there are two ways of calculating this statistic. Again, it is unclear from his document which approach is proposed by Senator Baucus.

2. Underwriterguy asked what the impact would be on high deductible plans.

As noted above, HSA out-of-pocket limits are permitted by the Senator Baucus’ proposal. So HSAs should continue to be available. Further, high deductible plans, even if they are not HSA eligible, will be permitted up to the HSA out-of-pocket maximum.

3. Michael Flynn asked if the insurance exchanges will compete with private insurance brokers or eliminate them.

There is nothing in the Chairman’s Mark that prohibits exchanges from using independent brokers. Better still, the system envisioned by the proposal contemplates a role for brokers. Under the Baucus Plan, exchanges would be created on a state or regional basis. The administrators of each exchange would make the decision whether or not to use brokers.  As I’ve written before, I believe the exchanges contemplated by the Senate Finance Committee will be likely to use brokers.

4. Nosedoc asked which health insurance plans will be taxed as so-called “Cadillac Plans.”

Senator Baucus is proposing an excise tax on insurers “if the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount. The tax is equal to 35 percent of the aggregate value that exceeds a threshold amount.” In 2013, the threshold amount would be $8,000 for individual coverage and $21,000 for family coverage. So if the annual insurance premium for employer-sponsored coverage was $10,000, the insurance company would pay a tax of $700 ($10,000 premium – $8,000 threshold = $2,000 x 35% = $700). The threshold amount would be indexed to the Consumer price Index for Urban consumers beginning in 2014). (Chairman’s Mark page 202).

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I think these cover all the questions, but if I missed any, please let me know and I’ll do my best to find the answers.

Health Care Reform Odds & Ends

When it comes to health care reform, to maul Dickens: It is the busiest of times. It is the calmest of times. Or as general agent Michael Traynor put it, “These are interesting times when talk of exchanges and pre-existing exclusions have bumped Paris Hilton and Lindsay Lohan from the news.”

This coming week it will be even harder on E! News and the like. Sure, Hollywood has the Emmys, but Washington has the debate in the Senate Finance Committee over America’s Healthy Future Act of 2009. Not a contest. Add to the mix President Barack Obama’s five appearances on Sunday morning television shows (plus his stint Monday night as David Letterman’s guest) and these are strange days, indeed. 

There’s several items in the mix I wanted to comment upon, but none of them really warranted their own post. So here they are, mashed together into a single article. Think of it as clearing the deck in anticipation of all the fun news coming out of Washington in the next few days. 

1. Excluding Pre-Existing Conditions

Yes, it’s true, health insurance companies exclude individuals with pre-existing conditions. When they can carriers refuse to offer coverage to those likely to use that coverage. According to some politicians and pundits of all political stripes, instead of being a legitimate business practice, this process (called “underwriting”) is evidence of the evil nature of health insurance carriers and their executives. 

Under today’s rules, however, underwriting is necessary to keep the cost of coverage from going even higher than it is today. Imagine permitting people to buy auto insurance from the tow truck driver at the scene of an accident. Or picture homeowners buying fire insurance after the flood waters recede. The cost of these policies would be astronomical. Why would anyone buy auto or homeowners coverage before they need it if they can buy the same policy after an accident or disaster? The cost of insurance in this environment would be the cost of the claim (plus administrative expenses). Have $1,000 in damage after that wreck? The cost of the policy sold by the tow truck driver would need to be more than $1,000 because no one else’s premium would be available to cover any of the cost.

The same applies to health insurance.  Allow individuals to purchase coverage on their way to the hospital and costs will skyrocket. (Don’t laugh, one of the GOP proposals would allow consumers to buy coverage in the emergency room). In New York and New Jersey, where there’s a mandate to sell individual health insurance but no mandate to buy it, premiums are three-times higher than in California.

Which illustrates the only way to resolve this situation: require everyone to obtain medical coverage. Without this balance (both a mandate for carriers to sell and for consumers to buy coverage) premiums quickly become unaffordable. Lawmakers who propose guarantee issue without a mandate to buy – and they exist on both sides of the aisle – are either grandstanding, mathematically challenged or ill-informed.

2. Losing Coverage When You Need It

The other popular market reform concerns carriers cancelling coverage after claims are incurred by policy holders, a practice called “rescission.” Much of the furor over rescissions in Washington and elsewhere are legitimate, the result of carrier’s tone deaf, heavy-handed, and inept approach to a reasonable concern: preventing fraud. So long as health insurance is voluntary, carriers need to protect their members from being gamed by those who would intentionally abuse the system. To hear some talk about the problem, however, you’d think every claim submission is answered by a termination notice. Estimating the total number of rescissions is difficult due to disparate reporting requirements around the country. Yet in testimony before Congress three of the largest carriers claimed to have canceled about 20,000 health insurance policies over five years. Four thousand annual rescissions sounds like a lot, but it’s a small fraction of the millions of policies sold and maintained by those carriers each year.

Because the number of terminations is small does not excuse the health plans from abusing their rescission power. Change in this area is needed to restrict rescissions to only intentional misrepresentation of medical conditions. In the meantime, overstating the severity of the problem may be good politics, but it is misleading. (Of course, if underwriting is eliminated, this problem goes away: if carriers cannot charge premiums based on pre-existing conditions there’s no reason to even ask about prior medical conditions.)

3. Non-Profit Doesn’t Mean Cheaper

Liberals demanding that reform legislation include a government-run health plan usually claim it will reduce the cost of coverage by introducing a non-profit health plan into the market. Here’s how Senator Jay Rockefeller put it on MSNBC, “There’s got to be some discipline to other insurance companies, that make them take seriously, not just competing with each other, but competing with somebody who because they are non-profit … and don’t have to please their shareholders because they don’t have any, that they can offer premiums at lower prices” (this sound bite begins at about the 2:35 mark). Yet there are already non-profits operating in most states. In California, for example, Kaiser Permanente and Blue Shield of California are two. In some parts of the state, these plans do offer the most affordable plans; in other regions the lowest cost plans are available from their for-profit competitors. Experience indicates little correlation between a carrier having shareholders and their premiums. Claiming it does may sound good, but anyone taking the time to see what’s happening in the real world will realize this is a false argument.

4. Ugly Language is Dangerous.

House Speaker Nancy Pelosi raised the possibility that the angry rhetoric prominent in the health care reform debate could turn violent, comparing it to the situation in San Francisco over gay rights in the 1970s. The link between the anti-gay rhetoric and the murder of Mayor George Moscone and Supervisor Harvey Milk is legitimate. So is the Speaker’s concern. Words can motivate. Passions can lead to horrendous acts – from terrorist bombings to the murder of doctors who perform abortions.

What’s hypocritical about Speaker Pelosi’s comment, however, is that she has contributed to tenor of the debate. When Speaker Pelosi, the individual third-in-line to the presidency calls opponents “immoral” and describes them as”the villains” in America’s health care reform system she loses the ability to complain when others claim her policies are socialist. The fact that Speaker Pelosi is guilty of what she rails against should not mean her warning is ignored. America’s health care system will be reformed by thoughtful deliberation. Depicting President Obama as Hitler, painting swastikas on the offices of lawmakers, pastors praying for the death of President Obama, or calling opponents “traitors” inspires ugly emotions and provides cover for crazies who take the law (both governmental and ecclesiastic) into their own hands.

Speaker Pelosi hopes for a more responsible tone in the health care reform debate. Her greatest contribution to achieving this goal would be to moderate her own rhetoric.

CBO Bolsters Baucus Health Care Reform Plan

The Congressional Budget Office has given a boost to the Chairman’s Mark of America’s Healthy Future Act 0f 2009. In a preliminary analysis of  the health care reform proposal put forward by Senator Max Baucus, the chair of the Senate Finance Committee. the CBO estimates the plan would reduce federal budget deficits by $49 billion between 2010-and-2019.

The Congressional Budget Office is highly regarded by both parties for its independent analysis. Their findings can cripple a bill or enhance its stature. In this case, even though the report is preliminary, the CBO adds substantial credence to Senator Baucus’ reform effort. A good thing considering the attacks on the proposal from both wings of the political spectrum.

The CBO presented its findings in a letter to Senator Baucus on September 16, 2009. (The analysis is summarized on the blog of CBO director Douglas Elmendorf). In addition to the positive effect on the federal deficit the analysis projects the health care reform legislation would increase federal revenues by $139 billion over the 10 year period. To be sure, the CBO, working with the staff of the Joint Committee on Taxation notes these estimates “are all subject to substantial uncertainty.” Further, the analysis was based on a description of the Chairman’s Mark of the America’s Healthy Future Act provided by Senate Finance Committee staff, not the document itself let alone actual legislative language.

What the CBO reports is that Senator Baucus’ health care reform bill would reduce the number of uninsured Americans by 29 million by 2019 according to the analysis. This would increase the percentage of Americans legally in the country and under the age of 65 to approximately 94 percent in 10 years from its current level of roughly 83 percent. This would leave “25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).”

Where these newly insured consumers obtain coverage is kind of interesting. As you read these numbers, keep in mind that the size of the individual health insurance market nationally is estimated to be approximately 18 million people. The CBO estimates roughly “25 million people would purchase coverage through the new insurance exchanges, and there would be roughly 11 million more enrollees in Medicaid than is projected under current law.”  These numbers are significant. They will change the dynamics of the market, but they hardly represent a government takeover, especially considering that the Senate Finance Committee proposal does not create a government-run health plan.

The health care reform plan put forward by Senator Baucus has been subjected a great deal of criticism by Democrats and Republicans, but the attacks by liberals have been especially vicious. Which means the real debate has begun. During August it was conservatives dominating the attack on Congressional health care reform proposals. Now liberals are joining the rant party. Here’s another example from Countdown with Keith Olbermann who, like the Glenn Becks on the right, seems unable to disagree with someone on public policy without calling them names or attributing venal motives to anyone on the other side. It’s politics by outrage that demeans the debate, but pleases the partisans.

Are there flaws in Senator Baucus’ health care reform plan? Yes. Hopefully the debate starting next week in Senate Finance will fix many of them. Is his plan better than the status quo?It certainly would be for the 29 million Americans gaining coverage under the proposal. Reducing the deficit seems like a step in the right direction. And, as I’ve noted before, to the dismay of Mr. Olbermann, health care reform will be decided by moderates. And moderates aren’t attacking the America’s Healthy Future Act.

Baucus Introduces America’s Healthy Future Act of 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)

Lack of GOP Support for Baucus Health Care Reform Matters, But Not So Much

After months of trying to craft health care reform legislation that would garner at least some Republican support, Senate Finance Committee Chair Max Baucus appears ready to move forward without GOP support – at least for now. According to the Associated Press, Senator Baucus will release his proposal on Wednesday without any Republican co-sponsor. The media will claim this is a huge setback for Senator Baucus and for President Barack Obama.

Maybe, but I don’t think so. First, there is a possibility at least one Republican will support the legislation when it comes to a vote in committee. Politico.com reports that “Sen. Olympia Snowe (R-Maine), who is considered the likeliest Republican to sign onto the bill, said she wants to wait to see how the committee process plays out. “’I am committed to this process,’” Snowe said. “’I want this effort to continue and I am going to work through all these issues and the committee process will advance that as well and we will continue to work together.’” While the other two Republicans working on bi-partisan legislation sounded less upbeat, they have not completely closed the door to supporting bill either.

The second reason the lack of any Republican support may not matter much in the long run is that Senator Baucus’ bill will appeal to Democratic moderates. And while Republican votes would be useful, it is moderate Democrats that hold the key to health care reform. Without the support of most of the members of the Moderate Dems Working Group in the Senate or the Blue Dog Coalition in the House, Congress cannot pass health care reform legislation. There are 18 Democratic Senators who are a part of the moderate group. At least eight of them must support legislation for it to pass. In the House, where Democrats outnumber Republicans 257-to-178, there are at least 52 members of the Blue Dog Coalition. They need at least 13 of them to support reform legislation.

Yes, there are more liberals in Congress than moderates. And some of these liberals are threatening to oppose health care reform that does not meet their litmus test of including a government-run health plan. But it’s much easier for a moderate to oppose health care reform than it is for liberals.

A moderate can stand on the floor and claim the bill is too expensive or involves too much government. Given their districts, this is unlikely to hurt them politically. In fact, it will likely help them in the upcoming election.

For a liberal to oppose one of the most important priorities of the Democratic Party because it doesn’t go far enough is a much tougher message. They must claim that millions of Americans should go without health care coverage because the bill isn’t ideologically pure enough. They must explain why insurance carriers should be permitted to continue to deny coverage to individuals with pre-existing conditions because the legislation doesn’t include a public option. In other words, liberals need to argue that the status quo is better than any reform. That’s not only a tough argument to make, it’s a foolish one.

Senator Baucus would love for Republicans to support his health care reform bill. President Obama would too. But they don’t need Republicans to support the bill. They need moderate Democrats.

Senator Baucus is pitching his proposal to those moderates. If he succeeds and if President Obama can get liberals to vote for what they will perceive is a partial loaf, then health care reform passes. If either fails in their assignment, so does health care reform.

It’s that simple. And that complicated.