The Alan Katz Health Care Reform Blog

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Posts Tagged ‘health insurance co-ops’

Senate Finance Health Reform Framework Creates Context for President’s Speech

Posted by Alan on September 8, 2009

In yesterday’s post I described some highlights of a draft health care reform proposal being circulated in Washington by Senate Finance Committee Chair Max Baucus. Yesterday all I could find were news stories about the proposal. Today the full text of what is called the “Framework for Comprehensive Health Reform” is available.

There’s a lot of interesting details in the proposal. It would dramatically change the way health insurance is priced, purchased and administered. It brings together several proposals to reduce the underlying cost of care (although it fails to bring them together into a single section – a political error in my view). It offers subsidies to make coverage more affordable. requires individuals to obtain coverage, and penalizes businesses of more than 50 workers who fail to offer its employee’s insurance. It does not include a government-run plan, but does create state-level health insurance exchanges and authorizes health insurance co-operatives.

The document is only 18 pages and well worth the reading. Because what is significant about the framework is its embodiment of the more moderate ideas under serious Congressional consideration. The framework is not legislation and the Finance Committee is likely to make significant changes to various aspects of the proposal. But if the legislation that emerges from the committee is anything like what’s being circulated by Chairman Baucus, it is the vehicle for reform that has the best chance of capturing any Republican support and of attracting moderate and conservative Democrats. It is also the legislative package destined to be the target of liberal wrath.

Which is another reason the Senate Finance Committee’s Framework is significant. The proposal is being circulated just before President Barack Obama’s address to Congress on health care reform. In his speech President Obama will be creating the context for the final push toward comprehensive health care reform. Previously the debate had focused on the only proposals on the table – the liberal bills passed by the Congressional committees. You were either for them or against them. The Framework being considered by the Senate Finance Committee brings forward a new option, a more moderate option. It won’t attract the support of conservative Republicans – nothing Democrats propose could. But it may attract some GOP votes and it certainly will bring along many moderate and conservative Democrats.

I have long maintained that health care reform would be decided by such moderates. But it is up to President Obama to make this possible. His speech will either strengthen or weaken Senator Baucus’ proposal. His address is expected to clarify what provisions he considers crucial to reform and which he simply prefers and encourages. If he stakes his position firmly in the liberal camp the chances of moderates prevailing is greatly reduced. If, however, he embraces some of the provisions put forward by Senator Baucus, the debate will shift considerably toward the middle. And the legislation likely to emerge from Congress will look substantially like the Framework.

In other words, President Obama is coming to the health care reform arena with no intention of sitting on the sidelines. Now that there are two teams on the field, he needs to make clear which one he’s on.


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Could Co-ops Provide Competition Where It’s Needed?

Posted by Alan on June 14, 2009

Based on what was being said on the Sunday talk shows today, the justification for creating a government-run health plan to compete with private carriers seems to be expanding. One of the fresh arguments does not seem to carry much weight, but the other might.

Some are claiming that consumers need to know they can buy the same health plan anywhere in the country. By having a public plan offering coverage nationally they would be able to change jobs, move to a different state and still keep their current coverage. Accepting that this would be a nice situation, it certainly isn’t a strong reason for a public plan given the risk that step entails. As I’ve posted before, the temptation to tip the playing field in favor of government programs is too tempting for lawmakers. Already on the table is allowing tax credits to make premiums more affordable eligible only for coverage purchased through an Exchange, for example.

The simple fact is, without a level playing field a government-run plan will eventually — not the first year, maybe not the fifth, but eventually — drive private carriers out of the market. If that’s what Congress and the Obama Administration want to do, they should just say so and try to make it happen. But if they are sincere about preserving private options for Americans, then they need to tread carefully. Creating a public plan just so consumers can keep the exact same plan when they move to a new state is simply not worth the danger.

The second justification is an amplification of the original rational for a public plan: that it would encourage competition in the market. On CNN’s State of the Union, this morning, Secretary of Health and Human Services Kathleen Sebelius brought up the lack of competition in her home state, Kansas (until her confirmation as Secretary, she was Governor of Kansas). And it is true that in some states a single carrier will have 60 percent or higher market share for medical policies sold to individuals and small businesses. In those states, additional competition should be beneficial.

Yet in other states competition is far more robust. In California, for example, there are several carriers competiting for individual and small group coverage. None, I believe, have more than 45 percent and at least three have more than 20 percent. A government venture is, arguably, unnecessary here.

If competition is sufficient in some states, but lacking in others, perhaps a national solution isn’t required. Instead, allowing the solution should be fashioned at a more local level. Senator Kent Conrad’s compromise proposal could be adapted to do just that. Senator Conrad is calling for the creation of non-profit health insurance co-operatives, much like what exists in some areas for electricity. They would be owned by local residents and businesses. They would compete under the exact same rules as private carriers. The government’s only role would be to provide seed money to get them launched. These co-ops could bring competition to places where it currently doesn’t exist. In an area where one carrier controls more than 50 percent of the market, for example, the government could assist in creating a health insurance co-operative — or several of them.

The health care reform debate is getting closer to the nitty-gritty stage every week. President Barack Obama is urging Congress to put a bill on his desk this year and Congressional Leaders are working hard to make that happen. To pass anything, let alone pass it quickly, controverseys like government-run will need to be resolved. Liberal Democrats are insisting it must be included in the final health care reform package. Republicans, including those who broke with their party to pass the Administration’s stimulus package, are adamantly opposed to it.  As the Associated Press reports Senate Minority Leader Mitch McConnell as saying, “I think that, for virtually every Republican, a government plan is a nonstarter.” Some  moderate Democrats are opposed to the idea, too.

Senator Conrad’s co-op idea may provide the needed common ground. Moderate Republican Senator Susan Collins noted, according to the Associated Press article, that the co-ops are “far preferable to the government-run plan that has been discussed by the administration. We need to better understand how it would work. But it’s certainly better than a Washington-run plan.”

The idea of a government-run plan is not the only controversey that will need to be addressed to pass comprhensive reform. But it is an obstacle. And it can serve as a template for resolving other issues. Replace targeted solutions for national ones where the problems are not national in scope. Helping health insurance co-operatives get launched in areas where there is no competition could solve local problems without creating a national one.

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Public Health Plans and Level Playing Fields

Posted by Alan on June 11, 2009

Whether comprehensive health care reform should include a government-run health plan is receiving a lot of attention of late. As well it should. Several issues before Congress have the potential of creating substantial, negative unintended consequences, but few as much as a pubic health insurance plan.

Advocates of government-run plans insist, as The Huffington Post reports President Obama did at a town hall meeting in Green Bay, Wisconsin, on Thursday, that “If the private insurance companies have to compete with a public option, it will keep them honest and it will help keep their prices down.”

However, as I’ve written before, a government health plan can have severe consequences to private carriers. Current government programs like Medicaid and Medicare pay doctors and hospitals less than their actual costs. They make up the difference by increasing what they charge private health plans. But Medicaid and Medicare don’t compete directly with private carriers. The government-run health plan advocated by President Barack Obama and many Democrats would. The cost shift their would result in an ever increasing pricing gap betweent he public plan and private carriers. Eventually private carriers would become uncompetitive and leave the market.

President Obama hears these concerns, but rejects them. In Wisconsin, The Huffington Post reports him as saying, “So, what you’ve heard is some folks on the other side saying, I’m opposed to a public option because that’s going to lead to government running your health care system. Now, I don’t know how clearly I can say this, but let me try to repeat it. If you’ve got health insurance that you’re happy with through the private sector, then we’re not going to force you to do anything.”

People can keep their private coverage if they want. Well, maybe. If the public plan behaves like Medicare, then this argument becomes a bit disingenuous. Medicare pays roughly 19 percent less than the actual cost care. Senator Edward Kennedy has proposed a public plan that pays providers 10 percent more than Medicare. This underpayment would force even more dollars to be shifted to private insurance companies. Not a recipi for those private plans you have the right to stay in to last very long.

President Obama is optimisitc a compromise can that avoids this inevitable result can be found. “And I think that we can come up with a sensible, commonsense way that’s not disruptive, that still has room for insurance companies and the private sector, but that does not put people in the position where they are potentially bankrupt every time they get sick.” Maybe he can. If so, it would be nice for him to describe what this compromise might look like.

Senator Kent Conrad a proposal that might work. He calls for creating non-profit, co-ops, owned and operated by local residents and small businesses. They would receive federal dollars to get launched, but otherwise would receive no favored treatment and would have to be self-supporting.  However, House Speaker Nancy Pelosi opposes such an approach according to the New York Times’The Caucus blog. At the same time, however,  Speaker Pelosi claims to want a public health plan to compete fairly in the marketplace. “It should be actuarially sound. It should be administrative and self-sufficient. It should be a real competitor with the private sector and not have an unfair advantage. When you say the words public option if that is the term about we will be using, you have to say right next to it, level playing field.”

The interesting conundrum this raises is, if a public plan is going to be just another option competing on a level playing field, why create it? Yet if it is given an artificial advantage it distorts the market in harmful ways. If a goal is to preserve the private market, this is problematic.

One option being discussed, according to the New York Times, is to introduce a public plan only “if people were not able to get insurance through private companies. This approach, called a trigger on Capitol Hill ….”  At least this approach makes some sense. If the private market in an area is dominated by one carrier, the government would introduce competition.  Competition does keep the participants honest. If it’s lacking in a community, a case can be made that the government can and should provide it.

Whether this limitation on public plans would satisfy its advocates or its opponents is yet to be determined. What is clear is that we’ll be hearing a great deal more about public plans, level playing fields and fair competition in the months ahead. Whether what eventually emerges is compatible with any of these concepts remains to be seen.

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