The Alan Katz Health Care Reform Blog

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Posts Tagged ‘health insurance exchange’

Obama: Don’t Bet Against Health Care Reform This Year

Posted by Alan on July 17, 2009

A few hours ago I wrote about how President Barack Obama was ratcheting up the heat and pressure on Congress to pass comprehensive health care reform in August. Today he turned down the heat a bit, but kept the pressure on. In a skillful speech he laid out to the American people the benefits they will gain from health care reform, described the substantial areas of agreement already achieved by negotiators, reinforced his reasons for seeking reform, and pledged that reform will be enacted this year.

Some highlights from his speech.

Existing common ground: “We’re now at a point where most everyone agrees we need that we need to invest in preventive and wellness programs that save us money and help [us] lead healthier lives.We have an agreement on the need to simplify the insurance forms and paperwork that patients have to fill out every time they go to a hospital or see a doctor. We have an agreement on the need to reform our health insurance system so that if you lose your job, change your job or start a small business. you can still get affordable health insurance. We have an agreement on the need to prevent insurance companies from denying coverage to Americans with pre-existing medical conditions. And we have agreement on the need for a health insurance exchange, a marketplace where people can compare prices and quality and choose the health care plan that best suits their needs.”

On the benefits reform: “This is what health insurance reform will mean for the average American. It will mean lower costs, more choices and coverage you can count on. It will save you and your family money. You won’t have to worry about being priced out of the market. You won’t have to worry about one illness leading to your family going into financial ruin. Americans will have coverage that finally has stability and security. And Americans who don’t have health insurance will finally have affordable quality options.”

Impact on the deficit: “Health insurance reform cannot add to our deficit over the next decade. And I mean it.”

On cost containment: “Our proposal would change incentives so that providers will give patients the best care, not just the most expensive care, which will mean big savings over time. This is what we mean when we say that we need ‘delivery system reform.’ I’ve proposed to Congress .. that an independent group of doctors and medical experts will oversee long term cost saving measures. Every year there’s a new report that details how much waste and inefficiency there is in Medicare, how best practices are not always used, and how many billions of dollars could be saved. Unfortunately, this report ends up sitting on a shelf. And what we want to do is force Congress to make sure that they are acting on these recommendations to bend the cost curve each and every year.”

What’s at stake and the timing of reform: “Now is not the time to slow down. And now is certainly not the time to lose heart. Make no mistake, if we step back from this challenge at this moment we are consigning our children to a future of skyrocketing premiums and crushing deficits. There is no argument about that. If we don’t achieve health care reform we cannot control the costs of Medicare and Medicaid and we can not control our long term debt and our long term deficits … If we don’t get health care reform done now then no one’s health insurance is going to be secure because you’re going to continue to see premiums going up at astronomical rates,  out-of-pocket costs going up at astronomical rates and people who lose their job or have a pre-existing medical condition or changing their jobs finding themselves in a situation where they cannot get health care. And that is not a future that I accept for the United States of America. And that’s why those who are betting against this happening this year are badly mistaken. We are going to get this done. We will reform health care. It will happen this year.”

A few observations:

The President referred to his effort as “health insurance reform” on more than one occasion. Every drama needs a bad guy. With hospitals and doctors supporting key elements of reform, prepare for a lot of the rhetoric to turn against the insurance and pharmaceutical industries.

President Obama did not mention the month of August even once. As I wrote earlier today, he had been hammering at Congress to pass legislation next month. If the House and Senate were each to pass legislation that quickly it would still need to go to a conference committee, which means final passage would still be in the Fall. By emphasizing when the bill will get to his desk (“this year”) as opposed to when milestones are achieved in Congress, he shifts attention away from the inside baseball of the legislative schedule and returns it to the benefits of reform (“It will save you and your family money.”). That’s smart politics – it focuses on the benefits, not the features, and avoids appearing like he’s jamming reform through an unwilling Congress.

In his list of areas of agreement, the President included Exchanges, but did not mention a government-run health plan. Exchanges, as noted in a previous post, Exchanges can be a force for good or for not so good. Watching what kind of exchange emerges from the debate will be important. One should not read too much into his failure to mention public plans. He was simply being accurate – there’s no consensus on them. This doesn’t mean he’s giving up on the idea, just that the issue is still open.

President Obama also did not use his statement to threaten Republicans with an expedited process that would prevent them from filibustering on health care reform. This public restraint contrasts with the comments of his top aides. Coupled with his recent meetings with Senate moderates it indicates the Administration has not completely given up on the finding common ground critical for a bi-partisan solution.

The Obama Administration is deep into campaign mode on the health care reform issue. As he proved over the past two-plus years, it’s risky to bet against Barack Obama in a campaign. As the man said, “We are going to get this done. We will reform health care. It will happen this year.” If there’s any way to deliver on this promise, President Obama will find it.

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics | Tagged: , , | 15 Comments »

Health Insurance Exchanges Unlikely to Eliminate Brokers

Posted by Alan on July 14, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

President Obama Entering Health Care Reform Arena

Posted by Alan on July 13, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics | Tagged: , , , , , , , | 4 Comments »

CBO Analysis Highlights Difficulty of Affordable Universal Coverage

Posted by Alan on June 15, 2009

Among the duties of the Congressional Budget Office is determining the financial impact of legislation proposed by lawmakers. Their highly credible analyses is given great credence within Congress. Which means today’s preliminary report on the health care reform package crafted by Senator Edward Kennedy and other members of the Senate Health, Education, Labor and Pensions Committee is especially important.

The CBO Preliminary Analysis of the Affordable Health Choices Act, released on Monday, underscores the challenge Congress faces in attempting to insure the uninsured without breaking the federal budget. Before discussing the finding, it is important to note: this is a preliminary analysis of draft legislation. The CBO analysis focused on “major provisions on health insurance coverage,” leaving several important elements out of their review. There are elements of the draft bill that have not yet been modeled, for example, allowing children through age 26 to be considered dependents on their parents’ policies. There are a host of other caveats involved. So it is best to treat the findings of this report as broad and directional.

Considering the sincere commitment Senator Kennedy and his allies have for universal coverage, the direction of the Congressional Budget Office’s conclusions must be disappointing.

Without intervention, the CBO estimates that by 2019 approximately 228 Americans under the age of 65 will have health care coverage, but from 50-to-54 million people — about 19 percent of this population — will not. If the HELP Committee’s health care reform package were enacted, the CBO estimates the percentage of uninsured would fall to 13 percent of the non-elderly population would still be without coverage — approximately 36 or 37 million.

The net increase to the federal budget for covering these 13-to-18 million Americans would be $1.o trillion between 2010 and 2019, most resulting from the subsidies the legislation would offer to individuals earning up to 500 percent of the federal poverty level purchasing coverage through a government-run Exchange.

In the CBO Director’s blog posting on the analysis, Director Douglas Elmendorf points out that while the study estimates that 39 million Americans would obtain coverage through the Exchange, “the number of people who had coverage through an employer would decline by about 15 million (or roughly 10 percent).” He pegs the net decrease in the nation’s uninsured at about 16-to-17 million people.

No one claims comprehensive health care reform will be easy. The Affordable Health Choices Act is only one reform package on the table. And, as reports, the White House made clear it is not the Obama Administration’s plan.  The CBO preliminary analysis on the draft legislation developed by the Senate HELP Committee makes clear just how difficult — and expensive — it will be.  Will the CBO report convince lawmakers to scale back their ambitions for government’s involvement in America’s health care. Perhaps, but I wouldn’t count on it. Health care reform is as much about ideology as pragmatism. 

The CBO study should embolden Congressional moderates, however, to stand firm for comprehensive reform that neither breaks the budget of the federal government nor American families.

Posted in Barack Obama, Health Care Reform, Healthcare Reform | Tagged: , , , | 4 Comments »