Sunday, November 28, 2010

"Don't Litigate, Innovate." How To Implement A Fully Funded Alternative To The New Health Care Overhaul -- And It's Already In The Law

This post of mine first appeared at Kaiser Health News last week.

What if a Republican governor and a Republican legislature had the ability to implement their version of health insurance reform and the federal government would have to pay for it? It's a great idea. And I'm thrilled to say that a bi-partisan bill has already been introduced in the Senate by Ron Wyden, D-Ore., and Scott Brown, R-Mass., that would help facilitate exactly this end.

First, let's review section 1332 of The Patient Protection and Affordable Care Act to realize how states are already -- at least eventually -- given the ability to innovate in this manner. Here is a simplified summary:
  • A state may apply to the Health and Human Services secretary for a waiver of all or any requirements with respect to the insurance exchanges, mandates, and subsidies with respect to health insurance coverage within that state for plan years beginning on or after January 1, 2017.
  • The secretary has to provide for an alternative means by which the aggregate amount of the tax credits and subsidies, which would have been paid on behalf of participants in the exchanges, would instead be paid to the state for purposes of implementing their own version of the law.
  • The secretary may grant a request for a waiver only if the secretary determines that the state plan will provide coverage that is at least as comprehensive as the coverage defined under the new law and offered through similar exchanges established by the states.
The bottom line is that the new law invites states to present HHS with an alternative to the insurance provisions of the new health law and gives the secretary the ability provide the state with the same funding it would have received under the overhaul so long as the state can get the same number of people covered under similar coverage.

Arguably, that waiver request could be absent the individual mandate, the employer mandate or any other key provision in the new law so long as the state made a credible argument that they could reach the same expansion target.

Is it a pipe dream that any state would take the same amount of federal money that would have been spent there anyway as a result of the health overhaul and instead build its own version of health reform? Maybe not. And the Republicans may be perfectly positioned to put such plans into action.

The 2010 mid-term elections were not only a big congressional victory for the Republicans but a big victory in the governors mansions and state legislatures as well. Republicans picked up 680 seats in state legislatures (by comparison Republicans won 472 seats in the last Republican landslide in 1994). They now control both houses of the state legislature in 26 states. And they control the entire state legislature and the governor's mansion in 16 states! In other words, Republicans have the electoral "trifecta" in 16 states -- they can pretty much pass whatever they want.

If Republicans really know how to implement the right kind of health care reform system they have a heck of an opportunity because the Democratic health care law says that, with a waiver, they can get their hands on all the health law’s federal money.

And it's not just Republicans that might want to innovate. I am hearing there are a number of Democratic governors taking a look at this provision in the law. The one catch is that neither Republicans nor Democrats can implement their state version of a health insurance system prior to January 1, 2017.

But then the Congressional Republicans say they want to fix the new health care law the Democrats just passed.

It would seem to me that House could pass a bill enabling the states to move much sooner than 2017 and, if it did, Democrats in the Senate, as well as the President, would be hard pressed to block them.

After all, a state wouldn't be entitled to the federal health insurance reform money unless a Democratic HHS Secretary (a certainty until at least January 2013) certified that the state's plan was going to cover at least as many people as well as the federal law was going to do it.

In fact, the bill introduced by Sen. Wyden and Sen. Brown would roll the date back to January 1, 2014.

Maybe some of these Republican state attorneys general ought to drop their lawsuits that call into question the constitutionality of the new health law and just suggest their governors get behind the Wyden-Brown bill and show us how to do it the right way!

Tuesday, November 23, 2010

Will it Be the Bond Market That Finally Forces Serious Health Care Financing Change?

When will the Congress and the White House finally make the hard decisions in order come to grips with the federal deficit problem?

When will we finally deal with real health care reform and get the entitlements, and with them the private health care cost issue, under control?

My focus on trying to answer those questions has always centered on what's going on in the health insurance market: When will costs simply become untenable and therefore force real change?

Watching "Meet the Press" on November 14th, it occurred to me I may have been missing the catalyst for real health care change.

Here is an exchange between moderator David Gregory and former Fed Chair Alan Greenspan:

MR. GREGORY: But don't we have to have an adult conversation with people about what the real [deficit] problem is?

DR. GREENSPAN: Look, I think something equivalent to what Erskine Bowles and Alan Simpson put out [Deficit Commission Chairs' report] is going to be passed by the Congress. The only question is, is it before or after a bond market crisis?

MR. GREGORY: Right.

DR. GREENSPAN: Because there's no alternative. Look, I...

MR. GREGORY: But you got to explain a little bit more what that means. You're talking about debt.

DR. GREENSPAN: Well, here, here's the issue. Right now we have very low bond prices, the markets are functioning in a reasonably good way. The big, serious problem is whether or not the outlook for the longer term deficit spooks the bond market to a point where long-term interest rates and mortgage rates move up very sharply. If that happens, that will cause the double dip. And I'm just basically hoping that we have enough sense to realize that we've got to resolve this issue before it gets forced upon us

"The only question is, is it [our finally dealing with the debt and entitlement problems] before or after a bond market crisis?"

The single biggest driver in our national debt problem is the cost of our health care entitlements.

It may in fact not be the health care system itself and its unaffordable costs that finally force real action for health care cost containment––it may be the global bond market and its lack of confidence in America's ability to finally deal with our debt, and its health care driver, that will cause a crisis that forces health care action.

But would such a crisis force meaningful and rational health care reform or just draconian fee schedule cuts across the board that puts the health care sector––particularly the providers––in a crisis of their own?

Monday, November 22, 2010

The 300 Page MLR Rules—About as Valuable as Taking Your Shoes Off at the Airport

This whole medical loss ratio (MLR) provision in the new health care law is a fool’s errand. When it comes to controlling health care costs it is about as productive as taking your shoes off at the airport is valuable at improving air travel security.

Without a doubt, the new health care law does far too little toward making health care costs affordable. And, marginal health insurance carriers have little hope of doing a lot to bring costs under control.

But for consumers what matters is cost--and that is measured by a health plan's monthly premium. The cost of an insurance policy is market driven. In any market on any day, that insurance company has to quote a competitive price no matter what their expense ratio in that market.

Which insurance policy is low cost health insurance is determined by its price—not some convoluted MLR formula developed by bureaucrats that runs about 300 pages.

Too often people inside the Beltway underestimate how price competitive the health insurance market is. Go to the Internet and you can almost instantly get a number of quotes comparing benefits and price. Go to your local insurance agent and you get the same thing.

Show me a health plan with a 78% MLR and one with an 81% MLR and I cannot tell you which one has the lowest price. The higher MLR plan may be doing more to manage costs and thereby producing a lower premium rate. Heck, Medicare has the lowest MLR in America and is under constant criticism that it does not manage costs.

And don't underestimate the value these little health insurers bring to the market. They are the ones who must quote low rates to survive and they do more than many can imagine to keep the big guys honest.

But the authors of the new health care law think consumers are dumb and need the federal government to draft thick incredibly complex MLR regulations so they can be saved from themselves.

The insurance exchanges make a whole lot more sense than these MLR regulations—side-by-side comparisons of plans by cost and benefits making the health insurance shopping experience clear will be enough without this huge addition to the federal bureaucracy.

By HHS’s own calculations over 20% of those in the individual market are in plans that spend more than 30% on administration—another 25% are in plans that spend 25% to 30% on administration.

HHS expects 9 million consumers to get premium rebates.

But that assumes that the insurance companies that would pay those rebates are going to stay in the market and lose money paying them. Of course many insurers with little hope of ever being able to comply are not going to do that.

The new guarantee issue and pre-existing condition reforms don’t go into effect until January 1, 2014.

How many of those 9 million consumers are going to see their insurance company exit the market instead of lose money paying rebates?

If these consumers lose their insurance because their carrier exits they have to buy it from a different insurance company—but they are going to be subject to underwriting and pre-existing condition rules that are still in effect. You can see the headlines: “Cancer patient loses coverage under the Obama health plan and can’t get new coverage.” And, yes they can go to the new high risk pools--in six months and maybe for less coverage and higher costs.

Afraid that many people will lose their coverage, HHS has said it will grant waivers to these rules when there is the potential for the market to be “destabilized” by the implementation of the MLR rules.

I presume that means Democrats are scared of headlines reporting about consumers who have lost the insurance they wanted to keep because of the new law.

So, when the day is done, HHS is getting ready to implement a huge and complex regulation complete with massive reporting requirements but won’t do it if it disrupts any of the high expense carriers with big state market share the law is intended to go after.

And to the extent HHS does implement these new MLR rules who do you think the winners are going to be? It won't be consumers, it will be the giants of the health insurance market who dominate the market today and have an expense ratio advantage driven by their size. This is the jumbo health insurance company full employment act!

HHS and the TSA—just take your shoes off and keep your mouth shut!

Sunday, November 21, 2010

Health Care—Tell Us the Truth Before You Tell Us Why You Are Right

This is post of mine that appeared last week at Kaiser Health News.

Just after the election, I saw an exchange between CNN’s Anderson Cooper and the head of the Tea Party House Republican caucus, Michele Bachmann. Cooper tried to pin Bachmann down on just exactly what “specific spending cuts” she would make to get federal spending under control. When he suggested that Medicare was going to need big changes if the deficit was going to be reduced, Bachman wouldn’t be specific but responded that we “need to reform the system” but this “can’t be about scaring senior citizens.”

If the Republicans are serious about getting America’s fiscal house in order they are going to have to do a lot better than that.

During the election, I heard one Tea Party Republican candidate for the House say that we needed to get on top of all of the deficit spending and to do that we needed to reform the entitlement programs. But then he said hospitals and doctors are underpaid and we need to be sure they get better reimbursements.

Democrats aren’t much better at confronting the entitlement problems. President Obama has been telling the American people that the health care bill they passed in March -- the Patient Protection and Affordable Care Act -- will make health insurance affordable. Heck, it’s in the title of the bill. He’s also been saying that the new law actually reduces the deficit.

It is true the Congressional Budget Office (CBO) does estimate the new health care law will cover about 30 million more people and reduce the deficit by $138 billion over ten years. Of course to reach these numbers the bill uses plenty of budget gimmicks like front-end loading revenue and back-end loading benefits, ignoring the $300 billion physician fee crisis and raising taxes by $500 billion.

But, accepting the claim that the bill does reduce the deficit by $138 billion, we also need to remember that the same CBO report predicts we will add $12.7 trillion to the deficit over the next ten years -- a big chunk of it because of the health care entitlement costs that are out-of-control. To put this into perspective, without the $138 billion reduction in the deficit because of the health care bill, the CBO would have projected a $12.838 trillion increase in the deficit!

So both sides aren’t exactly facing our nation’s biggest fiscal problems in an honest way.

The Democrats refuse to admit their new health care law is not the kind of health care reform that would have at least begun to fix the entitlement problem.

Republicans haven’t done more than go negative on the new health care law and haven’t put up any real proposals for how they would deal with this conundrum. Their favorite campaign sound bite was to call for selling insurance across state lines. Just which state’s health insurance policies are affordable and would make health insurance affordable if they were sold in the rest of the states?

The health care entitlements, the old ones and the new one, simply swamp the federal budget. Take a look at the chart below. It comes from the same CBO report that affirms President Obama’s claim that the new health care law actually reduces the deficit by $138 billion.

There are a couple of thing to note about the CBO’s long-range federal budget projections:
  • While Social Security is a challenge, it’s a pretty modest a challenge when compared to the health care entitlements.
  • If the Democrats had really done health care reform this year, the trend line for the cost of the health care entitlements would not be continuing its startling upward trend.
  • All of the rest of federal spending, including for defense, is a fairly small part of America’s deficit and debt challenges. Big cuts there hardly matter if you aren’t going to tackle the health care entitlements.

The full CBO Report

Don’t “scare” seniors? I’ve read the reports and I’m scared. What we just saw occur was “health care reform?” Hardly.

We need more proposals like those being made by the President’s deficit reduction commission, and the Medicare reform proposal authored by Republican House members Paul Ryan of Wisconsin, Eric Cantor of Virginia and Kevin McCarthy of California. Irrespective of whether they are the best proposals, their authors started from a place where they told the truth.

More than scaring seniors, or anyone else, both Democrats and Republicans need to treat the American people like adults and be honest about just how critical a problem we have with health care spending. If both sides could do that first, then it would make it a lot easier to have a real conversation about the trade-offs we will, someday, inevitably have no choice but to make.

Thursday, November 11, 2010

Shame on AARP For Their Response to the Deficit Commission Co-Chairs' Report

The Co-Chairs of the President’s Deficit Reduction Commission are out with their preliminary recommendations.

They’ve done a great job—they’ve offended about everyone!

But we have a nearly impossible but unsustainable challenge in front of us if we are ever going to crawl out of this deep hole.

It is not so much what is on their list as what this list tells us about just how fundamental the changes are going to have to be for anyone who depends in any way on the federal government—which would be everyone in this country born or going to be born for decades to come.

In fact, the preliminary report calls for the Congress to revisit the Public Option if health care costs don’t meet a set of initial five-year targets. Nothing has been left off the table whether it is an unfettered discussion of how bad things are or the wide range of controversial options that now must be considered.

So how does AARP respond to the truth about the problem and an honest attempt to deal with it?

Some separate quotes from their press release yesterday in response to the report:
“With the release of the Co-Chairs’ proposal from the President’s Fiscal Commission today, AARP has responded with concern about how these recommendations would hurt the health and financial security of middle class Americans in particular, and believes that the proposal is contrary to the best interests of American families.”

“During these tough economic times, the last thing we should be considering is targeting the guaranteed, inflation-protected Social Security benefits that millions of Americans count on every day,’ said Nancy LeaMond, AARP Executive Vice President.”

“We're also deeply concerned that the Co-Chairs' Proposals would aim to reduce the deficit by shifting health care costs onto seniors in Medicare. Raising costs on the sick and the most economically vulnerable is both wrong and counter-productive policy. Instead, we should be focused on efforts to lower costs throughout the health care system.”
I liked Senate Budget Chair Kent Conrad’s response a whole lot more, "People can say we want to keep what is. What is is not affordable.”

Of course any report like this is going to be "dead on arrival" on Capitol Hill. But it's real value is that it can be the beginning of an honest discussion on what we will have to do.

AARP has lots of people at its Washington headquarters that understand these problems better than most and very much care about maintaining the integrity of our entitlement programs.

I expected a lot more from them.

AARP should be doing its part getting our people ready for change not pretending that it can somehow be painlessly avoided.

AARP should be taking the lead in explaining to seniors, and those on their way to becoming seniors, just what the problems are and just how fundamental the change is going to have to be if we are in fact going to hand our children and grandchildren a sustainable American Dream.

Shame on AARP! If anyone could be providing critically important leadership here it is them.

Download the Co-Chair's Report

Monday, November 8, 2010

Health Care and the 2010 Mid-Term Elections--the Only Thing Now Certain is the Uncertainty

The election has given us a Republican House and a still Democratic controlled Senate. But, instead of Democrats having the 60 Senators they had when health care was passed in December, they will have a slim majority in the new Congress of 53 seats when the two Independents who caucus with them are counted.


Exit polls clearly show an anti-health care law sentiment. Exit polls done for the AP found 48% of Tuesday's voters want the new health care law repealed, 31% want it expanded, and 16% want it left as is.


Remember those swing Democratic House votes that were on the fence over the health care bill last March? Most who voted for it are now out of work—and all but 11 of the 34 of them who voted against it also went down to defeat. Why did even those who voted against the new health care law lose their jobs? Because of one vote they all had in common--they voted for Pelosi as Speaker.


The two most prominent Democrats who touted their yes votes in their campaigns for reelection—Wisconsin Senator Russ Feingold and North Dakota House Democrat Earl Pomeroy—lost.


So, does this mean there is an overwhelming tide running toward repeal of the law?


The election results are likely a prescription for gridlock. With an Obama veto and the Democrats still controlling the Senate by a slim margin, it will be difficult, if not impossible, to get a health care repeal bill passed in the next Congress.


I do expect the Republican House to pass a bill repealing the health care bill very early next year. Then it goes to a Senate run by Democratic Majority Leader Harry Reid—good luck with that!


More likely, what we saw in the mid-terms was the opening act toward the 2012 elections. Republicans will be blocked from any major repeal action by the Obama veto and the lack of a majority in the Senate and will use that to call for voters to finish the job by giving Republicans control of everything in 2012.


The biggest problem the Republicans have is a lack of an alternative health plan. Repeal and replace the existing law with what?


Without a doubt there is a strong anti-health care law sentiment running. And, it might be possible to scare up a bare majority in the Senate for partial repeal legislation that comes under budget rules requiring only 51 votes. With the Republicans ending up with 47 Senate seats, they might also be able to get the new West Virginia Senator, Joe Manchin, to vote with them. Democrat Ben Nelson of Nebraska can’t seem to figure out if he is a Republican or a Democrat, and maybe Independent Joe Lieberman of Connecticut could be another pick-up. They would still need at least one more Democratic vote to get to 51.


And, Obama would have to go along with the changes for them to become law.


But it would take 60 votes to repeal all of the law. And, 67 to sustain an Obama veto of any outright repeal law.


Changing the health care law with 51 votes will require Republicans to put something up that dealt only with budget items and made a compelling argument that it was a prudent change. Just trying to repeal the individual mandate (a budget item) but leaving in place the underwriting reforms (which would require 60 votes to repeal) would create lots of unintended consequences that could well scare away not only these swing votes but even more Republicans as well.


It is possible that Republicans could try to amend the new law’s insurance subsidies to look more like their tax credit proposals, for example. But even there they risk looking like they want to repeal employer-based health insurance and that would be a very tough sale.


Republicans might also try to restore the Medicare Advantage cuts. But to do that they would have to come up with about $150 billion to offset that cost in order to avoid just adding to the budget deficit.


So, the viability of any repeal effort, or any effort to pass major amendments, will require Republicans to put a plan on the table that is compelling. I have no idea what that is based upon what I have heard the candidates and the Republican leadership say during the campaign.


The new House majority will enable Republican House committee chairmen to harass the Obama administration’s regulators at HHS. We should expect lots of testy hearings, which would have more political value as Republicans try to build momentum toward 2012 than accomplish a lot the Senate, would pass.


I would have to believe that the Obama regulators are at least a bit chastened in the wake of the election. The final MLR rules are due out in the next few weeks and a number of state insurance commissioners have called for more flexibility in implementing them. Based upon what happened last Tuesday, will Sebelius grant that flexibility? One would think so.


Just as interesting will be the need to fix the Medicare physician payments by the end of November. It will cost about $15 billion to patch that problem for just 13 months. With the voters saying, “no more debt” just what is the “lame duck” Congress going to do about that? Add to that the small business “1099” problem that would also cost about $17 billion to fix before it becomes effective on January 1, 2011.


The election results were also good news for Republicans in the states where they picked up at least 10 new governors’ seats. In separate races for insurance commissioner, two went to opponents of the law while California elected a supporter.


These state races will affect just how aggressive the states are in establishing the insurance exchanges due to become available in 2014.


We could see Democrats and Republicans simply to agree to disagree over the new health care law--maybe even seeing appropriations, like the money needed to build the 2014 insurance exchanges, held up until the 2012 elections finally decide who will be in control in the lead-up to 2014.


For now, the election results add more uncertainty as we immediately begin the 2012 election campaign and everyone gets ready for the 2014 implementation of the bulk of the new health care law.


You know, one of the things we talked about on this blog, on the way to seeing this bill passed, was the sense that you can't pass something as big as health care reform without a consensus of support for it. If you did, there would be a huge risk that it would not likely have the necessary support to be properly implemented or even sustained.


If a Republican "defunding" fight over appropriations leads to the two sides gridlocked and finally just agreeing to table implementation until after the 2012 elections, we might just see health care as the preeminent 2012 issue--a vote for Republicans meaning repeal it and a vote for Democrats meaning implement it.


So, what was it exactly that was accomplished last March?

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