Back to the Future! Pelosi Calls Insurers “Villains”

Like we didn't know it would get to this.

This from Speaker Nancy Pelosi’s news conference yesterday:

"The public option--that's where the insurance companies are making their attacks-––it's almost immoral what they are doing. Of course they've been immoral all along. They are villains in this, they have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening and the public has to know...They had a good thing going for a long time at the expense of the American people and the health of our country. This is the fight of our lives."

Guess the days of everyone being at the table and getting along are over.

I’m not interested in getting into a conversation here about whether insurance companies are villains or not. I expect most of you are clearly on one side of that issue or another and that is not likely to change.

I would like to talk about the politics of Speaker Pelosi choosing to go after the insurers.

It’s clear that there is a House Democratic leadership strategy brewing to demonize the insurance companies to counter the Republicans' success to date in the demonizing of “Democratic attempts to put government in charge of your health care.”

The August recess will clearly be about one side trying to get and/or keep the high political ground on health care (not to be confused with the high road on health care). Just how this war of words turns out will likely determine whether this attempt to pass a big health care bill (note I did not say health care reform) goes somewhere or crashes and burns like all of the others.

It is disappointing to see that after months of intensive discussion about what we should do with our unsustainable health care system it’s all boiling down to the same old battle between “villainous” insurance companies versus “inept government control” of health care.

I will also suggest that Speaker Pelosi is doing the same thing Mrs. Clinton did in 1993—using her polling data to determine the way to sell health care is to go after the health insurance industry.

I recall Democratic pollster Celinda Lake’s data from a year ago; 82% of the people who voted in the prior election had health insurance for everyone in their family. 92% were themselves covered by health insurance.

The vast majority of people who vote have private health insurance and they are very happy to have it. They are very worried about keeping it and its growing out-of-pocket costs but that is different than being ready to ditch it.

In 1993, much of the undoing of the Clinton health plan occurred when opponents were able to convince voters, the vast majority of which had good insurance they wanted to keep, that their coverage was in jeopardy. In 1993, Mrs. Clinton made the decision to advance her health care plan making the insurance industry the villain. She did not understand the health care version of the haves versus the have-nots in this country and it cost her dearly.

It’s sort of like the difference between voters having little respect for Congress but liking their Congressional representative.

The health care debate is now devolving not evolving.

Maybe that is because neither side really has a real health care reform strategy to sell in positive terms to the American people.

I will suggest that both sides have tried to do a health care bill on the political cheap--arguing that we can fix this busted system and no one will have to lose or sacrifice to do it. Of course that is not true and all it does is give the other side plenty of room for criticism when you put your plan on the table--which is then easily countered with references to "villains" and "inept government control."

Back to the future.

Health Care Reform Coming Out of Senate Finance?

We’ve been getting lots of news these past few days leading to optimism that a bipartisan health care bill will soon emerge from discussions between the “Coalition of the Willing.” That term refers to the three Republicans and three Democrats trying to find common ground in the Senate Finance Committee.

First, let me be clear that I have the greatest respect for Senators Baucus and Grassley and their four colleagues. Theirs is the kind of bipartisan approach that all of Washington, DC should be following on any number of issues.

And, as I have posted here before, I am concerned that in their efforts to find compromise they are headed for a health care bill that is based on a formula of cost containment “lite,” minor paring of Medicare and Medicaid provider payments, and at least $500 billion in new taxes. I don’t see much changing fiscally if that is the final result in a health care system that is already unsustainable and on the way to spending upwards of $35 trillion to $40 trillion over the next ten years as it goes to 22% of GDP by 2018.

From what we have heard, their bill would hardly "bend" any curves.

Yes, we could well cover tens of millions more people and that alone would be a noble accomplishment. But just loading all of these people onto a system that we can’t now afford seems to me to be ultimately a fool’s errand. The number of uninsured we have in this country isn’t the fundamental problem—it is the most aggravating symptom of our real problem, which is unsustainable cost.

Being good guys and bipartisan doesn’t necessarily lead to the best policy!

But I would also caution people watching this process not to be so certain that when the final Senate Finance product is unveiled—if it is ever reached—that we are on the fast track to legislation.

We’ve literally had these Senators holed up in secret for a number of weeks engaged in a very complex group dynamic trading one policy and revenue concept for another that may be leading to a compromise that makes sense to them. But each trade-off they made, or are making, is something really important to someone outside their little group and maybe not something any one, or a group of, the other 529 members of Congress is willing to go along with.

What we do know is that every time a new idea for controlling costs, getting a good CBO score, or raising money has hit the media it has about always come in for lots of criticism from one side or the other—or even both at times.

For more than a year I have been telling readers of this blog that health care reform was going to be very, very difficult to do. That we really didn’t have the consensus in this country over just what the problems are and what we need to do about them, or the political will to make the tough calls we need to make. Many people have disagreed with that assessment. I may still turn out to be wrong about it being different this time—but not so far.

I’d wait to see just what the “Coalition of the Willing” is able to put on the table before we go declaring any victories. If for no other reason, any product is going to have to lay on the table for all of August and that won’t be pretty.

I will remind you that the last group to go off on their own and hatch a health care plan in secret didn’t do so well when it hit the light of day.

Made sense to them at the time.

A Health Insurance Premium Tax Would be a Chicken Tax

The Congress has looked at taxing about everyone and everything to pay for half the cost of a health care bill.

They’ve considered sugary soft drinks, beer, “millionaires,” and “gold plated” health benefits to name a few. Every time they come up with one it gets shot down by the interests it would offend.

First, as I have asked on this blog before, why do we need to use at least $500 billion in new taxes to pay for half the cost of a health care entitlement expansion bill? We will spend somewhere between $35 trillion and $40 trillion on health care in this country over the next ten years. Many experts contend there is as much as 30% waste in what we spend.

Advocates of a health care bill say we need it to reduce the cost of health care in this country that will otherwise bankrupt us if we don’t fix it.

With as much as $10 trillion to $12 trillion in waste, and cost containment as the stated goal, why do we need to raise people’s taxes $500 billion to pay for an expansion of coverage?

But since it is clear that the Congress and the White House have all but given up on real health care reform that would really “bend the curve” they are adamant they are going to raise taxes to pay for at least half the cost.

So, being rejected by all the interests that effectively countered every other idea for a tax increase, advocates now look to be excited about taxing insurance companies. The most talked about tax would be a tax on insurers who issue the “gold plated” policies—apparently a surtax on the value of such policies. But there has also been talk of a broader premium tax on all policies.

First, having run an insurance operation I can tell you exactly what the insurers will do with that tax—pass it directly onto the consumer. Today, most states charge a premium tax—usually about 2% of premium—on all insured (not self-insured) health insurance business. When calculating the premium on those policies, the insurer just adds the 2% tax as an expense factor and passes it on to the customer—like all other costs of doing business. This is not a theoretical exercise—the tax gets directly passed on and is embedded in the premium the consumer pays.

That’s why this would be a chicken tax.

Given all the beating the advocates have taken on all of the other tax ideas they’ve floated in recent weeks and having had to retreat on those, they are now looking at having someone else be the tax collector.

"This is a tax on insurance companies" goes the political argument—not on consumers or sugary soda or millionaires. The tax on insurers is popular this week because they are at the bottom of the political heap in Washington, DC these days—all that "good will" from things like $2 trillion offers hasn’t gotten them a lot.

And, such a tax "would discourage such overly generous health plans" goes the reasoning.

But it’s still a chicken tax—chicken because the politicians aren’t willing to look voters in the eye and tell them that with $10 trillion to $12 trillion in waste they still have to raise their taxes by at least $500 billion to pay for a health care entitlement expansion and chicken because those same politicians can’t face the “millionaires,” or unions, or even soda bottlers, or people with "gold plated” health care directly, or the rest of us for that matter, and tax us all directly.

When you get down to it, this is all devolving into a chicken exercise because no one in the Congress is really willing to face the real issue—the cost of health care in America. What else would you call a bill that will expand the health care entitlement but not face the hard choices necessary to really make America’s health care system affordable and sustainable?

What It Would Take to Really Make America's Health Care Costs Affordable and Sustainable

Most health care experts agree the reason our system is so unaffordable is because of all of the waste and unnecessary care—up to 30% of what we spend.

I will suggest that it will take the genius of individual creativity to separate the 70% of this health care system that is the best in the world from the 30% that is waste.

So far, the Congress has focused more on entitlement expansion then fundamentally reforming the system and tackling the real problem—getting all the excess costs out. The result so far is expensive health care proposals and no real reform.

How can we actually make the health care system affordable as we expand coverage? I will suggest a three-pronged attack:

1. Launching a number of hopeful initiatives already outlined by the President that would improve the delivery system. These include health information technology, comparative effectiveness research, wellness, and prevention. These have promise but there is no guarantee they will work without unambiguous changes in incentives so those who provide care will begin to effectively use them.
2. Changing the incentives for private sector consumers by adopting many of the financing proposals in the Wyden-Bennett Healthy Americans Act— which has already been scored by the CBO to broaden private sector coverage for no additional cost.
3. Adopt what I call the Health Care Affordability Model to do what we should really be doing—making our health care system affordable.

I will suggest that it is not enough to simply pay for the expansion of the American health care system and end up deficit neutral. At 17% of GDP already and with 30% of the system being wasteful we should set a goal to actually reduce costs from what they would have otherwise been.

The Wyden-Bennett proposals take us to a place where we can expand coverage for no additional cost. The Affordability Model gives the Obama cost containment policies teeth so we can actually make our system more affordable.

The Affordability Model creates an unavoidable imperative for health plans, health care providers, and consumers to finally cooperate in ridding the waste and avoidable care from our currently unaffordable health care system.

For seventy years, we have used the federal tax system to encourage the expansion of health insurance benefits. But now it only encourages more spending at a time when health care is becoming even more unaffordable.

We already know a great deal about where the waste is in our system—wasteful treatments and procedures, poor quality, avoidable sickness, and administrative costs.

We have the tools—or can create tools—to effectively manage the system.

But we haven’t done it quickly or effectively enough.

We haven’t done it because we haven’t had to—as out-of-control as the system is most of the stakeholders have continued to profit from the status quo.

There would not be any global budgets. The Affordability Model would use the tax system to fashion unavoidable incentives to control costs and improve its quality—no stakeholder would any longer profit from the status quo.

The Affordability Model would continue to allow employers to self-insure their health plans. It would not place any limits on insurance or provider prices. It would not interfere in the delivery of care.

The Affordability Model reflects a belief that quality health care decisions need to be made on a patient-by-patient basis, that health care professionals should make these decisions in collaboration with their patients, and that payers and providers cooperating toward the same objectives can produce meaningful results.

Under the Affordability Model, health plan networks would have clear-cut incentives to first begin to stabilize and then control their premiums. Failure to do so would mean the loss of their federal tax qualification and that would mean employers and consumers would move their business to health plan networks of insurers and providers that achieved results.

Consumers and employer sponsors would not be penalized. They would simply move away from inefficient and ineffective health plan networks.

If at any time all residents in a state did not have access to a tax qualified plan, the Secretary of HHS would be directed to introduce a public Medicare-like health plan in that state to compete with all private plans—qualified and non-qualified.

The Affordability Model would create an unambiguous reason for each of the stakeholders to finally work together to get America’s health care system under control. No stakeholder would want to see their network lose its tax preferences:

• The health plan would be placed at a substantial competitive disadvantage.
• If doctors, hospitals, and other providers were not in a tax qualified health care network they would lose patients to networks that did control costs.
• Employers and consumers would almost certainly purchase their health benefits only from qualified plans.

The result would be consumers and employers moving to health plans that succeeded in giving Americans better quality care at an affordable cost—and bringing the American health care system with them.

Read a detailed explanation of the how the Affordability Model would work here.

Health Care Reform Should Mean Health Care Reform--A Proposal for Real Change

CMS says that we will spend 17% of GDP on health care this year and we are on our way to having 22% of our GDP being spent for health care by 2018.

The stated goal of the President and all of the Congressional health care reformers is to accomplish health care reform and have it be deficit neutral.

Deficit neutral means we wouldn't reduce our costs one bit. We would have no assurances that we would make things better than the track we are on--to 22% of GDP--and it could be even worse.

Why would the U.S., where our costs are at least 50% more than any other industrialized nation's costs, want to let this thing keep growing to 22% of GDP?

Yes, I would have to admit that having most everyone covered and spending 22% of GDP would be better than having 50 million uninsured and spending 22% of GDP.

But let me also suggest, this is nuts!

If the question is how do we reform our system over the next ten years by tackling unaffordable costs and covering everyone, why is it acceptable for the stated end result of all of these efforts to be spending 22% of GDP on health care in 2018?

Am I crazy to think that health care reform needs to be about actually changing the system and solving the problem?

I have a suggestion for how we can actually change the system.

I call it the Health Care Affordability Model.

Government wouldn't demand anything of insurers, doctors, hospitals, patients, or anyone else. The Affordability Model would not include a public health plan. It would not have a cost board or turbocharged MedPAC. There would be no price controls on insurance or provider prices. There wouldn't be any complex pay-for-performance system requirements. There wouldn't be limits on what treatment protocols or technology a provider could prescribe. There would be no global budgets.

The Affordability Model could be attached to virtually every health care reform proposal now on the table.

The Affordability Model by itself would not require anyone to pay more--or less--for good care or bad care.

The Affordability Model would focus unambiguous incentives for the health care players on actually making the system sustainable and it would phase improved performance in over a period of years so those in the system could manage the transition without causing unacceptable dislocations.

And it would not set 22% of GDP as a laudable goal.

Here's a brief outline of the Affordability Model:

The Health Care Affordability Model

1. We can use American ingenuity to manage our health care system to better outcomes—cost and quality.
2. Providers and insurers have the tools to give the system better cost and quality outcomes—health information technology, wellness and prevention strategies, pay-for-performance, comparative research, and the like. And they can develop new ones.
3. But providers and insurers will not use these strategies to their full potential, or develop others, until they have to—now they do too well under the status quo.
4. The Affordability Model gives them no alternative.
5. Any network of insurers and providers who did not collaborate toward making the system affordable would lose their tax qualification—their plans would no longer be tax deductible for employers and consumers.
6. In order to maintain their tax qualification, health plans—through collaboration with health care providers—would be required to first slow their annual rate increases and then over a period of years stabilize their costs to the same rate the economy grows—a rate America could afford.
7. Because employers and consumers would only be interested in buying a qualified health plan, there would be enormous and unambiguous incentives for health plans, physicians, hospitals, drug and device companies, and other health care providers, to participate in and collaborate within networks of qualified health insurance plans.
8. The Affordability Model would fundamentally change the incentives in America’s health care system—without government controls and global budgets—by creating an overwhelming and unavoidable incentive for insurers and providers to finally cooperate toward the shared objective of controlling costs and improving quality.
9. But, if at any time all of the residents of a state did not have access to a qualified health plan the federal government would provide a Medicare-like public plan.
10. The Affordability Model could be attached to virtually every health care proposal now on the table.
    

You can see a much more detailed description of just how the Health Care Affordability Model would work here.