Oh, Ease Up on Joe Already

The Democratic rhetoric coming from Capitol Hill today beating on Joe Lieberman is, in the least, disingenuous.

The public option has not been tenable for months. It was not just Lieberman that has been against it in all forms--robust Medicare-like or the neutered variety in the House and Senate bills.

All of the liberals claiming they weren't going to vote for a health bill without a public option have known all along they were going to have to ditch it to get a bill. But no one wanted to tell the base that.

But poor Joe was the one who stood up and took the bullet for all of the other moderates.

Fellow Democratic moderate Mary Landrieu said this last week:

"Some of us have found it very puzzling as to how this [the public option] became the centerpiece of the health care debate. So our hesitation whether it's Sen. Lieberman, Sen. Nelson, myself, Sen. Snowe -- you could go on and on -- there are 12 or more Democrats who've never understood the benefit of this debate being focused on a public option."

And, here is what Democratic Senator Kent Conrad said today:

"In a curious way, it may make it more possible to get something done because he wasn't the only one with these concerns, it's very clear - he vocalized concerns many were having."

Did Lieberman double cross the Dems by backing off on the Medicare buy-in deal? After all, he supported the idea when he ran with Gore nine years ago.

If you want to blame someone for blowing those chances up I'd point at these guys. Here's a quote from Lieberman yesterday:

“Congressman Weiner made a comment that Medicare-buy in is better than a public option, it’s the beginning of a road to single-payer. Jacob Hacker, who’s a Yale professor who is actually the man who created the public option, said, ‘This is a dream. This is better than a public option. This is a giant step.'"

For the record this is what Hacker actually said: "But public option two, which was never on the agenda before, a buy-in to the actual Medicare program for 55- to 64-year-olds, is an enormous positive development. It’s actually the original idea, if you will, for the public option, simply letting people get into the Medicare program that provides broad, secure coverage at an affordable price.”

That kind of reaction to the Medicare buy-in is what really poisoned the well for the moderates. How could any of the moderates who have long been opposed to the public option embrace the Medicare buy-in as a public option alternative after that kind of defense of it?

On Friday, I posted that the Medicare buy-in was already dead and it was just a matter of how the liberals capitulated on the last vestige of the public option.

But poor Joe really set himself up to be the convenient liberal fall guy by getting out front all by himself on Sunday. He did the public option crowd up on the Hill a huge favor. Now, instead of telling their base there never was going to be a public option the liberals have poor Joe to blame.

"It's all Joe's fault there won't be a public option"--even though every Democrat on the Hill has known for weeks there never were close to 60 votes for it.

It takes 60 votes to pass something like health care reform. Those are the rules. When Republicans were in control a few years ago the Democrats weren't calling for the end to those rules. They were happy to use them to temper a conservative and partisan Republican House and Senate majority.

Connecticut sent us Lieberman--as an Independent not a Democrat--just like Minnesota sent us Franken and Alaska sent us Begich--both by tiny margins.

A health care bill takes 60 Senators--one by one.

The Medicare Buy-In Is Dead--The Liberals Are Now the Swing Votes in Health Care

The Medicare buy-in idea is dead. After Democratic Congressman Weiner's candid comment, “Never mind the camel’s nose, we’ve got his head and neck in the tent," no senator from the likes of Arkansas or Indiana is going to vote for this.

Add to that yesterday's critical Washington Post editorial and the sharp response from the various doc and hospital lobbies and this was dead before Reid's request even got to the CBO.

Face it, there will be no public option--and I don't consider the OPM idea even the ghost of a public option. Heck that thing is so weak you might think someone from the health insurance industry designed it (health insurer stock prices hit 52-week highs this week).

So it is no longer the moderate Dems who are the swing votes.

It is all of those liberals in the Senate and House who said they would not vote for a health bill that did not have a public option. True, the latest version in the Reid and Pelosi bill was nothing more than the neutered variety but at least the liberals had some political cover. Now they will have none.

Reid has about a week before the CBO report--which no longer matters--comes back and the Medicare buy-in is officially dead. The word is he is trying to rejigger the Medicare buy-in idea to placate the providers. But now it will forever be the "camel's head and neck" for already nervous moderate Democrats.

Democrats have kept rolling toward a health care bill even with poll approval rates in the high high 30s and low 40s because they know they cannot offend their base by failing to produce a health care bill. They know they have already lost lots of swing voters but it would be worse for them next November if they also lost that critical base.

The base wanted a public option and is rabidly mad about what is going on.

So, your garden variety liberal now has a big decision to make.

Vote yes for a bill that just pumps $850 billion into pretty much the same system we already have--insurance companies and all--or do what they said they were going to do if they did not get a public option--ditch a health care bill.

It's not the moderates I will be watching the next few days--it will be all of those liberals who said they would never do what their President is about to call on them to do.

Selling Insurance Across State Lines--Now the Dems Are Pushing the Idea--Why It Won't Work

A favorite Republican health care soundbite calls for making the health insurance system more efficient by letting health plans sell across state lines.

Now Democrats are jumping on that idea. The latest public option idea would have the Office of Personnel Management (OPM) contract with national not-for-profit health plans and introduce those plans into local insurance exchanges--that would be set up under the proposed House and Senate bills. Supposedly, these outside health plans would bring a new dimension of competition to local markets.

OK, here's a health insurance 101 question. Besides buying health insurance to cover expensive health care (pure insurance), what is the most important thing you buy when you buy a health insurance policy?

Answer: The provider network. Without an in-network discount from an HMO or PPO you might pay 30% or 40% more for your health care--in higher premiums or higher out-of-pocket costs. You definitely never want to pay retail at your doctor's office or hospital.

Beyond the discounts, agreements between providers and health plans also establish managed care protocols that save lots of money and keep the cost of insurance down.

By definition an out-of-state health plan--one that does not operate in a given state--does not have a local network. If it did, it would already be doing business there.

Today there are reports that the new Democratic public plan idea would have OPM contract with Blue Cross plans, or say Kaiser Permanente, to provide another not-for-profit health insurance option to compete with local plans in the local insurance exchange.

Think about that for a minute.

So, Kaiser Permanente, which operates with highly organized and capital intensive networks in its markets, would now come into a state where it has no networks and offer a plan? Blue Cross of Nebraska might offer an individual and small group plan in Rhode Island? Tufts Health Plan out of Boston might offer a plan in Oregon?

Based upon what network of providers in those places where they do not now do business?

Where do they get these screwball ideas?

It is not just the Democrats.

Republicans have been suggesting for some time that health plans not now doing business in a state should be allowed to cross state lines and offer policies there. Other than gaming one state's mandates and other regulations by domiciling in a less restrictive state, just what value would a health plan that did not have a network in a particular state bring to that state?

Again, an out-of-state health plan by definition isn't going to have a local provider network and will have health care costs that are a lot more expensive than a local plan that does have discounts and managed care protocols negotiated with providers.

Well, at least neither side--Democrats or Republicans--have the upper hand on this issue.

Liberal Demands Over Giving Up the Public Option Threaten Health Care Deals

I actually feel for Harry Reid this morning.

He was on his way. He had mastered an incredibly fine balance in his health care bill.

No it wasn’t real health care reform and it wasn’t going to bend any curves but the Dems long ago gave up on that looking for one big political “W” instead.

The liberals were finally backing off on the public option there never were the votes for. But even the “neutered” public option both he and Pelosi put in their bills still wasn't enough for a handful of moderate Democrats and the ladies from Maine. So, he put ten Democrats in a room to split the difference and get a deal at least his 60-vote caucus could live with.

They did and came up with a bizarre public option compromise that just plain finished the idea off that a government-run plan should compete with the private market and “keep it honest”—the OPM-run not-for-profit choice within a choice.

Liberals finally woke up and understood they were about to just give the private health care market millions of new customers subsidized by taxpayers and little was going to change in America’s health care system (took’em long enough).

So they said, “Wait a minute. Here’s our list of what we want for giving up on the robust public option.”

Their list includes:

• Tougher rules for the insurance industry—maybe including a 90% minimum loss ratio.
• Expanding Medicaid from 133% of poverty to 150%.
• A Medicare buy-in for people age 55 to 64.

The bottom line—if they can’t get a robust public option they are demanding that millions of people become part of the existing government-run Medicare and Medicaid public plans.

In the context of what they believe needs to be done to manage the health care system this all makes sense. It’s just another way to get to the same place.

But it also opens up a number of really big worm cans.

The insurance industry will hardly go quietly in the face of these proposals.

The previous deals with providers to limit their exposure to the health care bills are now in jeopardy. Providers now see millions of new patients coming to them at reimbursement rates 20% to 30% lower for Medicare and even lower for Medicaid. The House bill already expands Medicaid to 150% of poverty but Senate Finance purposely decided to stay at 133% to placate the providers.

The original Senate Finance bill at 133% of poverty for Medicaid was also designed to placate very nervous governors about the Congress expanding Medicaid too far and with it lots of unfunded mandates for the states. Those governors are now very worried about what is going on in the Senate.

Reid, and Baucus before him, had struck a fine balance with providers and governors.

The liberal wish list now threatens that balance.

This is not a do-over. But it does mean lots of finely balanced understandings and deals are back on the table.

And with few shopping days til Christmas!

The Latest Version of the Public Option—The Democrats Could Have Saved Us Lot of Time If This is What They Call a “Public Option”

If the latest version of the public option is something that will give its proponents reason to argue they still have a way to "make the health insurance market much more competitive," then a motor scooter is a Ferrari.

The details are still fuzzy but the word is that senators are working toward a compromise over the controversial public option that would create something that:

• Would be run by the Office of Personnel Management (OPM), which already runs the Federal Employee Health Benefits Plan (FEHBP).
• Would take bids from existing not-for-profit health plans which would then be offered as one or more choices in the insurance exchange open to small employers and uninsured individuals.
• Would attempt to take advantage of OPM’s experience in negotiating health plan premiums in order to offer small business and consumers the best possible rates.
• Would continue to have an insurance exchange, that in addition to the OPM product, would offer other both for-profit and not-for-profit health plans separate from the OPM offering.
  

This scheme would not involve the earlier proposals for a public option that enabled a government run health plan to require all providers to participate and would pay them Medicare-like rates—the “robust” version.

And, this idea would not be anything like the latest version included in both the House and Senate bills that would direct the federal government to set up a government-run insurance plan that would be required to negotiate provider rates instead of dictate them and could not mandate providers to participate. This newest scheme would replace the current version in the Senate bill.

In earlier posts I have referred to the latest version in the House and Senate bills as the “neutered” public option for its inability to really drive any costs down. The CBO has said that this version of a public option would likely only attract a few million customers and have rates actually higher than the general health insurance market.

I’m not quite sure what to call this latest version being negotiated by the senators. It strikes me as almost a redundant exercise. At least a scooter being passed off as a Ferrari.

The insurance exchange would already include all of the not-for-profit health plans operating in the market. These plans would already be under competitive pressure to offer their best rates—that is supposedly the point of the insurance exchange. Heck, the whole idea of an insurance exchange came from the FEHBP plan in the first place. The notion that adding the OPM to the equation--something that was based on the OPM model in the first place--will somehow drive costs down even further is hard to understand.

But let me tell you what this scheme would do.

It would give Democrats something they can call a “public health plan option” and declare victory.

If Democrats were going to buckle--really entirely capitulate--to this extent on their centerpiece health care issue they could have saved us a lot of time and aggravation by doing it a lot quicker!

I would add one concern. You might recall that the CBO said they thought that the public option in the Senate bill could attract a disproportionate number of the sickest people. As the details for this scheme emerge, I hope the Democrats don’t go so far as to create something that would set up the not-for-profits to get a disproportionate number of sick people and ironically relieve the for-profits from their share of that burden.

The Neutered Public Option—Where’s the Rage?

The public option contained in the House Democratic health care bill is hardly more than a neutered version of the “robust” public option one House Democrat after another said was a minimum requirement to keep their vote on health care reform. After threatening for months to fall on their swords if they didn’t get the “robust Medicare-like” version, there was nothing but enthusiastic support for the neutered version from almost all Democrats when the bill was unveiled last week.

Readers of this blog know that I don’t think the Medicare-like public option would be good policy because it would focus on provider price suppression as its primary cost containment tool when value based-purchasing is really the objective we need to be after. I have never understood why proponents thought cutting both the best and the worst providers payments exactly the same 20% to 30% was going to put us on a course toward better health care value.

So, what have they settled for?

From the CBO: The House version of the public plan “would typically have premiums somewhere higher than the average premiums for the private plans” in competition with it.

The House version is little more than the Senate’s co-op idea. At least Senate Finance wants to spend $10 billion setting those up. The House bill claims to be able to set up a national insurance plan for $2 billion!

But then what kind of value-based purchasing would you get from the new version of that public option. “60 Minutes” recently did a report on Medicare fraud pointing out that Medicare’s approach to cost management—pay all bills in 15 days without checking anything—has led to a rampant fraud problem as crooks, who steal lists of seniors, just bill Medicare for things that never happened, quickly get paid, and move onto their next location with literally millions of dollars in their pockets before Medicare finally catches on.

And, just which providers would contract with this House version of the public plan? The House bill makes provider participation voluntary and requires provider payments to come in no lower than Medicare and no higher than average commercial insurance reimbursement. Which doctors and hospitals would voluntarily take less than the commercial rates they already complain about? Likely not the best or most attractive providers.

If the public option has to pay the same rates commercial insurers do to get the best providers what price advantage would it develop?

But, you might argue, even this kind of public option will be cheaper because of its Medicare-like expense factor? Guess again. Just who processes health claims for Medicare in those 15 days Medicare mandates? Health insurance companies as Medicare contractors.

Move away from a universal program covering 40 million seniors and into a voluntary individual insurance program that will require marketing costs, individual policy issue, individual monthly billing, claim paying, the need to build a stabilization fund, raise money to build, negotiate and manage provider networks, and all of the rest, and what do you have? An insurance company.

To be sure the government insurance company will have a lower expense factor—it won’t pay taxes or pay shareholders. But now we are talking about a single digit expense difference all the while the public plan grapples with perceptions it is more like Medicaid than Medicare and likely saves little money actually managing anything.

But sick people might like the plan. If all the public option is going to do is pay claims in 15 days, patients looking to get away from the “hassle of managed care” might find it a lot more convenient!

Don’t expect any of the business interests to support the neutered House version. Their perspective is that it is set up to fail so that when it does it will need to be “rescued” in the form of converting it to the same Medicare-like plan that went nowhere in 2009.

While I have disagreed with proponents on the effectiveness of the public option as a cost containment tool, I have been gratified to see many of these same people point out the health care bills have little in the way of cost containment. Their response was that the public option was a necessary means to that end. Without the public option, many said, there was no hope for long-term affordability.

Now that the public option has been neutered in the House, and in that context an even more reluctant Senate is more unlikely to take any bold public option steps, just what will all of these people who saw it as the tool to manage costs say now?

As I have been saying for months, we are not on our way to health care reform or any real cost containment result. Maybe we are on our way to a trillion dollar entitlement expansion paid for half with modest provider cuts and half with $500 billion in new taxes. Undoubtedly a new infusion in the health care system of a trillion dollars, paired with cost containment “lite,” is a prescription for even more health care inflation.

I wonder what the robust public option proponents—beyond their outward enthusiastic support for the new House bill—really think about that?

So much for anybody falling on their swords.

On the issue of a public option being able to competitively manage the cost of care see also today's story: "Medicare Experiments To Curb Costs Seldom Implemented on a Broad Scale" at Kaiser Health News.

“The Public Option Is Back in Play”—That Depends Upon Your Definition of the Word “Is”

It appears that Harry Reid is going to include a robust Medicare-like public option in his Senate draft. Speaker Pelosi is also doing her best to put as robust a public option in her House version as she can get the votes for.

One press report after another has proclaimed the return of the public option.

I’d like to see some of these reporters to do a vote count.

No doubt the hype over the public option is at an optimistic level. No doubt Reid and Pelosi’s opening bid will be aggressive on the public option issue.

But the reality?

In the Senate you will find the only health care game in town that in the end will matter--how to get to 60 votes.

There haven’t been anywhere near 60 votes for the robust public option all year, or even something close to it, and there are not today.

Reid is reportedly going to include a robust Medicare-like public option with a state opt-out. That means there would be a federal Medicare-like public plan but that a state could opt out. Opting out would mean that both houses of a state's legislature and its governor would have to agree to opt out. That’s a pretty high hurdle and it is not going to appease the moderate Democrats in the Senate, or any Republicans including Snowe, who oppose a robust public option.

We could have a public option only if a “trigger” occurs. That is Senator Snowe’s general idea. OK, define that trigger. Do you think for one moment a liberal’s definition of a trigger will come close to a moderate’s definition of a trigger? It is the last week in October and we’ve been hearing about a trigger for months. Have you seen a definition of it yet?

Then there is the possible course in the House—a public option that has to negotiate with providers just like a private health plan does—“arms’ length negotiations.” For liberals, how is that different than a co-op and its inability to gain any real kind of traction? For moderate Democrats, it will likely be seen as the “wolf in sheep’s clothes.” Maybe a place to compromise but hardly the robust government plan its proponents are looking for and there is no evidence that this idea will attract those moderate Senate Democrats that don’t like the public option.

Then there is the state opt-in. The idea is that both the state’s legislative branches and the governor would have to agree to opt-in. This could well win moderate Democratic support because very few states would do it and it is attractive to states' rights moderates who would like to see state experimentation. This is a possible place for compromise but hardly a robust public option.

As I have said many times before, there will not be a robust Medicare-like public option or any form of a thinly veiled Medicare-like public option. When the day is done liberals will be satisfied to get what they can to get a bill across the line.

In my mind, the bigger issue continues to be how Democrats will balance individual affordability and paying for the thing.

There Will Not Be Health Care Reform in 2009 Without Republican Leadership

I will suggest that there is an opportunity for the Republicans to score a huge political and policy win. It can be done in a bipartisan way and it can be done in a way that does not sell out the core principles that either Republicans or Democrats believe in.

It would require a new effort—a clean sheet—this time initiated by the Republicans.

The Republicans have won August. No doubt about it. But they have “won,” not because they actually did anything to deserve the win—they pretty much sat back and let political gravity do all of the work.

Now what? Do Republicans really think they can sit back and do nothing for three or four more months and come out “winners?”

At this rate, this health care debate is headed for a stalemate that will not do the country, nor either party, any good.

More, I don’t know any leading Republicans who don’t think this health care system is in crisis, that we have to bring our costs under control, and every responsible American should have health insurance.

The Democrats could just be on their way to a health care reform “Waterloo”—again. Letting them implode on their own—with a little bit of help from the far right—is a tantalizing proposition. But it is not a terribly patriotic one.

I will also suggest that the American people are smart enough to know the difference between a Republican Party that reaches out to take a constructive role in turning this around as opposed to the party of “No” that backs themselves into an accidental “win.”

For Republicans who think they can again convert the Democrats’ health care problems into a big election victory in 2010, there is one huge difference between this battle and 1994. In 1994 the Congressional Republicans hadn’t been in power for decades—they had new and intriguing ideas. After the American voters’ verdict in the 2006 and 2008 elections, it is clear the American people don’t exactly see Republicans as a new and intriguing brand.

It’s pretty clear that the Republicans have as great a need to prove something to voters, as do the Democrats. Republican leaders just sitting there letting the talkmeisters do their work for them isn’t going to turn around voters’ perceptions of the Republican Party.

I will also suggest there is a pathway Republicans can be enthusiastic about suggesting to Democrats, that there already is precedence for, and about which Democrats should be able to become enthusiastic.

I would suggest four ideas for the Republicans:

1. Propose Bulletproof Health Care Security - Lots of Americans, especially those with health insurance, are worried health reform will hurt them. Republicans have a chance to put those fears to bed. They can propose that the President, the Congress, and all federal political appointees should have to get their health care from that same health insurance exchange regular citizens would use in the community in which their families live. Insurance underwriting reform would be part of it.

That guy we saw in a town hall this month screaming at his Senator could be a lot more comfortable knowing he would get exactly the same health insurance choices his Senator—and his President—got.

This approach would send a message that everyone could be confident about because their elected officials would be in the same boat.

It is also clear that most Democrats and Republicans can agree on leaving the employer-based system of health insurance alone—including ERISA. This would give individuals the right to keep the employer plan they now have or join their elected officials in the insurance exchange. It is the citizens’ choice—whatever leaves them wealthier and happier.

With this approach, Republicans can combine the kind of insurance networks the conservative Heritage Foundation has argued on behalf of for years with the kind of health insurance Ted Kennedy called for in his recent Newsweek essay.

2. Medical Malpractice Reform – None of the Democratic bills that have made it through committee even mention it. There won’t be any compromise between Democrats and Republicans over the old arguments about whether or not we need to cap damages. But the thinking over malpractice has evolved greatly in recent years—health courts, for example, designed to quickly resolve medical injury claims and promote medical error reporting toward improved quality.

In candidate Obama’s health care plan document he called for “promot[ing] new models for addressing physician errors that improve patient safety.” Sounds like health courts to me. Republicans should call him out on it by putting it in their offer!

3. Paying for It – It is gratifying that both Republicans and Democrats see the need to give families not covered by employer plans the subsidies they need to buy health insurance. Of course, that is by far the greatest cost in any bill.

I was struck by a recent Washington Post op-ed written by the co-sponsors of the Wyden-Bennett Healthy Americans Act—six Democrats and one independent plus five Republicans. In it, they said:

“The Democrats among us accepted an end to the tax-free treatment of employer-sponsored health insurance; instead, everyone—not just those who currently get insurance through their employer—would get a generous standard deduction that they would use to buy insurance—and keep the excess if they buy a less expensive policy.

“The Republicans agreed to require all individuals to have coverage and to provide subsidies where necessary to ensure that everyone can afford it. Most have agreed to require employers to contribute to the system and to pay workers wages equal to the amount the employer now contributes for health care.”

Let me suggest that Republican Senators Bennett, Gregg, Crapo, Graham, and Alexander are showing the way. Republicans don’t need to sign-on to the entire Wyden-Bennett bill so much as recognize that these bipartisan Senators have found a way to reorganize and modernize existing health care tax incentives toward raising revenue and making the system more efficient in a way that appeals to both parties.

And, it is notable that these Republicans and Democrats have also compromised on ways to reform the medical malpractice system with some unique ideas.

Wyden-Bennett is a model that covers everyone and is deficit neutral in the second year after it is enacted—and begins to bend costs down in the third year.

4. Tough Cost Containment – Liberals tend to believe that the best way to control costs is with the public option. I disagree with that just like Republicans do—I see it as a means to artificially suppress provider payments but not get at the waste in the volume of care that is really at the crux of the cost issue.

But what I have been gratified by are all of the liberals who say passing a health care bill would not be health care reform—more that it would be a wasteful exercise—without cost containment. I doubt there are any conservatives who would disagree with that statement!

August has proven that the public plan option is not tenable—as a cost containment device or anything else.

So how could both parties agree on containing costs?

I have suggested something I call the Affordability Model. Simply, we set and phase-in affordability goals for health care a number of years down the line. Insurance companies, doctors, hospitals, drug makers, and everyone else in the system gets to do business in the way they believe will improve cost and quality. Patients get to choose any health plan available in their market—a completely free market. Republicans ought to like that.

The networks of insurers, doctors, hospitals, and drug companies that are right in their choices and meet the cost containment goals would get to continue to offer their services and products through networks as tax deductible health plans for employers and consumers. The networks that don’t control their costs or maintain their quality will not be attractive to patients and employers. They will also not be tax deductible any longer—a meaningful government enforcement mechanism. More, if there were not any affordable networks available at the end of the period, a government plan would be made available. Democrats ought to like the enforceability of it all.
***

There are a number of other health care proposals both Republicans and Democrats can agree on such as greater use of health information technology, prevention, wellness, and comparative effectiveness research.

One can see a pathway to a very meaningful reform of America’s health care system that both sides could agree to.

But with the politics of health care now so polarized who is in the best position to extend the “olive branch” and break the impasse? I believe it is the Republicans who hold the keys to a breakthrough. A breakthrough that would be bipartisan and therefore one the American people could have confidence in. A Republican led bipartisan breakthrough on health care also wouldn’t hurt anyone’s confidence in the American political system.

Which course will most likely lead to a Republican return to power?

Sitting on their hands watching somebody else’s “Waterloo”—or demonstrating real leadership?

Splitting the Bills? The Democratic Leadership and the White House Staff Really Need a Vacation

The latest word is that the Democratic leadership and the White House see a “60% chance” they will split their health care bill into two parts—one a budget bill that would be eligible for the 51-vote Senate rule and the other the operational non-budget portions that will need 60 votes.

This is all intended to get around the Byrd Rule—which allows the use of reconciliation rules only for budget items. I explained that rule in a post yesterday.

This week just keeps getting more bizarre. After the Secretary of HHS backpedaled on the public option on Sunday and liberals went ballistic on Monday, on Tuesday the White House said they really weren’t changing anything. Things took another big turn late Tuesday night with White House “sources” saying they were going to play hardball and go it alone by ramming Democratic health bills through with 51 Senate votes. But on Wednesday they were saying going it alone was not so much a threat as what would be left to them if the Republicans don’t deal in good faith—that nothing has been decided.

Now, they are 60% sure they are going to spit the bills and ram it through—concluding there is little or no chance for a deal with Republicans.

You know, it’s only Thursday—what are they going to leak tomorrow?

The split the bills idea has to be the most bizarre of all.

It would seem the assumption is that they can load the most controversial parts of their health care bills into one unpopular bill—the President’s health care approval rating is down to 41% per the NBC poll yesterday. Presuming they can get the public option into the budget portion—a big if—they would then get their most committed House and Senate members to pass that. Then they would tell the Blue Dogs and moderate Senate Democrats they should have no hesitation to vote for the operational part two of the bill. If course, without their vote for part two the more controversial part one could not become operational.

I can see the Democratic leadership selling this to doubtful members: “So we’ll do the tough vote and you moderates and Blue Dogs will only have to vote for part two and the fact that it makes the overall bill operational shouldn’t be a concern to you. All those people back at the town halls won’t have a clue you had anything to do with creating a public health plan option.”

The Democratic leadership and the White House staff really need a vacation.

In my mind, this does nothing for the real challenge Democratic leaders and the White House face. That challenge isn’t about legislative strategy in the House or the Senate. The real challenge is the fact that their health care approval rating is in the low 40s.

The Obama Admistration Would Do Well to Read the Senate Rules and the Polls

The latest reports are that the White House is getting ready to ditch any thoughts about a bipartisan health care bill and just ram the Democratic bills through the Senate with bare majorities.

Readers of this blog know that I don’t think it is ever possible to ram anything so big as health care through with slim Congressional majorities and even less public support. I would suggest people who think this is a good idea take a look at two things—the latest polls and the Byrd Rule.

Today, NBC is out with a poll that shows support for the Democratic bills well under 50%--and worse amongst swing independent voters. That is not to say the Republicans are doing well either—but they aren’t trying to ram anything through.

This poll was taken August 15th to the 17th—after the President’s town halls.

A few of the findings:

• 54% are worried that government is going too far—41% are worried that reform will not do enough to lower costs and cover the uninsured.
• 41% approve of the President’s handling of health care—47% disapprove.
• Just 36% believe that Obama’s efforts to reform the health care system are a good idea—only 24% think they will result in better quality.
• 43% say they approve of a public option—47% oppose it.
• The cheap shots are having an effect—majorities think the Democrats would grant coverage to illegal immigrants, for example.
• Only 21% approve of the Republican’s handling of health care.
• 60% said the system needs big change—but that is down 12 points since April.
  

The notion that Democrats can ram something so big as health care reform through with the 41% approval rating the President now has on health care is just nuts.

Politically, they would be asking for an even bigger polarization on this issue than we already have. It is hard to believe they wouldn’t pay a huge price for that in November 2010. I know many liberals think this is the right course but the fact is that Obama won the presidency and Democrats extended their Congressional majorities not because of who liberals voted for but who moderates in this country voted for.

More, they can’t pass health care reform in the U.S. Senate with 51 votes. The “reconciliation” rules that allow for 51 votes are budget rules. The second the Dems try that route a Republican Senator will rise with a “point of order” successfully pointing out that 900 of the thousand page bill is “extraneous” to the budget—things like a public option, insurance exchanges, new underwriting rules.

The opportunity for parliamentary objections would occur under the “Byrd Rule.”

Here is the summary of the Byrd Rule from the Congressional Research Service:

The Byrd rule defines matter to be extraneous in six cases: (1) if it does not produce a change in outlays or revenues; (2) if it produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions; (3) if it is outside the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure; (4) if it produces a change in outlays or revenues which is merely incidental to the non-budgetary components of the provision; (5) if it would increase the deficit for a fiscal year beyond those covered by the reconciliation measure; and (6) if it recommends changes in Social Security. (Italics added)

The first point, that reconciliation cannot be used to for matters that did not produce a change in outlays or revenues, would likely be the provision a Republican would use—pointing to insurance underwriting rule reform, for example, as not having a federal budget impact.

Law in the Budget Act defines the Byrd Rule—it cannot be suspended by a simple majority vote in the Senate.

It is likely that a Republican point of order on a any one of the non budget items in the bill would be found “extraneous” by the Senate parliamentarian—there is enormous precedent for such a ruling. In fact, the rule’s author, Robert Byrd (D-WV), warned President Clinton that he could not use reconciliation to ram his health plan through!

To overcome the parliamentarian’s ruling would take 60 votes.

The upshot of all of this—it will take 60 votes to pass a comprehensive health care bill.

It will also take a lot more than a 41% health care approval rating.

The White House needs to start thinking about how it will accomplish that and stop the threats it can’t carry through on.

August 20 update: Splitting the Bills? The Democratic Leadership and the White House Staff Really Need a Vacation

Co-Ops Are the Single Dumbest Idea I Have Heard in the Health Care Debate in Twenty Years

This is a repost from June 23--sort of like regifting...

I am sure you have heard the story about the committee that was charged with designing a horse but, because of the bureaucratic ways of the committee process, instead ended up creating a camel.

We will not see a Medicare-like public health plan as part of any health care reform bill in 2009. I know proponents don’t want to hear that but it is crystal clear to me there simply are not the Democratic votes in either house of Congress for it.

But proponents are bound and determined to get something with the moniker “public plan” attached to it before they will sign-on to a bill. In an effort to compromise, North Dakota Senator Kent Conrad has suggested a defanged public plan in the form of a not-for-profit health care cooperative. I have been critical of that suggestion on this blog because his proposals look to me to be no different than the dozens of not-for-profit community-based health plans already operating—not the least of which is North Dakota Blue Cross.

When the day is done, what would Senator Conrad’s co-op proposal accomplish that is any different than the not-for-profit community-based health plans, that already have 50% of the market share in the under-age-65 market, have achieved?

But let’s take it a bit further.

At the thirty thousand foot level the notion of a public health plan cooperative doesn’t sound like a bad one.

But when you dig into it and actually explore how such a thing would work, it looks more and more like a camel to me.

First, the stated objective of a public plan cooperative would be to step up market competition to lower costs—to negotiate lower prices and more efficient provider treatment protocols. The argument goes that the existing plans aren’t trying hard enough.

OK, let’s start with the notion that a co-op can do a better job of negotiating prices and protocols. But wait, on day one how many members does the co-op have? Well it has no members on day one. So, the co-op's provider relations guy goes to the doctor and hospital administrator and demands better prices and protocols. My guess is the provider’s response would go something like this, “So you are here because your stated objective is to screw my reimbursement down more than it is, you have no members now, and if I give you the rates to take members away from the existing health plans you are going to make life even more difficult for me than those existing health plans have?" My guess is that when the provider stops laughing…

Next, the co-op has to hire people to staff its management and operations ranks. Who are they going to hire? Out-of-work realtors? Obviously, the co-op will have to hire experienced health plan people. First, for those of you in the business, just think of all the competition for your services if 50 new health plans suddenly get lots of capital to start-up. But secondly, if the co-ops hire the same people as are running today’s health plans—particularly people in not-for-profit plans now—why would the end result be any different?

And, how will they compete with health plans--for and not-for-profit--who have spent decades developing billion dollar information technology systems, pricing databases, and provider networks? From a standing stop, how many decades will it take to create anything meaningful? And when they are done, on what basis does anyone believe they will look any different than all of the not-for-profits we have today?

And, how will the co-op compete for these new hires? Why would the best talent want to go to work for a quasi government agency paying government pay scales whose future is in doubt? Will the co-op pay more than existing health plans to lure talent away? If so, how will their administrative costs be any lower? After all, payroll is at least half of total overhead costs.

Just how will the government decide how to capitalize these new plans? In the 90s we spent $75 million to $100 million to capitalize a health plan in each of the major markets. How much capital will each co-op get? In the market, that question was answered through the creation of a business plan. Any private not-for-profit health plan that did not ultimately meet minimum scale or reserve requirements was scuttled. Just how much, and over how many years, will the government dump capital into these plans and who will make the decision that the limit has been reached? Will co-ops have an unlimited access to government capital without accountability? No matter how ineffective they are will the government just keep subsidizing their losses?

Already, there is talk in the Congress about allocating $10 billion to build these things.

This whole debate gets back to the simple question I have not heard any of the co-op proponents answer: Just how will a co-op turn out to be any different than North Dakota Blue Cross with its profit percentage of less than 1% and its board a cross section of the provider, business, and consumer community?

Or for that matter, any one of the dozens of other similar Blues plans and not-for-profit community-based HMOs in just about every county in America?

But when you are grasping for a compromise—and putting the urgency for compromise ahead of good policy—it sure is easy to come up with a camel.

Related posts:

Here's an Example of a Cooperative Not-For-Profit Health Plan--North Dakota Blue Cross

Health Care Cooperatives--An Old New Idea--So What's a Blue Cross Plan?

A Public Health Plan That Looks Just Like a Big HMO---Why?

Are Democrats Getting Ready to Ditch the Public Option? But They Would Still Be Challenged by the Trillion Dollar Price Tag

It looks to me like the popular objections to a health care bill being expressed by voters this month are concentrated in two primary areas:

1. A concern about “government control of the health care system”—mostly around the public plan option.
2. The trillion-dollar cost of a health care bill at a time deficits are swelling and worries about who will really end up paying for it.

As a result of the first concern, we are getting the first indications that some Democratic leaders are ready to ditch the robust Medicare-like public option and are beginning the process of talking the party out of demanding it be included in a health care bill.

This from Politico today:

After the toughest week yet for health reform, leading Democrats are warning that the party likely will have to accept major compromises to get a bill passed this year – perhaps even dropping a proposal to create a government-run plan that is almost an article of faith among some liberals…

"Trying to hold the president's feet to the fire is fine, but first we have to win the big argument," former President Bill Clinton said Thursday at the Netroots Nation convention, a gathering of liberal activists and bloggers who will prove most difficult to convince. "I am pleading with you. It is OK with me if you want to keep everybody honest. . . .But try to keep this thing in the lane of getting something done. We need to pass a bill and move this thing forward."

It has been clear to me for months, and I have been saying so on this blog, that the public option has not had the votes even among Democrats to make the finals. With all the heat “a government takeover” of health care has attracted from those at the town hall meetings either the Democrats ditch it or get used to the idea they have no chance of passing health care reform.

Given all of the stridency we have heard from liberals in recent weeks making inclusion of a public plan a litmus test for the minimum health bill they will vote for, it will be interesting to see just how this rolls out.

But getting rid of the public option doesn’t make health care reform easy.

While there are lots of other issues to sort through, I will suggest that the public’s unease with health care goes beyond the public plan. Voters seem every bit as uncomfortable with the trillion-dollar cost of reform and just how it would be paid for. They just don’t seem to buy the argument that savings from the current system and a tax on someone else will save them from eventually having to pay for it—and I think they are justified in believing that.

With talk about abandoning the public option also comes a discussion about a smaller health care bill that would cost less and just make a down payment on reform—focusing on insurance rules and the insurance exchange.

That is a possibility. However, even that will not be easy.

In order to craft an insurance system where pre-existing conditions limits and medial underwriting could be largely or entirely done away with, it would also have to be a fix that got lots of the healthy people to buy coverage. To do that, get a good mix of the sick and the healthy to maintain a viable insurance pool, the subsidies for those now uninsured and unable to afford the thousands of dollars health insurance costs would have to be robust.

Those insurance subsidies are what costs so much and make up the better part of the trillion dollar price tag the current Democratic health care plans have.

So, we can theoretically get rid of the robust Medicare-like public plan option with a stroke of the pen but not the trillion dollar price tag—and with it the voters’ concern about how much a bill costs and who will pay for it.

Related posts:

Health Insurance Reform or Health Care Reform? The President Gets It Right!

The Public Plan Option: Litmus Tests Are Never a Good Sign

Insurance Companies Say They Can't Compete With a Public Option--But FedEx and UPS Do Pretty Well Against the Post Office--What's the Difference?

The Post Office doesn’t get to unilaterally fix the cost of all of the things it buys that go into its services--Medicare and Medicaid do.

What critics of the public health plan option often fear is that, like Medicare, a public option health plan would be able to unilaterally set what it pays doctors, hospitals, drug companies, and other providers. Private health insurers often pay providers 20% to 30% more than Medicare does.

If the Post Office had the purchasing power Medicare has it would unilaterally pay whatever price it wanted to for its labor contracts, its trucks, it’s office leases, etc. If the post office had that power just how long do you think FedEx and UPS would stay in business?

Since President Obama and supporters of the Democratic health care plans were asking that question all day yesterday I thought it might be helpful to answer it.

The Public Plan Option: Litmus Tests Are Never a Good Sign

Before now, I can think of only one “litmus test” in American politics—abortion.

That is an issue that simply polarizes the nation—and our political system. On a good day, people on one side or the other just agree to disagree and move on.

But I think we are seeing another litmus test issue emerge—the public health plan option.

I have no doubt that there are not the votes to pass a public plan option in the U.S. Senate. After this recess, I very much doubt there will be the votes to pass it in the House.

If you don’t believe me, listen to the Democratic Budget Chairman, Kent Conrad; "The hard reality is . . . that a public option does not have enough support in the Senate to pass.”

I have also never heard the political dialogue on an issue so strident so late in a debate—coming from both sides.

Neither side gives any indication—even between the lines—they are willing to give on this issue.

I recently saw a news conference held by the Democratic Chairs of the Progressive, Black, and Asian Pacific Caucuses in the House all come up to the microphone and say in the most uncompromising terms they will not ever vote for a health care bill that does not have a robust public plan option. The language was way beyond the normal political posturing.

Needless to say, conservatives won’t have anything to do with a public health plan option. More, they see their opposition as gaining traction and they see no reason to let the Democrats off the hook.

The White House has not been helping either. Way past the point that I would have expected them to begin softening their tone on the issue, getting ready to take what they can get on health care, they continue to be adamant in support.

No one is leaving themselves an escape hatch.

A litmus test for any policy issue is a prescription for a political train wreck.

The Co-op Version of the Public Plan—It’s a Camel!

I am sure you have heard the story about the committee that was charged with designing a horse but, because of the bureaucratic ways of the committee process, instead ended up creating a camel.

We will not see a Medicare-like public health plan as part of any health care reform bill in 2009. I know proponents don’t want to hear that but it is crystal clear to me there simply are not the Democratic votes in either house of Congress for it.

But proponents are bound and determined to get something with the moniker “public plan” attached to it before they will sign-on to a bill. In an effort to compromise, North Dakota Senator Kent Conrad has suggested a defanged public plan in the form of a not-for-profit health care cooperative. I have been critical of that suggestion on this blog because his proposals look to me to be no different than the dozens of not-for-profit community-based health plans already operating—not the least of which is North Dakota Blue Cross.

When the day is done, what would Senator Conrad’s co-op proposal accomplish that is any different than the not-for-profit community-based health plans, that already have 50% of the market share in the under-age-65 market, have achieved?

But let’s take it a bit further.

At the thirty thousand foot level the notion of a public health plan cooperative doesn’t sound like a bad one.

But when you dig into it and actually explore how such a thing would work, it looks more and more like a camel to me.

First, the stated objective of a public plan cooperative would be to step up market competition to lower costs—to negotiate lower prices and more efficient provider treatment protocols. The argument goes that the existing plans aren’t trying hard enough.

OK, let’s start with the notion that a co-op can do a better job of negotiating prices and protocols. But wait, on day one how many members does the co-op have. Well it has no members on day one. So, the co-op's provider relations guy goes to the doctor and hospital administrator and demands better prices and protocols. My guess is the provider’s response would go something like this, “So you are here because your stated objective is to screw my reimbursement down more than it is, you have no members now, and if I give you the rates to take members away from the existing health plans you are going to make life even more difficult for me than those existing health plans have?" My guess is that when the provider stops laughing…

Next, the co-op has to hire people to staff its management and operations ranks. Who are they going to hire? Out-of-work realtors? Obviously, the co-op will have to hire experienced health plan people. First, for those of you in the business, just think of all the competition for your services if 50 new health plans suddenly get lots of capital to start-up. But secondly, if the co-ops hire the same people as are running today’s health plans—particularly people in not-for-profit plans now—why would the end result be any different?

And, how will the co-op compete for these new hires? Why would the best talent want to go to work for a quasi government agency paying government pay scales whose future is in doubt? Will the co-op pay more than existing health plans to lure talent away? If so, how will their administrative costs be any lower? After all, payroll is at least half of total overhead costs.

Just how will the government decide how to capitalize these new plans? In the 90s we spent $75 million to $100 million to capitalize a health plan in each of the major markets. How much capital will each co-op get? In the market, that question was answered through the creation of a business plan. Any private not-for-profit health plan that did not ultimately meet minimum scale or reserve requirements was scuttled. Just how much, and over how many years, will the government dump capital into these plans and who will make the decision that the limit has been reached? Will co-ops have an unlimited access to government capital without accountability? No matter how ineffective they are will the government just keep subsidizing their losses?

Already, there is talk in the Congress about allocating $10 billion to build these things.

This whole debate gets back to the simple question I have not heard any of the co-op proponents answer: Just how will a co-op turn out to be any different than North Dakota Blue Cross with its profit percentage of less than 1% and its board a cross section of the provider, business, and consumer community?

Or for that matter, any one of the dozens of other similar Blues plans and not-for-profit community-based HMOs in just about every county in America?

But when you are grasping for a compromise—and putting the urgency for compromise ahead of good policy—it sure is easy to come up with a camel.

Related posts:

Here's an Example of a Cooperative Not-For-Profit Health Plan--North Dakota Blue Cross

Health Care Cooperatives--An Old New Idea--So What's a Blue Cross Plan?

A Public Health Plan That Looks Just Like a Big HMO---Why?

It’s NOT the Prices Stupid!

Out here on Kent Island, the federal government says that I like to watch the Baltimore TV stations and therefore forbids my satellite provider to give me access to the local DC channels. (We’re about an hour from both Baltimore and DC.)

There is reason number one never to put the government in charge of any more than absolutely necessary.

While my new digital converter box had been working just fine for months, enabling me to switch over and get my favorite weatherman from DC, on Friday that signal was lost. Losing Doug alone is a reason to become a libertarian.

But fiddling with the converter box Friday night (there is a health care story here), I came across an interview between former Clinton Labor Secretary Robert Reich and Bill Moyers.

Reich was arguing that it's necessary to have a public plan as part of a health care reform bill because only then will government have the ability to pool enough people together to negotiate for lower prices. And, lower prices are the route to a sustainable health care system:

"Well, there's a very simple test. And that is the public option big enough and is it going to have bargaining leverage to get drug prices down and keep private insurers on their toes, forcing them to cut prices.

"There's nothing actually pushing the system unless you have a public option that gives the insurers and the pharmaceutical industry and the hospitals a real run for their money"

Setting aside concerns that government ever negotiates anything, Reich’s focus on prices is just plain wrong.

Medicare now pays doctors and hospitals prices that are 20% to 30% lower than what commercial insurers and HMOs pay them.

So, if we follow Reich’s logic, the current Medicare plan, paying much lower prices, should have health care under control. Of course, Medicare is as unsustainable as the private health care system.

Uwe Reinhardt has done lots of great research finding that America’s health care prices are higher than those in the rest of the western industrialized world.

But the more immediate problem here is utilization—the often-made Dartmouth Atlas argument. The very same argument the President very properly made in Green Bay last week.

The first things we have to tackle are the structural over-utilization problems that have evolved for decades. If we just go and start cutting prices 20% or 30%, we'd create a chaotic situation. Can you imagine the cost shifting that would ensue from even more underpaid providers in the form of even higher utilization rates?

Sustainable health care reform has to be about incentives that will fundamentally change practice patterns.

Reich, and the other public plan proponents, need to explain why, if getting lower prices through a public plan is the solution, isn't Medicare already a model of health care efficiency?

Here's an Example of a Cooperative Not-For-Profit Health Plan--North Dakota Blue Cross

North Dakota Senator Kent Conrad has proposed establishing not-for-profit cooperative health plans as an alternative to the Medicare-like public health plan President Obama supports.

I will suggest Senator Conrad take a look at this one:

North Dakota Blue Cross Blue Shield

From their website:

"More than 65 years ago, Blue Cross Blue Shield of North Dakota (BCBSND) began as two separate pre-paid health care plans for hospital and physician services. The two companies merged in 1986 and, in 1998, converted to a not-for-profit mutual insurance company."

A Stable Company:

• "Systems and processes essential to assisting health care providers are strengthening the ties between providers and BCBSND
• "BCBSND follows sound underwriting principles
• "Working to maintain adequate reserve levels to ensure funds are available to pay for member claims and administrative expenses"

In 2008, Blue Cross of North Dakota insured 475,000 people. The company had $1.3 billion in revenue and had a (miserly) net income of seven-tenths of one percent ($8.8 million).

In addition, the plan is overseen by a community Board of Directors representing doctors, hospitals, businesses, and consumers--all North Dakotans.

Senator Conrad, is this what you had in mind?

Earlier post: Health Care Cooperatives--An Old New Idea--So What's a Blue Cross Plan?

Health Care Cooperatives--An Old New Idea--So What's a Blue Cross Plan?

As opposition to a Medicare-like public health plan option grows, there has been a lot of talk about the compromise idea of creating not-for-profit health insurance cooperatives that would compete on a level playing field with existing private insurers. The reasoning goes they would keep the existing insurers "honest" by introducing a new element of competition.

That's a great idea.

And it was a great idea 60 years ago when the first Blue Cross plans were established. See also: Here's an Example of a Cooperative Not-For-Profit Health Plan--North Dakota Blue Cross

What's the difference between a not-for-profit health insurance cooperative and all of the existing not-for-profit Blue Cross plans?

In April, I discussed the notion that such not-for-profit state driven plans already exist in other forms and haven't accomplished a lot in a post: A Public Health Plan That Looks Just Like a Big HMO---Why?

Proponents of this compromise co-op idea often point to health plans run by states for their workers as an example of the government already running efficient health insurance programs. I noted that 30 states already have a similar health plan model combining medical self-insurance with commercial networks—usually Blue Cross networks—to operate a publicly-run health plan for their state workers.

I also discussed similar models set up by states to provide state-run workers' compensation programs in direct competition with the private workers' compensation insurance companies. Here is an excerpt from that April post:

I don’t know of any of these state self-insured plans that are generally getting better results than the typical large private employer’s self-insured plan—or any commercial health plan. And why would they—they are just large self-insured employers using the same commercial networks the ERISA market uses. CalPERS, the biggest for example, has a partnership with California Blue Shield and the last time I looked their costs weren't anything to write home about compared to the typical Fortune 100 employer.

Just which state employee plan is a model for reducing health care costs, ridding the system of unnecessary services, and measurably reducing the "premiums" it charges its sponsors and employees?

But, you might argue, these state plans have expense ratios far less than the existing individual and small group market. Sure they do--just like a typical large employer. Now add the cost of servicing individuals and small groups and why would they be any less expensive than a private plan offered in the same "Insurance Exchange." They don't have to make a profit, one might argue. Really? A public plan would have to develop the same stabilization reserves any existing not-for-profit health plan has to build for in the down years.

There actually are plenty of examples of government going into the insurance business on a level playing field basis with the private sector. There have been a number of state workers’ compensation funds over the years as well as state sponsored physician medical malpractice funds—usually built at a time when the private sector was not creating adequate market capacity for even average risks. [I am not pointing to high-risk pools here but state sponsored insurers aimed at the mainstream market.] All of the ones I know about ended up looking exactly like the private players. The fact that none of them ever dominated the market is testament to just how similar, or ineffectual, they turned out to be compared to their private market cousins.

As an example, I would point you to the California State Compensation Insurance Fund. Founded in 1914 by the state legislature, it is a workers' comp insurer. In the mainstream market the Fund looks, acts, and underwrites just like the private players. California has always been a problematic workers' comp market--can't say having the Fund for 95 years has solved any systemic work comp problems there.

What the Fund has been though is a doormat for the private market and political regulators--carriers move into and out of California when workers comp regulation becomes intolerable for them and back in when the regulatory climate is tolerable. But the Fund has to stay no matter what and its revenue and financial stability have varied widely as a result. When the carriers are interested in being in California, they pretty much take market share away from the Fund at will.

When the day is done, it seems to me the authors are arguing they can create something that looks just like the existing private health plan market...

So?

Looks to me that in an effort to create a level playing field and overcome the objections to a public health plan the authors have succeeded.

But they have also just come full circle and toward what end?

About half the private health insurance market in the U.S. is in not-for-profit health plans and networks (Blues, Kaiser, etc.). Just how would a "modest" public health plan provide something materially different?

The House Tri-Committee Bill—The Playing Field Just Moved Back to the Middle

Just when people were getting ready to write-off the Baucus bipartisan approach to a health bill the debate has swung back to the middle on a number of critical issues.

For a longtime I have been telling you two things:

• The final health bill will be more moderate than liberal—for example, no Medicare-like public plan, only a soft individual mandate, but including insurance exchanges and underwriting reform.
• A health care bill will go nowhere without a politically viable way to pay for it and no one has yet to put that on the table.

The Democratic caucus from the three House Committees working on a health care bill just released their outline.

It is clear that the House Blue Dog Democrats and other moderates have had a big impact upon it. Those who thought the House would come up with an unrealistically liberal proposal need to think again.

First, there is a public plan proposal. But it is the neutered variety—“The public health insurance option is self-sustaining and competes on ‘level field’ with private insurers.” This is a clear response to the Blue Dogs and other moderates saying “no way” to the Medicare-like public plan.

The House version of the insurance exchange idea only applies to the individual and small group market.

There would be a “pay or play” employer mandate accompanied by benefit standards—something I continue to believe will not survive to the finals out of opposition by the employer community to taking their ERISA plan design flexibility away. The individual mandate is the soft version--applying only to those who can truly afford it.

But on the spending side, it doesn’t look like the fiscal conservatives have had a lot of impact. The House bill also promises to subsidize individuals and families with incomes up to 400% of poverty. For physicians, it promises to get rid of the Sustainable Growth Rate formula and give primary care physicians a raise. It also promises to improve low-income Medicare subsidies, and eliminate cost sharing for all preventive Medicare services.

These are all good things—but they are also very expensive. This is where it gets a lot more problematic. Spending money for all of these things could well take this bill to a cost well north of $1.5 trillion depending upon the details.

The House bill puts no new revenue ideas on the table—they don’t even begin to talk about how to pay for it in any detail.

Because of the influence of the moderate and conservative Democrats the House outline is not so far away from the kind of bipartisan compromise that can be had—in terms of a plan outline.

But on the cost of the bill, and how it will be paid for, there is little to make us believe the “Blue Dogs” have had much influence.

This pushes my health care reform meter past $1.5 trillion on the cost side for this particular bill with still only about $300 billion in the tank.

Word on just whose hide the money will come out of has to come out soon. The Blue Dogs will be successful in continuing to demand full pay-fors.

That is when the “fun” will begin.

"The Tri-Committee Health Reform Draft Proposal"

Public Plan Option: Sustainable Growth Rate Formula On Steroids?

Everyone in the health care debate seems to agree that the biggest problem is costs and that the best way to control costs is to get at the waste in the system. To raise the money needed to cover everyone and to make the system sustainable, goes the argument, we need to convert the upwards of 30% in excess costs now in the system to savings.

I think that’s right.

Many of my friends in the health care debate say the way to do that is with a robust public-plan option. The reasoning goes that a Medicare-like public plan that can drive down reimbursement rates for providers will create strong competition for the traditional insurers and health maintenance organizations (HMOs) so they finally have to tackle the problem of costs and waste.

I agree with their premise that we need to have unambiguous incentives for the stakeholders to get the job done and finally drive the waste out of the system.

But I question whether a Medicare-like public plan option can do it by creating a new competitive landscape based upon provider underpayment: today most private health plans pay doctors about 20% more than Medicare and pay hospitals about 30% more.

Read the rest of this post at Health Affairs.