The Wyden-Ryan Plan Will Be the Foundation for Serious Medicare Reform—and Maybe More

In two companion articles in January’s New England Journal of Medicine, Henry Aaron with Austin Frakt, and Joe Antos critique the Wyden-Ryan Medicare reform proposal.

Senator Ron Wyden (D-OR) and Representative Paul Ryan (R-WI) are proposing a hybrid Medicare reform proposal combing both Republican defined contribution free market principles—a premium support scheme—with Democratic defined benefit principles—a baseline guaranteed plan and premium support.

In, “Now is Not the Time for Premium Support,” Aaron and Frakt argue that there is a market history of Medicare experimentation that hasn’t accomplished much and that a premium support scheme could well leave beneficiaries the victims of cost shifting:

Advocates of premium support claim that Medicare Part D, which has a premium-support structure, shows that competition holds down spending and that beneficiaries make wise choices. Their claims are unjustified. Although Part D drug spending per enrollee is lower than was initially forecast, non-Medicare drug spending is even further below past projections. Furthermore, enrollees have, on average, chosen plans that exposed them to greater financial risk than the best options available to them. Most important, because Part D has no public option, it cannot provide evidence on whether private plans are better or worse than a government plan would be.

So, although it's true that Medicare is a key driver of long-term federal spending, we don't believe that recently proposed premium-support reforms are the solution. They lack safeguards for beneficiaries. They threaten to shift costs to the elderly and disabled and force them to shop for coverage in a confusing insurance market. And the ability to run health exchanges for the Medicare population is currently in doubt.

Even the more pro-market Antos, in an article titled, “The Wyden-Ryan Proposal--A Foundation for Realistic Medicare Reform,” offers only limited praise for the plan:

Ryan and Wyden hint at the need for commonsense reforms to traditional Medicare, including a new structure of deductibles and copayments, a cap on catastrophic costs, and a new physician-payment system. They skirt the central problem: a disorganized fee-for-service system and top-down limits on prices paid for services drive the use of more, and more complicated, services. The program's survival depends on our willingness to make substantial changes over the next few years — before the major reform is implemented — so that traditional Medicare can provide cost-effective care without draining the Treasury.

The current proposal also offers a more politically palatable fiscal target at the cost of achieving fewer “scoreable” savings. Under Ryan's earlier proposal, the federal subsidy would grow only with general inflation (1.5% in 2012, according to the CBO) instead of the more generous target of GDP plus 1% (a rate projected to total 4.8% in 2012). Not coincidentally, that is the same fiscal target established for the Independent Payment Advisory Board (IPAB) under the ACA.

A 3.3-percentage-point difference in fiscal targets translates to a 1-year increase in program spending of about $20 billion, or about $300 billion over 10 years. Adopting the weaker target means a substantial loss of budget savings, but only if Congress would actually enforce the stricter limits. That may be unlikely given recent history. Over the past 8 years, Congress has overridden even relatively small reductions in physician payments called for by the sustainable growth rate formula. Clearly, a favorable score from the CBO does not guarantee lower program spending.

But then Antos suggests Wyden-Ryan could be the basis of real reform:

Given the serious fiscal problems facing this country, slowing the growth of Medicare spending is no longer optional. The only question is how to do it. The Wyden–Ryan proposal outlines a strategy for Medicare reform that harnesses market forces to control costs. It provides a real alternative to the top-down controls favored in the ACA. Paul Ryan and Ron Wyden have defined the policy parameters that could be the basis for real Medicare reform in 2013.

I will suggest that the last point is key.

Wyden-Ryan is now little more than a policy outline. It does fall short on real reform because it offers only a bare outline for how it will contain costs—there will be a still undefined fallback mechanism if costs exceed targets.

But what Wyden-Ryan does do is offer a political roadmap for how we could well see Medicare reform addressed after the election—particularly if Republicans gain control of the Congress.

Any successful reform has to achieve two things:

1. It has to be politically feasible in the first place.
2. Then it has to work—in this case it has to control costs and provide quality health care.

What Wyden and Ryan have given us is a very well developed political strategy for reform and only the outline for policy reform.

As I said in an earlier blog post:

What is elegant about the Wyden-Ryan compromise is that they have proposed a hybrid plan—it contains significant elements of both a Republican defined contribution and a Democratic defined benefit approach.

Republicans get an affordable cap on what the federal government would spend on Medicare—that growth would be no more than GDP+1%—and they would get a program built on a free market platform where consumers would have the incentive to maximize their premium support by shopping for the plan that best met their needs.

Democrats would get a plan that still contained the traditional government-run Medicare plan as one of the options and they would have a plan where all seniors were guaranteed a federal premium support level good enough to buy at least the two lowest cost Medicare plans available in their community—albeit maybe not the traditional Medicare option.

If there was ever a place for Republicans and Democrats to compromise on Medicare reform this is it. It is an elegant compromise—a hybrid—of both defined benefit and defined contribution principles.

Sooner or later all of this partisan bickering has to end. A Republican sweep in the November elections would do it. Wyden-Ryan would be on top of the health care agenda if that happened.

Even if we faced a divided government in 2013, the imperative for entitlement reform makes addressing Medicare costs unavoidable. In that case a basis for ideological compromise will be necessary. Wyden-Ryan presents that opportunity.

It will be the next part of the plan that is still too vaguely defined—how costs would be controlled and beneficiaries therefore protected—that Wyden and Ryan must address. Both Antos and Aaron/Frakt are right in pointing that out.

How will we achieve the needed “scoreable” savings a future Congress can’t easily override and do it in a way that will be politically palatable in the first place? That is the big question. Wyden-Ryan is just an empty political box without answering that.

But do not underestimate how important this first bipartisan step is that Ron Wyden and Paul Ryan have taken. Unless the Democrats sweep the November elections, this is what the next debate will revolve around.

In fact, one can foresee this same bipartisan political formula as a means to eventually deal with the under-age-65 health insurance market. Remember Wyden-Bennett? Could there be another under-65 version of Wyden-Ryan?

A Way Out of the Health Care Wilderness?

I just came across an interview that I will suggest we all may have missed and perhaps charts the way out of this health care reform wilderness we now seem to be in.

It was on February 2nd and was between the Washington Post’s Ezra Klein and rising Republican House star Paul Ryan (WI).

Ezra asked Ryan about the bipartisan Wyden-Bennett bill as a place for both sides to find common ground. It’s a bill that blends the Democratic notion that everyone needs to be covered sooner rather than later with the Republican idea that we use tax credits to make people better consumers. And, the bill pays for itself on the front-end.

Ryan responded, “I have a lot of respect for that plan. If I were a Democrat, it’s the bill I’d be on. He’s got more mandates than I’d like. But if Ron Wyden and I were in a room, we could hammer out a deal by tomorrow.”

“If Ron Wyden and I were in a room, we could hammer out a deal by tomorrow”?

Well if all you guys need is a room there are plenty of those on Capitol Hill.

I suggest Ron Wyden give Paul Ryan a call and get to it!

Health Care Outlook Not Improving

The next big test for a health care bill in 2009 (notice that I did not call it health care reform) will come in Senate Finance.

The final vote in that committee will tell us a lot about whether the Democrats have any chance for 60 votes in the full Senate. So far, it does not look good.

I have the greatest respect for Senators Baucus and Grassley and their good faith efforts to find a bipartisan health care solution. But I also think their efforts were fatally flawed from the beginning.

I think the problem is that Baucus and Grassley were trying to bridge the wide chasm between liberal and conservative ideas. Finding the fine balance necessary has created an unwieldy compromise—no one is happy. Most striking, the compromise reached between cost and premium subsidies has yielded an $880 billion bill that requires middle class people to buy health insurance they will in no way will be able to afford. On top of that, the policies have big deductibles and out-of-pocket costs.

As I have said on this blog before, we cannot do something as big as health care reform without bipartisanship. The American people will never be comfortable with one side’s proposals so long as the other side is taking shots.

Any successful health care effort will need political cover from at least some respected members of the minority party.

This health care effort has occurred on one side of the political spectrum. Grassley and Baucus tried to bridge a wide chasm between the conservative side and the liberal side and were only able to build a rickety bridge across it that, it would appear, Grassley can’t even sign onto.

To get this done, we will need to build a consensus on health care from the middle and then build out. We need to start with the things everyone can agree on and then push simultaneously as far right and left as we can go and still hold a consensus.

I know I have said this a few dozen times before on this blog, but Wyden-Bennett is an example of that middle-out model.

You might respond that Wyden-Bennett is off the table.

Have you noticed recently the growing number of times that name keeps coming up in media reports?

Recent post: "Please Don't Call It Health Reform"

"Please Don't Call It Health Reform"

Readers of this blog already know of my disappointment in what the White House and many in Congress are calling "health care reform."

So, I was happy to see Alain Enthoven's recent KHN op-ed.

Here is a small portion of it:

"Once again the President did not put forth serious proposals to reduce the growth rate in health expenditures in his speech last night. Obama likes to talk about the iconic systems: Mayo, Intermountain, Kaiser Permanente, and Geisinger, but the Democratic bills do practically nothing to promote their growth or systems like them.

"The House Tri-Committee and Senate HELP Committee bills offer none of the fundamental reforms that would be likely to change the system or significantly slow growth in expenditures. Rather, what they offer is continuation of our present traditional employer-based, non-competitive fee-for- service system. They don’t respond to the President’s call for reforms that would lower the growth trajectory, or even that would not add to the fiscal deficit."

I highly recommend your reading all of it here.

Bob Bennett Wants to Turn "Control of Our Health Insurance System Over to the Government"–-Say What?

That’s what the Club for Growth is saying about Senator Bob Bennett’s health care proposals.

Apparently, the Club for Growth has a reading comprehension problem. Or, are they just trying to twist the truth about the Utah Republican's health care efforts? The Wyden-Bennett Healthy Americans Act has to be the most pro-market health care reform proposal on the table.

First, it does not have the controversial public health care plan option that the pending Democratic health care legislation does have. Every one of the health insurance plans that would be offered under Bennett’s bill would be a private plan.

The Wyden-Bennett plan also puts the value of any employer-provided health plan in the hands of the consumer. Employers can keep their plans and employees can remain in them. But consumers can also take the cash and go purchase any plan available.

For a long time, conservatives have suggested putting the value of health care plans in the hands of consumers, so they could use the money to buy the kind of plan that works for them, as well as changing the tax code as Wyden-Bennett does to facilitate that.

Senator Bennett’s bill also creates a health insurance exchange where consumers could go to compare policies and pick the one that is right for them but that is hardly a proposal for government to take over the health care system.

Likely the truth the Club for Growth is trying to twist has its roots in this: The conservative Heritage Foundation has been critical of the design of these insurance exchanges in Wyden-Bennett because they rely on the use of a standard plan. As they put it, “standardization undermines personal choice and market innovation.” I think that is a valid criticism of a bill that is by no means perfect in its original form.

But that is a long way from condemning Senator Bennett’s efforts to find a way to accomplish bipartisan health care reform as promoting “a government takeover.” As the conservative Heritage Foundation put it in their review of the bill:

“By introducing the Healthy Americans Act (S. 334), Senator Ron Wyden (D-OR) and his chief co-sponsor, Senator Robert Bennett (R-UT), have courageously challenged the status quo on the federal tax treatment of health insurance and public health programs for the poor. The bill correctly targets the inequitable tax treatment of health care that favors coverage obtained through the place of work. It also recognizes the weakness of the existing public health programs, Medicaid and the State Children's Health Insurance Program (SCHIP). The bipartisan bill has attracted a dozen co-sponsors, drawn equally from both parties.

“Still, as the chief sponsors point out, the bill is a work in progress, intended to stimulate discussion. And despite many attractive tax reform aspects, a troubling feature of the bill is that it would replace the current health system with one that is heavily regulated by the federal government: Individuals would have access only to plans permitted by the government and would be required to purchase such a plan.”

A “courageous” attempt at reform that Bennett and all of the other authors agree is a “work in progress” is hardly a reason for the Club for Growth to condemn good faith efforts.

The Club for Growth also claims that Bennett is sponsoring the bill with "liberal Democrats." The Wyden-Bennett bill has such “liberals” co-sponsoring it as Republicans Judd Gregg of New Hampshire, Mike Crapo of Idaho, Lindsay Graham of South Carolina, and Lamar Alexander of Tennessee.

Here are what these Senator’s and their co-sponsors for the Wyden-Bennett bill recently said in a Washington Post op-ed piece:

“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.”

Legislating is about give and take. I expect Senator Bennett would favor a health insurance market more like the one the Heritage Foundation has outlined. But for this kind of effective leadership, and not having the perfect bill, the Club for Growth says Bob Bennett is in favor of government control of health care?

If we had more Senators like Bob Bennett conservative ideas for modernizing America’s health care system, like turning massive health care purchasing power over to consumers and creating a health insurance supermarket, would be making even more progress.

Bob Bennett deserves a lot better than this cheap shot by people who were supposedly his friends!

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?

Never Give Up!

At the rate this crazy health care reform debate is going it could well come full circle and back to twelve Senators who still think they have a good idea--if everyone else would stop digging in on what they can't agree on.

This from a Washington Post op-ed they co-authored this week:

As 12 U.S. senators from both sides of the aisle who have widely varying philosophies, we offer a concrete demonstration that it is possible to find common ground and pass real health reform this year. The process has been rocky, and slower than many had hoped. But the reports of the death of bipartisan health reform have been greatly exaggerated. Now is the time to resuscitate it, before the best opportunity in years is wasted.

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. The Congressional Budget Office has reported that this framework is the only one thus far that bends the health-care cost curve down and makes it possible for the new system to pay for itself. It does this by creating a competitive market for health insurance in which individuals are empowered to choose the best values for their money and by cutting administrative costs and spreading risk across large groups of Americans.

Ron Wyden is a Democratic senator from Oregon. Robert F. Bennett is a Republican senator from Utah. The other authors of this op-ed, and co-sponsors of the Healthy Americans Act, are Sens. Debbie Stabenow (D-Mich.), Ted Kaufman (D-Del.), Daniel K. Inouye (D-Hawaii), Mary Landrieu (D-La.), Joseph I. Lieberman (I-Conn.), Bill Nelson (D-Fla.), Judd Gregg (R-N.H.), Michael D. Crapo (R-Idaho), Lindsey O. Graham (R-S.C.) and Lamar Alexander (R-Tenn.).

Are these twelve "tilting at windmills?"

My observation is that we are nowhere close to achieving any kind of health care bill in 2009. This thing is deadlocked. When I drill down past all of the optimistic spin I find Senators and Representatives that can't agree on any one of dozens of key issues. Those House bills that are out of committee? Wait til you see the floor debate on those. After this recess, it won't be pretty and I'm talking about moderate and conservative Democrats here.

The Senate Finance bipartisan "gang of six" are attracting loads of attention as the Senate heads home for the recess. But take a look at what they're coming up with and I doubt you could find another six Senators that would sign on to it.

But the twelve who have signed on to the Wyden-Bennett Healthy Americans Act aren't giving up.

Don't count them out--they just might outlast every other idea put on the table. Goodness knows they've outlasted dozens that have come and gone already!

Wyden-Bennett Touted as an Alternative

I have to say I was a bit surprised watching Meet the Press this morning to hear the pundits on both sides of the political spectrum discussing the Wyden-Bennett Healthy Americans Act as an alternative to the more partisan Democratic health care reform bills already on the table in the House and Senate HELP Committee.

The Republican spin seemed to be that, "We've always been for Wyden-Bennett, it's real reform."

The Democratic spin was something like, "Suddenly you're for Wyden-Bennett, where have you been all this time?"

To me the good news is that the debate may finally be getting to the question of what real health care reform is. As I have posted on this blog before, I am concerned that we are really on our way to a massive entitlement expansion without actually changing the health care system in a way that will make it affordable.

Wyden-Bennett is a serious health care reform proposal.

Hopefully, finally bringing Wyden-Bennett into the mainstream of the debate means we are about to have a serious discussion about systemic health care reform.

I hope it isn't just Republicans, far too many of whom have been sitting on their hands for months, grasping at something to make them look like they have a credible alternative.

But if they are just grasping for something to believe in they at least have found something credible.

All previous posts on Wyden-Bennett "Healthy Americans Act"

Time to Take Another Look at the Wyden-Bennett Healthy Americans Act?

This from today's Kaiser Health News:

"A bipartisan proposal from Sen. Ron Wyden, D-Ore., to replace the tax exclusion for employer-based health benefits with a standard deduction would do more to contain healthcare spending than Senate Finance Chairman Max Baucus' plan to cap the exclusion, according to a recent assessment by the Joint Committee on Taxation,' Congress Daily reports. 'The revelation is lending a boost to Wyden as he attempts to sell Finance members on the key idea of his signature Healthy Americans Act.' The bill, which the CBO has scored the bill as deficit neutral, "has 13 co-sponsors, including Sens. Debbie Stabenow, D-Mich.; Bill Nelson, D-Fla.; and Mike Crapo, R-Idaho, who all sit on the Finance Committee" (Edney and Cohn, 6/18).

The Congress is stuck in the mud on health care reform.

The Congressional Budget Office (CBO) continues to demand real health care reform and not the cost containment “lite” stuff they’ve largely been asked to score so far.

The recent letter from CBO Director Doug Elmendorf to Senate Budget Chair Kent Conrad is a very important document. Really, Elmendorf has laid out a detailed roadmap all but saying—“Here’s how I can give you what you are looking for.”

The message to the Congress is clear—stop playing around the edges and get serious about real health care reform:

In the absence of significant changes in policy, rising costs for health care will cause federal spending to grow much faster than the economy, putting the federal budget on an unsustainable path. This letter responds to your request for information about the features of reform proposals that would affect federal spending on health care over the long term.

As you noted, many experts believe that a substantial share of spending on health care contributes little if anything to the overall health of the nation. Therefore, changes in government policy have the potential to yield large reductions in both national health expenditures and federal health care spending without harming health. Moreover, many experts agree on some general directions in which the government’s health policies should move—typically involving changes in the information and incentives that doctors and patients have when making decisions about health care.

However, large reductions in spending will not actually be achieved without fundamental changes in the financing and delivery of health care. The government can spur those changes by transforming payment policies in federal health care programs and by significantly limiting the current tax subsidy for health insurance. Those approaches could directly lower federal spending on health care and indirectly lower private spending on it as well. Yet, many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning. Modest versions of such efforts—which would have the desirable effect of allowing policymakers to gauge their impact—would probably yield only modest results in the short term.

Therefore, one broad long-range approach for reform that has drawn interest recently would combine specific policy actions—to generate near-term savings and provide experience that would lay the groundwork for future savings—with a mechanism or framework to impose ongoing pressure for achieving efficiencies in the delivery of health care. The effectiveness of that path would depend ultimately on the willingness of federal policy to maintain significant and systematic pressure over time and would require tough choices to be made. Without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.

On the cost containment side, Elmendorf’s letter is very specific in suggesting some things that will work—many of them taking the power out of the Congressional hands and putting it into that of a third party to keep the pressure up over time. No more SGR back peddling.

Then there are taxes. Readers of this blog know that I have been critical of using old-fashioned tax increases just to raise cash to pay for health care entitlement expansion. Why would we ever want to chase something--health care--that has been growing almost four times faster than the wage rate with taxes?

But that is different from using tax policy to encourage efficiency in the marketplace. From Elmendorf’s letter:

CBO’s Budget Options volume discusses a number of such changes. One option would replace the current tax exclusion with a refundable but more limited tax credit. Another option would limit the amount of health insurance premiums that could be excluded from income and payroll taxes to specific dollar amounts that represented the 75th percentile of premiums paid by or through employers. These approaches would change workers’ incentives about how much insurance to purchase and how much care to demand, and they would increase federal revenues by several hundred billion dollars over 10 years.

The Wyden-Bennett Healthy Americans Act is a health care reform proposal that would creatively used the tax system to change the incentives—in this case replacing the tax exclusion with a tax credit as Elmendorf has suggested.

Some have been critical of Wyden-Bennett because the first version would have ended the employer-based system of health insurance, as we know it. But I was pleased to see Senator Wyden amend the bill to enable employers to continue their benefit plans.

Some have suggested that my enthusiasm for Wyden-Bennett is inconsistent with my being so hawkish on cost containment.

For sure, Wyden-Bennett needs to have its cost containment effort expanded. Don’t be surprised to see some movement on that score.

But right now both of the Senate health care committees are stuck in the mud. They have health plans that are pricing way north of what we can afford—the Finance Committee at $1.6 trillion—and they don’t have much more than $300 billion to $400 billion in scoreable savings to offset that cost.

It’s time to take another look at the bipartisan work Wyden-Bennett has accomplished in order to get the process unstuck. Elmendorf seems to be all but begging Senators to take another look at some of the key elements of the bill.

Since the CBO has already scored the Wyden-Bennett Healthy Americans Act as deficit neutral, let me suggest that should come in handy to Senators who can’t seem to make any progress with the CBO.

The First "Harry and Louise" Ads!

To me a "Harry and Louise" ad is negative health care reform advertising meant to defend a special interest's self-interest in what we all pay for health care. Whether it actually has "Harry" or "Louise" in it is for me beside the point. To qualify it just has to be trying to scare people to protect a special interest.

Yesterday, CQ's Drew Armstrong had a story with the headline, "Labor Unions' Campaign Targets Wyden's Proposed Cap on Benefits Reduction."

From his article:

The ads, called “Stop Wyden’s Health Tax,” are sponsored by Oregon chapters of national labor unions in an effort to defend their members from having any portion of their health benefits taxed. Wyden, D-Ore., has proposed a cap on the tax deduction for employer health care benefits.

The $60,000 advertising buy will run in the Portland and Eugene markets. It is being paid for by local chapters of AFSCME, the National Education Association, and the United Food and Commercial Workers International Union.

Labor groups on the conference call declined to comment on whether the ads were meant as a shot across the bow of Baucus and others. Instead, they said they were waiting to see the legislation.

Ya think? Sort of like, "Was that dead horse head in the guy's bed in Godfather 1 meant to send a message?"

America's labor unions have been at the front of the parade calling for everyone to come together and accomplish health care reform. They have been quick to point out the problems with insurers, drug companies, and all of the other special interests and haven't been shy about taking the moral high ground.

I doubt there is literally anyone in this debate (including these guys) that, at least privately, wouldn't agree that rich benefit programs are contributors toward our high health care inflation.

So what happens when a Senator makes a constructive proposal, thinks outside the box, reaches out to fellow Democrats and Republicans, and crafts a health care proposal an impressive number of both Democratic and Republican Senators have signed onto?

He gets a dead horse head in his bed with the clear message he won't be the last if he and his colleagues don't tow the line.

How much of a threat is Wyden’s plan to these unions' members anyway? The Healthy Americans Act would limit the amount workers could exclude from taxes to $6,025 annually for an individual. Married couples with children could deduct $15,210, plus an additional $2,000 per dependent child.

That compared to the average cost for family health insurance at just under $13,000 a year. So, families that have health plans costing more than $2,000 over the average have nothing to worry about.

Talk about taking the moral high ground.

Like the Healthy Americans Act or not you can't fault the creative bipartisan effort being made here.

This is how they reward a legislator back in Oregon who thinks outside the box and has accomplished more to date than any other member of Congress in crafting a bipartisan solution to a big problem?

The "Cleanest and Strongest Lever" to Make Health Care Reform Work

I like the Congressional Budget Office (CBO). In a town where self-serving BS generally pollutes the health care reform discussion these guys regularly play it down the middle. Are they always right? I suppose not. But they play the game on the up and up and that makes them noteworthy.

Their latest contribution came from Director Doug Elmendorf. In Congressional testimony he said that, "The cleanest and strongest lever that [the Congress has for] private health care [reform] is the tax exclusion. Many analysts would agree that adjusting that exclusion can be very beneficial for health insurance coverage and for ensuring a more efficient health care system." He went on, "In the public sector...the comparably clean and strong lever would be increasing cost-sharing by Medicare beneficiaries."

His comments came during testimony where he told Congress that the number of those uninsured would reach 54 million in ten years if we do not fix the system.

Now this suggestion certainly wasn't music to the ears of Democrats that have generally avoided things like health care tax reform and cost sharing but it was an honest appraisal of just what it is that will do a lot of the heavy lifting that real health care reform will require.

Last December, the CBO published a list of 115 health care reform options and their impact on long-term federal spending--another stellar job by them. In a post summarizing their findings, I said that it was clear from their work that making the health care system affordable would mean having to deal with what and how we pay providers and beneficiaries--the politically problematic part of meaningful reform. This latest testimony just underscores that conclusion.

Is there any support in the Congress to actually deal with the long-standing tax exclusion for health benefits or entitlement cost sharing? Just a few days ago a bipartisan coalition of 13 Senators from Lindsey Graham to Joe Lieberman to Ron Wyden announced they were reintroducing the "Healthy Americans Act."

Will the Congress and the administration be so bold to actually tackle these kinds of far-reaching goals?

At least the CBO and 13 Senators appear ready.

Likely Health Care Reform Will Not Reform the American Health Care System

Remember those Archway "Windmill Cookies?" They were a favorite when I was growing up.

Robert Pear's article in the New York Times this weekend reminded me of that treat my mother used to buy for us kids. His article also illustrated the crisis many families are facing in what looks like it will be the worst recession of our lifetimes.

Archway was a great American company--it was in business for 72 years. Great treats that were part of so many childhoods and the place a lot of people worked for most if not all of their working years. A company that took good care of its people.

Until Archway went out of business recently when its current owner--a private capital fund--shut off the financing in the face of big losses. Unfortunately another common American business story these days.

Archway had a self-insured health plan regulated under ERISA. ERISA health plans, unlike pension plans, have no funding requirements or backstop federal insurer. If the company can't fund its health benefit plan the benefits cease and the workers simply become another creditor if they have outstanding medical bills to be paid.

The employer-based ERISA health insurance system may just be about the best thing in our dysfunctional health care system. 175 million people generally have great health insurance because of it. The vast majority of employers voluntarily offer comprehensive benefits and do everything they can to cover their people--most paying 75% of the premium. You don't hear about age rating, guaranteed insurability problems, or limited benefits. Having a choice, I expect about every American would pick a typical corporate ERISA health plan over Medicare or Medicaid.

The problem is that the whole ERISA health insurance system depends upon the employer's goodwill and ability to pay the bill month to month.

With unemployment at about 8%, and likely headed to at least 10%, lots of people are being laid off.

Worse are all of the corporate insolvencies.

If the employer goes out of business there is no COBRA benefit continuation option because your ERISA plan is dead--the administrator is not on the hook to give you COBRA options or pay your outstanding bills even if it is one of the national health plans. Health plans generally pay their claims one or two months in arrears, so if you had surgery last month and the plan hasn't paid any of your self insured bills and then ceases to operate you are out of luck (you may have coverage for claims that have reached the plan's reinsurance point).

That is what is happening at Archway today.

Some advocates for health care reform use this kind of example to tell us this is a big reason we need to have a health reform bill passed in the Congress next year.

They are right--but they also may not understand that even an Obama campaign-style health reform bill will not come close to ending this problem.

For example, non-partisan health care analysts at The Lewin Group, have estimated the Obama health plan would only cover about half of the uninsured leaving 22 million still without coverage. The similar Massachusetts Health Law is providing no assistance for most families making between $52,000 and $110,000 a year toward the $10,000 to $12,000 cost of family health insurance in that state.

As I have said on this blog before, doing a halfway job on health care reform is hardly progress. Health care reform without effective cost containment is just destined to blow up. Saying we are doing access reform but leaving the system full of coverage gaps raises expectations but just gives us a more expensive and even more unaffordable system.

Stories like this are not a reason to copy the Massachusetts Health Law or even enact the Obama Health Plan. Neither will come close to giving workers health insurance security.

Only a health plan with tough cost containment, a comprehensive safety net that works from day-1, and a self sustaining means to pay for it all will solve this problem.

We don't need to do this in steps. Wyden-Bennett, as an example, gives us a self-financing comprehensive safety net that covers virtually everyone--and continues to allow for ERISA plans. Add to that some tough cost containment and we can really solve this problem.

But let's not kid ourselves that any of the plans that look to be on the table today are the answer to what the former Archway employees are going through. They are not.

The Healthy Americans Act--Wyden-Bennett Bill--Still in Play

A recent letter from 15 Senators to President-Elect Obama caught my eye.

The letter was from Senators Ron Wyden (D-OR), Bob Bennett (R-UT), and the other 13 Senators on their health care reform bill--7 Democrats 7 Republicans, and one independent--to President-Elect Obama reminding him of the progress this bipartisan group has already made toward health care reform.

As readers of this blog know, I am not optimistic that we can get any big comprehensive health care reform bill done in the next two years. That doesn't mean I don't want to see it happen as badly as anyone else.

The Democrats, even with 60 votes, will never get health care reform done by themselves. It certainly won't be done bypassing the 60-vote rule in the Senate and thinking 52 or 53 votes could change 16% of our economy.

The kind of real bipartisanship that can send the signal to the American people that we are headed in the right direction on so risky an enterprise as health care reform will need 70-80 Senators and like bipartisan majorities in the House. Without it, the naysayers will pick its bones apart.

Parliamentary maneuvering won't get this huge job done.

In the least, health care reform will take bipartisanship--and it will likely take statesmanship.

Democrats want to get everyone covered sooner rather than later.

Republicans don't want to build a new system on the same base they, and most people, see as contributing to our out-of-control costs.

Wyden-Bennett is in no way perfect health care policy. The give and take of a health reform process would make that impossible. Tough cost containment is lacking like it is in most of the health care reform plans I have seen. But Wyden-Bennett does begin to restructure the system in a way that can give us hope the incentives for more appropriate spending will begin to be in place. The Healthy Americans Act is, within the context of the political art of the doable and respect for what both sides are looking for, elegant policy if I have ever seen it.

Wyden-Bennett is elegant health care policy because it draws from many of the best ideas on the right and the left, lays out a practical road map, and pays for itself.

But it also takes on some tough issues. While it has been modified to allow employer plans to continue, it does change the tax system to make health care more of an individual responsibility. This is very much the vision of Republicans, including John McCain's.

Many employers are dubious about risking changes to the employer-based system. As someone whose career has been built on ERISA, I can understand benefit managers whose job security might be threatened, and insurers who would be reluctant to call for something that might threaten their client's job security. But why would CEOs and CFOs concerned about competing in the global economy not be onside with a plan that caps their obligations?

One of the more intriguing opponents are the labor unions. With wages relatively flat, one of their prime reasons for their being are the benefits they have negotiated, and fight an uphill battle to protect, for their members.

But wages have been largely flat because health care costs are burning up the available money employers have for compensation--cash or benefits. Workers are worried they would have less health insurance security. But no plan I know of has come up with the structure and funding to assure far more health insurance security to people than we have today. That would put the focus in labor negotiations back where it should be--on wages.

Wyden-Bennett achieves perhaps the most important goal in health care reform--it is revenue neutral early on. It is so largely, but not entirely, because it rearranges existing tax preferences and premium support.

With the fiscal realities we are facing, I do not see how we have any chance at health care reform without some statesmanlike rearranging of what we spend on health care today.

We have the Baucus plan, (which interestingly left tax changes on the table) the upcoming Kennedy bill, and likely many other health reform plans.

But no other idea really starts to change, rather than build upon, a system we all agree is unacceptable. No other idea has the bipartisan support out of the box that Wyden-Bennett does.

No other plan likely has as big an uphill battle as Wyden-Bennett because it is so different. Incremental change is always the apparent path of least resistance--and in the end the least satisfying.

But why not try to get health care reform right?

This from the Lewin Group's report on the Healthy Americans Act:

We reviewed the cost and coverage impacts of the Act. Our key findings include:

• The program would cover 246.8 million people. Over 99 percent of Americans would have coverage;
• National health spending, projected to be $2.3 trillion in 2007, would actually decline by $4.5 billion despite the expansion in private coverage, due to savings in administration($29.8) and increased price competition for insurance ($54.9);
• The annual rate of growth in national health spending would be reduced by about 0.86 percent. Savings over the 2007-2016 period would be $1.48 trillion, which is 4.5 percent of spending over this ten-year period (Figure ES-1);
• All new federal program costs, $812.9 billion, are fully funded with: $516.9 billion in premium payments net of subsidies; Employer assessment revenues of $89.3 billion; State and federal share of savings to Medicaid of $153.5 billion; Reduced disproportionate share hospital (DSH) payments of $18.8 billion; Increased Social Security tax revenues less offsets of $13.1 billion; and Elimination of selected business tax credits ($22.9 billion).
  
• State and local Government safety-net program savings of $22.4
• Employer health spending falls by $309.8 billion (from $428.8 billion). This amount will be passed-on to workers as wage increases under the cash-out; and
• Overall, increases in family premium payments are offset by the increase in wages and subsidies provided under the plan.

The Healthy Americans Act in Detail as well as the Lewin Study.

The McCain Health Plan's Good Idea for Health Care Reform--Likely Going Down With the Candidate

John McCain would reform the American health care system by providing big tax incentives for it to transition from being employer-based to one built on a system of individual responsibility. He would do this by eliminating the longtime personal tax exemption on employer-provided health insurance and replacing it with a $2,500 individual, and $5,000 family, tax credit for those who have health insurance.

It's too bad this idea will likely recede from the national health policy debate whether John McCain wins or loses the presidency. Even if he wins, the Democratic majorities in Congress will be so large there is little chance we will be able to move away from the traditional employer health insurance base in the next few years. All you have to do is look at the way Obama and all of the Democratic candidates for the Senate and House have railed against McCain's plans to "tax your health benefits" to see how Democrats have willingly painted themselves into a political corner that makes this idea a non-starter in the new Congress.

As I have said on this blog before, I have been largely disappointed in the McCain health plan. He started out with a bold new approach but never closed the loop on so many key elements in his plan. For example, he leaves those with pre-existing conditions to the fate of state-based risk pools--a place no one would ever vote themselves into. See: John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed

It never made sense to me for McCain to ask voters to take a bold leap with him to reform the health care system but do little to make voters comfortable with the consequences of all that he was proposing. As a political proposal, the McCain health plan was a disaster. Who would ever vote themselves into such a system with less health care security than they have today?

It is no surprise that a big part of Obama's advertising budget has been spent zeroing in on the McCain health care plan's tax changes. I am surprised they didn't zero in on even more of it.

McCain's failure to make such a big leap away from our current system of third-party pay something voters could look forward to also makes it harder for more serious proposals to fundamentally redo our health care system on a platform of individual responsibility--the Wyden-Bennett plan for example.

The employer community themselves have amazingly added fuel to the arguments we need to stay with the employer-based system. The U.S. Chamber, the Business Roundtable, The National Business Group on Health, the American Benefits Council, and the NFIB have all had at least cool things to say about McCain's tax credit idea (New York Times, October 7th). The health insurers have gone along with this opposition--most certainly afraid to call for their benefit manager clients' layoffs!

Why are employers so against taking this big benefit cost off their books? They continue to see benefits as an effective way to compete for workers. They are also worried that they are going to get the bill anyway but won't have any control over what it costs in a new system.

As I have also said many times on this blog, I believe that either the employer-based or individual-based approach to health care reform could work. However, my guess is that if most health policy experts could create a clean sheet health care system in America, putting it on an individual platform would be one of the things most--liberal and conservative--would agree to do.

McCain has made such a mess of selling his health plan--and Obama has done such a good job of taking advantage of it--that I fear we have boxed ourselves into the third-party pay employer-based system, that has proven to be so expensive, for a longtime to come.

The only hope for this idea is that, in the face of daunting federal and state budget deficits, a restructuring of the system on an individual platform may be the only way we can achieve health care reform on a pay-as you-go basis--Wyden-Bennett for example, pays for itself in the third year.

But the well has been poisoned over an individual-based system in the face of big Democratic majorities that have so opposed the idea in this election.

The Democrats, in trashing the idea of a tax change for health benefits, and the Republicans in so fumbling the argument, may have taken the one way we could have done pay-as-you-go health care reform off the table.

Or, both sides can take a second look at it--this time complete with the appropriate arguments and policies that give voters the health care security they require.

Update: Speaking of fumbling the arguments for the conservative approach to health care reform, a few hours after I posted this, a leading McCain spokesman was quoted at CNN regarding the McCain health tax credit:

Younger, healthier workers likely wouldn't abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain's senior economic policy adviser.

"Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the credit."

So just why would Holtz-Eakin expect anyone to vote for the end to the employer tax exemption on health benefits in favor of the McCain tax credits?

The Pretend Presidential Debate on Health Care--The Health Care Press Needs to Force the Presidential Candidates to Get Real on Health Care "Change"

Let's pretend that either Senator Obama or Senator McCain will be able to implement their respective health care reform plans if elected. Should be easy--we've been doing it for months now.

Or, we can get real and expect them to do the same.

For all the arguments both are making that they are change agents, including over the candidates' competing health care reform proposals, is this dirty little secret––neither Senator's health care plan has a chance of being implemented.

Senator McCain is not going to get a likely Democratic Congress to pass a health care reform plan that eliminates the deductibility of employer-based health insurance and pushes millions of consumers into a wide-open and less regulated insurance market.

Maybe the Congress should pass it--but they won't.

If Obama is elected he will not get even a Democratic Congress to pass his health care plan which will cost at least $100 billion a year. The 2009 deficit is now projected to be in the $500 billion range--and that is before the huge cost in 2009 to extend the Bush tax cuts even Obama favors and the cost of the Freddie and Fannie bailout.

Maybe the Congress should pass Obama's health care reform plan in the face of these overwhelming fiscal realities--but they won't.

So this presidential debate over "my health plan versus your health plan" is interesting but it's actually pretty irrelevant.

The real question that needs to be put to these candidates: Just how will you achieve bipartisan health care reform in the face of the reality of needing to deal with a Democratic Congress (McCain) and a crippling budget challenge (Obama)?

Bipartisanship means reaching out to get enough of the other guys onside. Political leadership means finding the place a deal can be made. So, just how would these candidates get the job done?

Let me suggest that it is more important for voters to hear from these candidates about how they will handle the real world of health care reform rather then the pretend one they seem to be debating.

Let me give you a for-instance.

There is one bipartisan health care reform plan that takes from both sides and the CBO says is cost neutral. It has 16 Senate sponsors--8 Republicans and 8 Democrats.

Senator Ron Wyden (D-OR) and Senator Robert Bennett (R-UT) have crafted a health care reform plan that gives both sides the most important things each are looking for:

• For the Republicans, it gives them a plan that moves away from the third-party employer-based payment system to one of individual responsibility and the promise of a more vibrant market.
• For the Democrats, it provides a plan that assures everyone will have access to coverage and provides the financing to get about everyone covered in the short-term.

But here's the big one: The Congressional Budget Office and the Joint Committee on Taxation have said the Wyden-Bennett plan could be operational by 2012 and would be budget neutral by 2014! In health care terms, parting the Red Sea would be an easier accomplishment.

I'd ask McCain and Obama just how they would accomplish health care reform--in the real world not in the pretend one they are in now. I'd go further and ask each of them if he would sign the Wyden-Bennett plan if it came to his desk.

If I had the answers to these questions then I would really know something about just how they would be "change" agents and accomplish health care reform!

Update on the financial crisis and health care reform: What I'm Telling the Health Care Business About the Future

Earlier post:
Watch the Wyden-Bennett "Healthy Americans Act"--It Could Be the Place Health Care Reform Compromise Takes Place in 2009

The National Coalition On Benefits' Oppostion to the Wyden-Bennett "Healthy Americans Act"--Maybe They Like It After All?

The National Coalition on Benefits is a group of more than 150 of America's biggest corporations as well as the U.S. Chamber of Commerce and the Business Roundtable.

They wrote a letter to Senators Ron Wyden (D-OR) and Bob Bennett (R-UT), cosponsors of the bipartisan "Healthy Americans Act," telling them that their bill was a non-starter because it dared to mess with ERISA. The Wyden-Bennett bill has 16 bipartisan Senate sponsors and 23 House sponsors.

The Coalition objected to Wyden-Bennett because of its emphasis on the individual health insurance platform over the traditional employer-based system of health insurance:

In summary, we believe that a sensible, consensus approach to health reform should build on our voluntary employer-based health care system and not undermine the essential role of employers in our health care system. Central to this is the current ERISA standard which provides a single, uniform federal framework and makes it possible for employers to offer health benefits to millions of employees, which they highly value and depend on.

Upon reading the letter, I was frankly puzzled that many of America's largest companies, the U.S. Chamber, and the Roundtable would be so against what is also the core principle in the presumptive Republican presidential nominee's health plan. John McCain shares the same basic approach to individual responsibility in health care the Wyden-Bennett bill uses--including the elimination of the employee tax exemption on employer-provided health insurance in favor of individual incentives for coverage.

Apparently, things are not all that happy over at the National Coalition on Benefits because a significant number of its corporate members were more than surprised to find out they were against the Wyden-Bennett Health Plan when the letter came out. I am hearing there has been at least one conference call between leadership and some unhappy companies who found their name on that letter.

That the letter could also be interpreted as a denunciation of the core individual responsibility section of the McCain Health Plan and supportive of the Obama approach, that would build on the existing employer-based system, didn't help things. Xerox also chairs the coalition and the Xerox CEO has been a strong supporter first of Senator Clinton and now Senator Obama.

ERISA may well be the most successful thing we have in our not so successful health care financing system. The vast majority of employers have been incredibly responsible in providing almost 200 million people valued health insurance despite all the challenges they face in doing so.

None of the Coalition members want to see ERISA eroded--just as the mission statement of the National Coalition on Benefits asserts. But I also expect that what most of those Coalition members meant by that is that they do not want to see ERISA changed in the context of the current health care financing system.

ERISA was passed by the Congress and signed into law in 1974 by President Gerald Ford. It is 1974 health care thinking. It is at the center of a system that is not working.

These big companies know that and, while they understandably are not about to give up the protections they have under ERISA in the current system, the notion that they could never support building an entirely new system on a different foundation is hardly the same thing. I can't believe two of its members in particular--Chrysler and GM--would disagree with that statement.

To fix the American health care financing system we have will require lots of new thinking. The kind of thinking offered by John McCain and the Wyden-Bennett bill, among many other ideas liberal and conservative, need to be part of the mix.

While the McCain Health Plan and the Wyden-Bennett Health Plan are similar in that they would both build on a system of individual responsibility by moving away from America's traditional reliance on the employer-based system, the two plans are very different in other critical areas. Wyden-Bennett goes well past the McCain Health Plan in assuring virtually universal access to health insurance. In fact, one could see Wyden-Bennett as a hybrid of both the McCain and Obama health plans because it couples the individual responsibility concepts conservatives like (and the National Coalition on Benefits objects to) with the liberal notion that we need to get everyone covered sooner rather than later.

For America's largest corporations to enter the debate at this early stage and demand that the Wyden-Bennett bill--and the McCain Health Plan by not so subtle inference--come off the table because they would build a health care system on a platform different than the one devised in 1974 was outrageous on the face of it.

It is hopeful to hear that this might not be where corporate America stands after all.

Earlier posts:

Watch the Wyden-Bennett "Healthy Americans Act"--It Could Be the Place Health Care Reform Compromise Takes Place in 2009

So I Guess the HMOs, U.S. Chamber of Commerce, Business Round Table, and Over 150 Big Corporations Are Opposed to McCain's Health Plan?

So I Guess the HMOs, U.S. Chamber of Commerce, Business Round Table, and Over 150 Big Corporations Are Opposed to McCain's Health Plan?

That's the only conclusion I can come to after having read the letter the National Coalition on Benefits has written to the authors of the Wyden-Bennett Healthy Americans Act.

Wyden-Bennett is a comprehensive health care reform proposal that would largely replace the existing employer-based system of health insurance with one based on individual responsibility and individuals purchasing coverage. It has 15 bipartisan Senate co-sponsors and has been scored as revenue neutral by the CBO.

Here's what the coalition letter says:

[Any health care system] change must not erode those parts of the health care system that are working. The core provisions of the Healthy Americans Act would cause large scale disruption in the source, financing, and regulation of the employer-sponsored health coverage that now serves most Americans. This disruption for the majority of Americans who have coverage today through their employer will make it more difficult to achieve our common goal of addressing the needs of the 47 million Americans who lack health insurance coverage entirely.

Moreover, widespread and sudden disruption in employer-sponsored health coverage is likely to harm employer-employee relations because most employees have a longstanding expectation that their employer will be their primary source for health coverage.

I would presume the Coalition is in the process of sending a similar letter over to Senator John McCain since his health care reform proposal would end the tax preference for employer-provided health insurance and replace it with a $2,500 individual, and $5,000 family, tax credit. While McCain would also not outlaw employer-provided health insurance, ending its longstanding tax exclusion and shifting those tax benefits to the individual is clearly designed to give the market a big push in the direction of individual responsibility that McCain favors. I guess that would all qualify as a "widespread and sudden disruption in employer-sponsored coverage."

In fact on the subject of eliminating the tax exclusion for employer-provided health benefits, something the Wyden-Bennett bill and the McCain plan have in common, the coalition had this to say:

The [Wyden-Bennett bill] also ends the income exclusion for employees as it applies today. This directly penalizes employer-sponsored coverage and would cause most employers to cease sponsoring health plans.

Senator Obama, on the other hand, supports reforming the health care system by building on the existing employer-based system. I can also see Senator Obama already preparing TV ads pointing out that corporate America doesn't want anyone "disrupting" the employer-based health insurance system--like McCain would do by ending all of the longstanding tax preferences workers now get for their employer health insurance.

It is surprising that so many of the biggest names in corporate America would pick this time to undercut the core part of the presumptive Republican nominee's health care plan--moving away from third-party pay toward a system of individual responsibility.

Guess they're closet Obama supporters.

A Detailed Analysis of Barack Obama's Health Care Reform Plan

An Detailed Analysis of Senator John McCain's Health Care Reform Plan

"I Hear the Train a Comin"--What Does That Johnny Cash Refrain and the Employer-Based Health Care System Have in Common?

OK, maybe it's a stretch but bear with me.

I heard a senior exec from a big health plan say the other day that it's hard to believe we will ever see the end of health insurance distributed primarily through the workplace in favor of an individual-based health insurance system. In fact, much of the health insurance industry is lining up behind staying with the system we know best and the one who has been our customer all these years--the employer.

That is understandable. As someone who came up through the ranks looking at the employer as the customer and individual health insurance as a minor product subset I have the same reaction.

But I will tell you that this idea of moving away from third-party employer pay and to a system of individual responsibility--or moving from defined benefit health insurance to defined contribution health insurance--has been coming on us for some time now.

My recollection is that this idea all started with Stuart Butler and Bob Moffit at the conservative Heritage Foundation maybe 15 years ago. Then it spread to more limited proposals for medical savings accounts (MSAs) in the mid-90s and later to the HSA concept and the whole notion of consumer-driven care. George Bush took it the rest of the way with last year's State of the Union proposal to end the employer tax exemption in favor of an individual deduction for health insurance. John McCain has now refined that idea with his tax credit proposal.

Nor do liberals need to be afraid of an individual-based solution. Universal health care systems such as Germany, Switzerland, and Japan provide health insurance to all of their citizens through a structure that has the individual making choices from a list of private health plans.

The bipartisan Wyden-Bennett health reform proposal--a health care reform bill to watch--now adopts the concept as do others.

Now, the Massachusetts health plan, the stalking horse for the incremental expansion of the employer-based system that Barack Obama favors, is showing us incomplete results on the access front for what is turning out to be a very unsustainable cost.

The Massachusetts health law results are going to do even more to get people worried about expanding that plan for the whole nation. If not the Massachusetts formula for health care reform, then what?

My perspective is that this once far-out idea for an individual health care market is no longer so far out.

Is the country ready for such a leap from employer health insurance plans that generally work very well for the people lucky enough to be in them? Not today.

But a whole series of developments seem to be coming together--problems with Massachusetts, the unsustainability of the employer system in a global economy, a number of serious individual-based health care reform proposals, an imperative to structurally deal with health care costs not just dump more people on the existing system, and now a coming presidential debate that will put this idea front and center.

I hear the train a comin and its getting closer all the time.

Watch the Wyden-Bennett "Healthy Americans Act"--It Could Be the Place Health Care Reform Compromise Takes Place in 2009

Health care reform will be hard to do after the November election. I've even called it a long-shot.

Polls clearly show the voters split evenly between the Democratic and Republican approach to health care reform. I can't tell you who will win the presidency but I am willing to make the bold statement that it will be a close election and neither very different approach to health care reform will enjoy any kind of mandate.

That will mean finding common ground between these very different approaches will be more than tricky.

But we may already have an outline.

Senator Ron Wyden (D-OR) and Senator Robert Bennett (R-UT) have crafted a health care reform plan that gives both sides the most important things each are looking for:

• For the Republicans, it gives them a plan that moves away from the third-party employer-based payment system to one of individual responsibility and the promise of a more vibrant market.
• For the Democrats, it provides a plan that assures everyone will have access to coverage and provides the financing to get about everyone covered in the short-term.

But here's the big one: Last week the Congressional Budget Office and the Joint Committee on Taxation said the Wyden-Bennett plan could be operational by 2012 and would be budget neutral by 2014! In health care terms, parting the Red Sea would be an easier accomplishment.

The key to the individual-based program's financing is an employer contribution. Employers would be required to pay a tax based upon a sliding scale of 3% to 26% of the cost of basic health insurance--tied to their size and revenue per employee. That would convert to a per worker tax of something like $250 to $2,000 for an employer. Employers who now contribute would be required to convert their contributions to higher wages during the first two years and pay the sliding scale tax later.

Under the Wyden-Bennett plan, people with an income of less than 400% of poverty would be eligible for subsidies, everyone would have access to guaranteed and community rated coverage, and the feds would oversee a system of private individual-based insurance and would collect the base-line premiums through the tax system.

In exchange for all of this consumer support, the Wyden-Bennett plan would also require individuals to have health insurance (an individual mandate) and that it must be purchased from a state-run purchasing pool that would require health policies have substantial benefits (rich benefit mandates) and offer a choice of private policies. There would be a flat personal tax deduction ($12,000 for a couple) for consumer insurance payments and low-income subsidies would be tied to the lowest cost policy available.

While employers could offer plans created especially for them by the state purchasing pools it is hard to see why they they would other than to comply with existing labor contracts that required benefits that did not fit the standard state pool offerings.

Those in SCHIP and Medicaid would be converted to this private system. The private insurance sector would clearly have lots more business as they picked up the uninsured and those in these public programs.

Just as there is something for everyone to like there is also something for everyone to dislike.

Conservatives still see too many benefit mandates, too little financial incentive for people to be better health care consumers, and too much federal regulatory control over how the private insurance market would work: See a critical view of the Wyden-Bennett "Healthy American's Act" from the Heritage Foundation.

Liberals, particularly the unions, will be concerned about moving away from the employer-based system. Liberals will also be concerned about continuing to base the system on private insurance--particularly the higher cost individual form and ceding SCHIP and Medicaid to private insurance companies.

Employers will be hard hit to pay for it. Those who provide health benefits today will have to convert their existing health support to wages and pay another tax on top of that.

I would also label the proposal "cost containment lite." It clearly emphasizes access over cost cost control.

It will also be easier to pass this bill since it doesn't directly take on any of the powerful health care special interests--insurers, drug companies, doctors, hospitals, or lawyers. However, the biggest losers would include insurance agents (out of business for health care), Medicaid and SCHIP program bureaucracies, and insurance company employees who do billing and eligibility work.

In exchange for all of the new business, insurers would be subject to a lot more regulation including minimum loss ratios and a complex bid process that could only narrow premium margins. This would likely be a business model not as kind to Wall Street.

But as a place for a country split right down the middle to come together and begin a health care reform process?

Watch this one.

The Wyden-Bennett "Healthy Americans Act"