A Thoughtful Argument Against a Public Plan

May 29, 2009

As readers of this blog know, I’m a supporter of the concept of a public health plan to compete with private insurers as a means of controlling costs through a provider fee schedule somewhere between Medicare and much higher commercial rates.

But there are valid arguments against this approach.  In a paper titled, The Public Plan: Not Worth the Risks, Jeff Goldsmith of Health Futures Inc., argues that “an attractive alternative is to leverage the two public plans we already have,” i.e., Children’s Health Insurance Program (which has already been expanded) and Medicare (which he says could cover nearly 11 million uninsured baby boomers if eligibility was extended to age 55, with subsidies for low-income boomers.

Goldsmith also advocates reforming the insurance distribution chain through a “sophisticated, user-friendly, Web-based health insurance exchange…Let businesses and individuals sign up directly for coverage, and bypass the costly intermediaries who take a surprisingly large chunk of the health premium dollar.”

But mostly he warns against the damage a public plan would inflict on private health insurers by stealing away lucrative membership–a variation of the “a public plan would be too successful” argument. 

“If we want to consider seriously a single-payer option, which would involve deliberately sunsetting the private health insurance industry, let’s have that discussion up front and see where it leads. To back into a single-payer system by inadvertently blowing up the private insurance system would be irresponsible, with the potential for significant collateral damage to the health care delivery system along the way.”

The problem is nobody wants to have that discussion in a serious way.  The solution has to be a public-private partnership to have any political legs.  A public plan still sounds like a good way to make reform financially realistic, while still leaving room for a smaller–but still viable–private health insurance industry.


CBO on Budget Treatment of Health Reform

May 29, 2009

This is way inside baseball, but for the true policy wonks in the crowd the Congressional Budget Office has issued a brief on budgetary treatment of health reform proposals. 

According to CBO, premiums for a public plan and insurance purchased through a national exchange should be counted as federal revenues if there is an individual mandate and tight government control of the insurance market.  They should not if there is no mandate and no public plan or if there is a loosely restrict private market with a mandate. 

“The key consideration is whether a proposal would be making health insurance an essentially governmental program, tightly controlled by the federal government with little choice available to those who offer and buy health insurance—or whether the system would provide significant flexibility in terms of the types, prices, and number of private-sector sellers of insurance available to people,” writes CBO director Douglas Elmendorf in a blog post.

Clear now?

UnitedHealth Offers Ideas on Medicare Savings

May 28, 2009

Comes now UnitedHealth Group with a “working paper” on how Medicare can save $540 billion over 10 years, prepared by the company’s new Center for Health Reform & Modernization.  As you might expect from a health plan, the suggestions focus on reducing avoidable or inappropriate care, applying evidence-based standards of care, and improving care management.  The biggest savings potential, according to the paper, would be $166 billion through the provision of nurse practitioners at skilled nursing facilities to manage illnesses and prevent avoidable hospitalization.

The Cost of the Uninsured–Part 2

May 28, 2009

Updated data from Families USA suggest that 7.7% of healthcare premiums in 2008 (or $368 individual, $1170 family) was the result of providers shifting costs to the insured in order to provide uncompensated care for the uninsured.  That’s up from $341 individual, $922 family in 2005, when Families USA last visited the topic.  (The data are for the privately insured, non-Medicare, non-Medicaid population).  In March 2009, the Center for American Progress Action Fund did its own update of the Families USA data, with slightly higher findings of $410 individual, $1100 family.  (See prior post).

According to Families USA, the uninsured received $116 billion in care in 2008, of which $42.7 billion was uncompensated.  The rest was paid by patients (out-of-pocket), government programs or charities.

Providers attempt to recover these uncompensated care dollars primarily by increasing charges for those with private insurance. This cost shift is borne almost exclusively by private insurance programs because the federal Medicare program’s rules do not allow Medicare provider payments to easily adjust upward in response to this pressure,” Families USA said.

Surprise: Hospitals Don’t Want Their Fees Cut

May 27, 2009

The hospital industry is all for finding ways to pay for healthcare reform, as long as the money doesn’t come out of its hide. 

“Proposals to reduce Medicare hospital payments, such as reductions in the annual update, are misguided and ignore that the Medicare program already underfunds hospitals….a staggering 58 percent, or 2840 hospitals, lost money serving Medicare patients in 2007,” writes the American Hospital Assn. in its response yesterday to healthcare reform financing options from the Senate Finance Committee.  AHA had a similar reaction to proposed 2010 Medicare reimbursement cuts (see prior post).

Instead, hospitals would like to see streamlined insurance administration, malpractice insurance reform, and taxes on healthcare benefits, among other ways of funding reform.

Scorecard update:

  • So health insurers blame cost increases on new medical technology and rising prices of medical services–glossing over administrative costs and profits–as major drivers.  (See reports from WellPoint and America’s Health Insurance Plans).
  • Hospitals, meanwhile, focus on medical liability costs and complex insurance administration–adding that “discussions of health care spending too often focus simply on cutting costs and overlook other important parts of the equation. Advances in medicine bring enormous benefits to daily lives–benefits that need to be weighed against the costs.”

Remember those heady days gone by when health plans and providers stood side-by-side and pledged to trim $2 trillion in healthcare costs to pay for reform?  I can’t believe two weeks went by so fast.

What Drives Health Plan Premium Increases?

May 27, 2009

It’s not health plan profits, according to What’s Really Driving the Increase in Healthcare Premiums, a new study from a health plan. 

“The bottom line is that those items typically blamed for rising healthcare costs–insurer  profits, the aging of America and the high cost of medical malpractice–in fact have little impact on healthcare premiums,” said Sam Nussbaum, M.D., chief medical officer of WellPoint, which released the report.

What is driving the premium hikes?  The report blames advances in medical technology, rising prices for medical services, cost-shifting to the private sector from the uninsured and government programs, the high cost of regulatory compliance, and unhealthy lifestyles (including lack of physical activity and obesity).

All of which is pretty much true.  But in fairness, there is a direct correlation between premium increases and rising managed care profits (even if overall health plan margins are tiny at just a few percentage points).  It’s also true that burdensome administrative costs are driven largely by the complexity of the private health insurance system.  (See here for a discussion) 

As for the part about the aging of America not being a big factor, I don’t know about you, but I’m feeling pretty shot already (and I’m still eight months away from joining AARP).

Individual Health Plan Rate Hikes Cause Controversy

May 26, 2009

Blue Cross Blue Shield of Michigan (Detroit) wants to raise rates an average of 56% for individual health plans, 42% for group conversion plans, and 31% for Medicare Supplemental plans.  Michigan Attorney General Mike Cox is freaking out.

Independence Blue Cross (Philadelphia) wants to raise rates 18% to 29% on average in three of its money-losing individual health plans.  Philadelphia consumer advocate Lance Haver is freaking out.

I can give you the facts about the increases.  I can quote a BCBS-MI spokeswoman on the rationale for the hikes (projected individual health plan losses of hundreds of millions of dollars) or refer you to financial filings from Independence showing how its individual plans are losing big money. 

On the other hand, I can point you to arguments from both Haver and Cox about why the increases aren’t justified.  Choose sides as you may.

What’s interesting to me is that individual health insurance is poised to play a big role in any healthcare reform package that makes its way to President Obama’s desk.  One way or another, it looks like millions more people will have this type of coverage. 

Yes, there will be regulations and safeguards and subsidies.  But without the type of cost controls that nobody seems ready to agree upon (i.e., without health plans, providers, drug makers and others sharing some real bottom-line pain), I’m guessing there will be many more of these ugly battles to come.

Wherefore art thou public plan?

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