What Happened to the Healthy Americans Act?

by Gillian Hubble

categories: For Profit Insurance, Obama and Congress

Published October 25, 2009 @ 09:00AM PT

Watching the Senate difficulties this week – failing to work around fancy math, having to dump fair physician payments as a result, and trying to substitute an ineffective opt-out public option for even more impotentco-ops – it makes you wonder about Wyden-Bennett. Remember S. 391, aka the Healthy Americans Act? It was billed as market-provided “single payer”, supposedly had bipartisan support, and was universally recognized as superior to the Baucus bill. And we’ve heard … nothing. Why ignore HAA (much more personal than a number, no?), a bill with much higher credibility and without a pesky public option at all? The answer turns out to be two-fold.

First though, let’s review what it had going for it. Back in August, HAA had 5 republicans and 7 democrats publicly backing it in an op-ed, including Mary Landrieu and Joe Lieberman (both none too keen on a public option.) However, three of its co-sponsors, Maria Cantwell, Jeff Merkley, and Arlen Specter, were remarkably quiet. It seems they didn’t want to step on any White House dictates, and Baucus’ process was one of them. Still, the bill was truly a bipartisan feat: it incorporated universal coverage in free-market exchanges designed to empower consumers to shop for the best value.

CBO scored HAA as revenue-neutral, the holy grail of healthcare coverage. Further, it empowered consumers to seek out the best healthcare value in a larger pool of Americans that meant better risk spread. And the basic plan was to be equivalent to the Federal Employee Health Benefits Program. Not bad! Even better, premiums could only vary based on geography and smoking status. No age or health status discrimination, period.

But on to the bad news …

1. Real Change
The keystone of HAA was to dismantle the long-standing employer insurance market. Its provisions called for transitioning everyone into state-based insurance exchanges. Basically your employer would give you the money it would have spent on your health plan, and you would in turn use it to purchase portable individual coverage on the exchange, taking a tax deduction at the end of the year. Your employer would be taxed between 3-26% of the national average premium for basic benefits. No more employer-based insurance, and tax employers? Now that’s different. Too different, as it turned out.

Unions ran advertisements denouncing it, because it would change the insurance almost everyone had, whether they liked it or not. Senator Lindsay Graham admitted that some of the “support” for HAA was for political cover, to counteract the Party of No accusations. When push came to shove, these folks would run for cover elsewhere. Obama called it a “radical restructuring” that would encounter “significant political resistance.” Tim Foley himself forecasted HAA’s downfall for this very reason back in January. Political resistance was so high that no one would even consider Wyden’s Free Choice Amendment on the Senate Finance Committee bill, which would have added some of HAA’s best features.

2. Demand-Side Economics
Fortunately there’s also a more logical reason to pass over HAA. A true single payer system controls costs by imposing a budget. HAA would control costs by reducing patients’ incentives and ability to buy benefits. You see, taxpayers’ standard health insurance tax deduction would only increase with inflation. As we know, healthcare costs have increased far faster than inflation. So individuals would progressively have less buying power and would therefore secure less comprehensive coverage. Basically, instead of providers having incentives to offer less care, patients have incentives and ability to buy less care.

Also, as everyone would be moved into a state-based individual market, it puts individuals at the mercy of private insurers and their rate-setting ways. There is no group bargaining process, as with employer-based care. So if HAA limits insurers’ ability to vary rates to only geographic and smoking differences, they are incentivized to raise everyone’s rates. Plus there is still the “divide and conquer” issue of 50 different patient populations pitted against a handful of large insurers. While cost controls are good, cost controls that don’t include insurers are misguided.

So yes, HAA is better than what Baucus proposed. It will probably be better than what the Committee of Three propose too. But it won’t be extracted from the wastebasket any time soon.

Photo pirateyjoe // CC BY 2.0