Public Plan
Should the Public Plan Option Use Medicare Rates?
Published April 15, 2009 @ 09:41PM PT
“You have to sort of get on the same page of what a pubic plan is when you’re talking about it. It’s been interesting to talk to people who say, ‘Oh, I don’t like the idea of a public plan’ —when you actually start talking to them about what it might look like, you realize you’re talking about two different things.” And if anyone would be familiar with this experience, it would be White House Office of Health Reform chief Nancy-Ann DeParle, who said these words at a roundtable this morning. For example, there’s much consternation from opponents of the public plan that it would have an unfair advantage by using the government-set rates for Medicare. But Jacob Hacker, the originator of the idea, never said it should use Medicare rates. Nor did President Obama. Nor did Sen. Baucus. Nor did Ms. DeParle. Know why? Because it’s not a great idea to begin with.
You hear this objection to the public plan all the time – that because the government sets prices for Medicare and can change them at any time unilaterally and private insurance cannot, insurers won’t be able to compete, and physicians, health care providers and hospitals will be stuck with lower reimbursement rates, causing them financial grief. We also hear that because Medicare and Medicaid reimburse lower than what a hospital or doctor really needs for the service, there’s a hidden “cost shift” in which they charge private insurance more to make up for what they're not being compensated by the government. The flip side of this poverty argument is that since private insurance is trying to market itself as having a robust network of providers, it drives their rates of compensation up in order to get more providers to sign up – which all works out because the larger their network, the more marketable plans are to customers. Nevertheless, there’s much snide commentary from the Wall Street Journal editorial board about how government always gets the price wrong compared to the private industry, and how government will cut sky-rocketing costs by arbitrarily cutting reimbursement and rationing care (even if they promise they won't), and the seas will fill with blood, and fire will rain down from the heavens, and Glen Beck will cry again, etc. etc.
Except this is has nothing to do with the public plan option as it’s been discussed by those in a position to make it happen. Jacob Hacker’s conception of the public plan is that it would negotiate rates with providers, like any other plan and unlike Medicare, creating dynamic competitive tension in which the public option and private insurance are checks against each other and keep each other honest. During the campaign, Obama said not one word about how the public option would set rates – just that people without insurance should have the choice of a public plan or a choice of affordable, comprehensive private plans. Sen. Baucus’ description of the public plan reimbursement rates reads like stereo instructions: “Rates paid to health care providers by this option would be determined by balancing the goals of increasing competition and ensuring access for patients to high-quality health care.” Buh? Ms. DeParle this morning went out of her way to suggest there are many options available: “So [these objections have] to do with how you price the providers if there’s a public plan. Well if that’s an issue, there are various ways of doing that. You don’t have to use Medicare prices, you can use something else.”
There are actually several progressive reasons not to use Medicare reimbursement rates. First of all, as we’ve discussed here at length, the fee-for-service payment model that Medicare and most U.S. medicine operates on is itself in need of reform, particularly to better compensate primary and preventative care. To improve quality, we’ll need flexibility to incorporate better payment systems including coordinated care, chronic disease management, the medical home and possibly even some type of extra payment based on outcomes – all programs that can be implemented through negotiations with various provider groups, but aren’t already part of Medicare pricing. To improve quality as well as save costs long-term, we need to correct the long-term Medicare bias towards hospitalization, institutionalization and long-term care, and against primary care, preventative care and long-term home care. These are reforms that need to happen in Medicare to help improve its already solid delivery of care. It’s going to be hard enough with 45 million people in Medicare (good luck, Gov. Sebelius!) It’s going to be nearly impossible if you add on top of that 100 million Americans in the public plan. And let’s not forget that some of the payment biases in Medicare is based on its patient population – older Americans who are more likely to use care, significantly more likely to already have one or more chronic diseases, and much less likely to be able to take full advantage of wellness programs, screenings and prevention. That won’t be the patient base for the public plan, which will instead include Americans of all ages. What we value by means of payment will necessarily be different between the two systems.
Forget the politics of the public option – on a policy basis, it just doesn’t make much sense to import the Medicare rates. As conceived by Hacker, the public plan doesn’t need Medicare rates to control costs – it’ll do that through having a fraction of the administrative costs of private insurance, a much larger customer base to negotiate solid purchasing power, and smart investments in cost-saving prevention, Health IT, and nimbly experimenting with newer, smarter models of compensating providers. The same Lewin Group analysis that said a public plan with Medicare rates and expanded eligibility would lead to substantial losses of revenue for doctors and hospitals also says that a public plan without those rates would yield a barely-perceptible 1% loss of revenue for physicians and actually slightly increase compensation for hospitals. On so many levels, it makes good policy sense for the public plan to determine its own rates through negotiation.
The fact that it steals the thunder from the main political objection of the forces of the status quo is just the icing on the cake.
(Photo credit: Congressman George Miller on Flickr.)
Public Option: The Choice of a New Generation
Published April 08, 2009 @ 07:18PM PT
It’s become clear that this spring recess, a lull in the Congressional session when members spend an extended period of time in their home districts, is time for those for and against reform to stock up on their facts, figures and arguments and prepare for the next round of debate. The public option – having the choice of enrolling in a public plan similar to Medicare rather than private insurance – is already one of the main flash-points in the Congressional debate, and we’ve already seen somewhat conservative analysis from the Lewin Group and a full-throated progressive defense of the concept in a new report from economist and health policy wonk Jacob Hacker in the past two days. But no matter who is describing the public option, the essentials don’t change: the public option would help control costs both for itself and private insurance, would make it easier to aggregate data on what works and doesn’t work in health care, and gives Americans, who have no such options now, the choice of whether they want a private or public coverage – a choice that all analysis suggests they both want and would overwhelmingly use.
Honestly, isn’t that the whole point of reform – to create a choice for individuals and families that’s affordable, portable and makes them healthier?
Hacker wrote the original proposal for the public option many years ago, but his report is not simply a restatement of the idea but a reaction to so much political confusion about what the idea is and is not. We’ve seen ample evidence of the tendency for “both supporters and opponents to project their greatest hopes and fears onto the idea,” as Hacker says, already this year. Witness Sen. Grassley and others fearing that the public option is a “back-door to single-payer” and would be unable to ever compete in a fair way with private insurance – and progressives hoping for the exact same thing! But that’s not Hacker’s conception at all. The public plan would not automatically be Medicare – it would rise and fall like a non-profit social insurance company should, with no ability to dip into Medicare funds if its costs overrun, no income-based subsidies available to its customers more than to private insurance customers, no using its federal reach to sidestep regional variances in costs that private insurance must deal with due to state mandates on benefits. But nor would it be a passive non-competitor. Without the administrative waste of private insurance, and with a business model that actively seeks to negotiate for the best and lowest prices from providers, and with further innovations to emphasize quality, the public option even divorced from Medicare rates would be a fierce competitor, spurring private insurance to either reform itself to become more efficient and cost-efficient, or get the hell out of the way.
As Jon Cohn writes on The Treatment, “It’s pretty telling, I think, that the insurance industry’s rallying cry against a public plan is, in effect, that a public plan would work too well--that it would draw away business by offering consumers a better deal. I can see why that's bad for insurers. But isn't it good for consumers?”
How the Public Option Is Like Ken Griffey, Jr.
Published April 07, 2009 @ 04:15PM PT
As Yogi Berra once said, "It's tough to make predictions, especially about the future." When Ken Griffey Jr. was traded to the Cincinnati Reds in 2000, a mega-superstar returning to the same team his father had played for and the city where he grew up, it seemed like the sky was the limit. Cincinnati gave him a parade and a hero's welcome on the day he was traded, pundits speculated on his ability to lift the Reds - who had come within one game of a playoff berth - to the playoffs, and I and my roommate rushed to pick him first in my fantasy baseball draft. But our predictions were off. Griffey had one of his worst seasons, the Reds finished 10 games behind the Cardinals, and our fantasy baseball team tanked.
Keep this in mind as you read the articles pondering the Lewin Group's new analysis on the public option that would compete with private insurance as part of a health care reform package.
Despite their reputation as being one of the leading go-to firms for giving ammunition to conservative fears that any public option would "crowd out" private insurance, a reputation stoked by Vice President and maverick quotation machine John Shiels (who delightfully gives the not-at-all restrained analysis "The private insurance industry might just fizzle out altogether" in today's AP report - way to stoke those fears, John!), the report itself recognizes its own shortcomings and the somewhat impossible nature of its task. They disclaim up front, "The public plan is difficult to evaluate because no one has specified in legislation how it would work." The best they can do is make an educated guess: less on what President Obama or Senators Max Baucus or Ted Kennedy have revealed about the public option, and more on what other candidates described, particularly about the public option using the leverage of Medicare rates and being open to everyone, not just the uninsured and small businesses. It's not a bad guess - akin to guessing that Griffey's performance as a Red would be in the realm of his 1999 stats with 48 homers, 24 stolen bases and 134 runs batted in.
Except in 2000, Griffey only hit 40 home runs, had 6 stolen bases and had 118 RBIs - and would never get that high in any of those categories again.
Chuck Schumer's Public-Private "Public Option"
Published April 04, 2009 @ 07:05PM PT
According to an article on LoHud.com, New York Senator Chuck Schumer has been designated the point-person on the Senate Finance Committee for making sure the public option – a government-administered plan that would directly compete with private insurance – is part of the health reform bill in the Senate. Normally this would be a good thing – Schumer has a sterling reputation for getting his legislation through, no matter the obstacles. But he’s already suggesting that he may be willing to compromise by redefining the public option so it’s not public at all.
Don’t get me wrong – I’m normally a member of the Chuck Schumer Appreciation Society (there’s even a group on Facebook). Indeed, in the article on LoHud quotes Schumer as saying, “"If competition works, why not have a public entity?” Still, the public option is shaping up as one of the major fault lines in the Senate, but it’s also somewhat ambiguous. Although Jacob Hacker and others have described the how and why of how a public option is essential to changing the game of coverage and necessary for market-based cost control, the president himself has always been somewhat ambiguous about how the program should work. Indeed, while John Edwards and Hillary Clinton would never say the words “public plan” without immediately saying, “similar to Medicare” and explaining that it would function like a Medicare you’d pay subsidized premiums for, Obama never quite defined what he meant during the campaign. With so many conservatives crying foul, that it was unfair to private insurance companies (by the way, I thought the goal was to extend coverage, lower costs and save lives, not avoid hurting the feelings of some very rich CEOS) and the usual malarkey about socialized medicine, it looks like a tough fight.
But it’s a fight worth having – it’s not a fight worth skirting through re-definition. Schumer made some waves about musing aloud to Kathleen Sebelius during her confirmation hearing about the idea of a “public option” that would actually more resemble the benefits plans offered at the state-level to State Employees. Indeed, Sebelius seemed somewhat open to the idea, since Kansas has it’s own Kansas Health Policy Authority which Sebelius herself pushed through four years ago. All of the state’s public health programs, government health programs (including Medicaid and SCHIP), and the benefits plans for all state employees are under the authority, and employees get to choose which plan they want from a menu of options, with good transparency in the documentation on which plan covers you for what at what costs.
All that’s great – it’s similar to the National Health Exchange that is the other part of Obama’s plan to cover the uninsured – but it’s explicitly not a public option. Just because the government is in the role of the employer in dealing with private insurance doesn’t meant the government is running it. At best, the state government is using its buying power to negotiate a better deal with a minimum standard package – also a good idea, but it’s just not anything resembling the public plan.
Schumer’s musings about the possibility of a public plan that follows the model of state employee benefits seems to be missing the point entirely. Forcing everyone into the private insurance options doesn’t do anything to force them to become more competitive, lower costs, or provide better quality. Administrative costs will remain the same. A business that relies to a certain extent on finding reasons not to pay for care will remain in place. At the most, we won’t allow the worst offenders to participate, but you still don’t have a “public plan” – just a public market for private insurance. And a plan that's public-private is still, at its core, private insurance only
Let’s hope these are just musings. This isn’t reform – it’s changing the name for the system we have already and finding a way to get everyone into it.
(Photo credit: psilver on Flickr.)
A Tale of Two Senators
Published March 27, 2009 @ 03:14PM PT
For those of us who believe that the health care reform legislation to be worked on in Congress this year needs to, one way or the other, decrease the influence of private insurance and increase the opportunities for public program coverage, it was the best of times, and it was the worst of times. For “the spring of hope,” Sen. Bernie Sanders introduced the first comprehensive single-payer bill in the Senate that we’ve seen in seven years. For “the winter of despair,” Sen. Max Baucus gave very public statements suggesting his support for the public competitor is just a bargaining chip. How can we take a step forward and a step back on the same day? Ladies and gentlemen, your United States Senate!
Let’s start with Sanders. Although HR 676 enjoys some broad support among House Democrats (and enjoyed a lot more last session), the Senate has been a vast wasteland for the Medicare-for-all approach since the untimely death of Sen. Paul Wellstone. The “American Health Security Act of 2009” is actually more similar to the Wellstone approach than it is to HR 676. In essence, the Federal government sets the regulations for comprehensive benefits (including dental, mental health and prescription drugs) and provide funds to the states to pay for health care. However, the states themselves set up their own single-payer administration, including figuring out how to get all of their citizens enrolled, getting them a Health Security ID Card. Once the State sets up its system to cover the comprehensive benefits it can, if it wishes, then find a way for paying for additional benefits. You can easily see Massachusetts, for example, paying for lots of services outside the Federal standard and Wyoming paying for the minimum and only the minimum.
Sanders’ bill also adds on some of the more popular policy items relating to increasing access to primary care, including fully funding community health centers in underserved and rural areas, and giving the National Health Service corps the funds for an additional 24,000 National Health Service Corps doctors. The remarkable thing is not that this bill has a chance of passing – it has zero co-sponsors and has been assigned to the Senate Finance Committee whose Chairman, one Max Baucus, has been outspoken in stating his objections to single-payer – but indeed that it exists at all in the chamber of Congress where the most progressive reforms go to die.
I’m going to be honest, though. I’d feel more comfortable explaining to people how this legislation isn’t socialized medicine if it hadn’t been introduced by the only Democratic Socialist in the Senate. Awkward… awkward…
On the flip side, that same Sen. Max Baucus has advanced a vision for reform that matches up quite well with the campaign plan of President Obama, the broad strokes of a plan coming out of the House and Sen. Ted Kennedy. This includes a public competitor, a plan similar to Medicare and available to those without insurance that would be publicly administered and compete with private insurance on the merits. Given the mounting firestorm over this policy coming from both among those opposed (including AHIP, Sen. Chuck Grassley and others) and from those supporting, including Howard Dean, who launched a Web site dedicated to supporting the public option, you wouldn’t expect Sen. Baucus to undercut his own negotiations by saying something like this:
Essentially, it's to keep it on the table to encourage the private health insurance industry to move in the direction it knows it should move toward.... And the public option helps encourage the private companies to move in that direction, because they're worried. We might have to modify the public option to get enough votes. I hear some concerns among Republicans about the public option. The main purpose is to keep the health insurance feet to the fire.
Wow. That’s not a ringing endorsement – it makes the public competitor sound like something that exists to drag out concessions from the private insurance companies and Republicans during bargaining. The excellent post by Karen Tumulty goes on to explain that many, including Len Nichols of the New America Foundation, have gone from vociferously defending the necessity of the public option to coming up with a weaker version that won’t engender the opposition’s ire. Suffice to say, denying people the choice of opting out of manipulative private insurance altogether, if we want to, only to receive promises that the private companies will be less manipulative doesn’t sound like a good bargain.
Dickens words in A Tale of Two Cities capture well the spirit of reform today. “We had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way.” Let’s hope more principled heads prevail before we all wind up going the other way.
(Photo credit: The Udall Legacy Bus Tour on Flickr.)
The Public Competitor = the Elephant in the Room
Published March 23, 2009 @ 02:39PM PT
It's hard to avoid bumping into a discussion of the public option/plan/competitor which is shaping up to be the main impasse in discussing health care reform. Sen. Chuck Grassley called it the point Republicans couldn't live with and Democrats couldn't live without. As such, we have Roger Collier proposing a compromise on the public plan before said plan has even been unveiled, Len Nichols pushing a position paper on what an acceptable plan might look like, and a lively debate on the National Journal's Experts Blog about whether or not the public plan is a time bomb. Looking at all the commentary, it's hard not to feel like I'm stuck in the fable of the blind men and the elephant - no one even knows what the public plan looks like, but everyone is reacting like they do.
No one knows what the plan looks like because neither politicians nor the plan's economic father, Jacob Hacker, have precisely described how it will work. We know it will be part of an exchange where it will be compete directly with private insurance plans, all of which have a well-defined minimum set of benefits, so people participating in the exchange will compare like to like. We know it will be "similar to Medicare" in that it will be administered and managed by the government using a combination of public subsidies and private co-pays to pay private hospitals and doctors. And we have a wealth of material about how the public plan, with its built-in efficiencies and economies of scale, will force private insurance to change the way they do business in order to stay in business. But honestly, that's all we know. Neither Obama during his presidential campaign nor Sen. Baucus in his white paper are in a rush to explain much more than that.
It's smart politics in that you're defending a theory rather than a thing. The theory is really tough to beat from an anti-reform side. "Competition" is a virtue of the free market, meaning the only way to demonize it is to say, in effect, the reformers are lying. Stuart Butler of the Heritage Foundation puts it best when he says, "The problem is that it is inconceivable that Congress would set up a public plan that would actually have to live by the same rules [as private insurance]." It's the "Liar Liar Pants on Fire" debate tactic. Our old buddy, John Sheils of the Lewin Group attempts to paint a scary picture of "crowd out," with people abandoning private insurance by the hundreds of millions, and hospital and doctor compensation hitting catastrophic lows. However, given that his opening paragraph misstates both John Edwards and Hillary Clinton's campaign plans (Uh, John? Neither one wanted to use Medicare to administer health care to all), how seriously can we take his analysis?
The public competitor works great in theory. The hard decisions will come later - will compensation use Medicare rates or will the public plan have to negotiate with providers on its own? Will any provider accepting Medicare automatically have to accept the private plan as well? Does the government get a better deal than the one based on private insurance? Or will cost savings come from changing the way care is compensated to focus on quality, like the San Francisco experiment which, although the wiser course, will cause pain of its own?
Right now, the public plan has a wall-like side, a trunk like a snake and a tail like a tree. It's frustrating even for people inclined to support the option not to have details, but it's the plan's best chance for survival.
(Photo credit: Suchana Seth on Flickr.)
Will the Real Chuck Grassley Please Stand Up?
Published March 20, 2009 @ 10:12PM PT
Like any good oracle or the series finale of Battlestar Galactica, Sen. Chuck Grassley made the reporters attending the Kaiser Family Foundation-sponsored briefing on health care reform (or those us tuning in for the podcast) feel like he was revealing more of his strategy than he actually was. As the ranking Republican member of the Senate Finance Committee, he appears alternately like a partner with Chairman Max Baucus, determined to get health care done, and as a skeptic, pessimistic that real reform can be achieved. Will the real Chuck Grassley please stand up?
After listening to the podcast and reading the various news reports, three burning questions remain for me:
1.) Why, exactly, is positive to have health care so misrepresented and smeared by conservative media?
Grassley was asked for his reaction to Rush Limbaugh and certain other nitwits going after something as elementary as comparative effectiveness research in the stimulus, and distorting it as an evil tool of rationing and doom. His answer bears cutting and pasting – maybe you can tell me what this means:
“I think they ought to hype them right now because people’s attention needs to be brought to it, and that’s the only way you’re going to get their attention. When the dust settles, they won’t have a leg to stand on and we will have and we will have a study and a tool that will be useful for doctors to use but not to dictate medicine.”
So the more irrational members of the conservative media should continue to spread lies and distortions because it creates hype and calls attention to the need for research in the first place? I tend to be a pretty optimistic guy, but I have a hard time believing that Grassley actually thinks smear campaigns can be overcome by dint of argument. The next logical question – the next time someone smears comparative effectiveness, or Health IT, or investment in prevention, or something else we need to have in order to get our costs under control, will Grassley step up and help try to win the argument, or will he stay back – as he did during the stimulus controversy – and let the hype run its course?
2.) Is he against any version of the public competitor or just endowing a public option with Medicare features?
Grassley has made no secret that he takes the most issue with the public option, fearing that it will “crowd out” private insurance through unfair competition, like using the same rates as Medicare or using Medicare’s bargaining leverage with providers to get even lower rates. Yet reporters walked out of the meeting both feeling like the public option was a deal-breaker for Grassley, while other felt he needed reassurance about the structure – that he could be persuaded if the option met some vague “fair competition” criteria.
The problem is no one knows what this public competitor would look like – not for sure. Jacob Hacker has described it in great depth, Barack Obama and Max Baucus have described it in minimum depth, and Len Nichols of the New America Foundation came up with a way to have a public plan that truly competes. But it’s impossible to say if Grassley has read any of the above descriptions, or is just automatically imagining the worst.
One thing’s for sure – he recognizes that it’s a make or break point: “"This is a deal-breaker for Republicans if it's in, and it's a deal-breaker for Democrats if it's not. Is there a compromise in between? I don't see one today. There might be one.”
Thanks, Senator. That cleared that right up.
3.) Can health care reform actually happen?
If nothing else, the podcast is a reminder that in the absence of a bill, it’s difficult for Republican lawmakers to give any sense if they’re for reform in general when there’s no bill to react to. Grassley seems legitimately optimistic about the chances for reform, saying, “"If it isn't done this year, it won't be done for the next four years. I think it needs to be done this year. I'm positive we can get health reform done.”
And yet, at the same time, he does not see (or will not share) his vision of a path to passage of a bill. The quote about mutually exclusive deal-breakers for Republicans and Democrats is not a rosy spot to be in.
So after all that, we’re no closer to knowing if Chuck Grassley will make history as a Senator who worked in a bipartisan spirit to finally begin tackling the issues of health care costs, quality and coverage, or if, when the going gets tough, he’ll stay silent or turn against the reform bill crafted by his Committee. We have no idea which Chuck Grassley we’ll see. And if I had to guess, I’d say Chuck Grassley doesn’t know which one he’ll be either.
