possibility that a public sector insurer
will compete with private insurers for the millions of new customers hat
universal coverage will bring to the marketplace. I have explained why it is so important that
the public sector alternative both to
“keep the private sector honest” (in President Obama’s words) and to set a
standard for affordable, comprehensive insurance for all Americans here and here
Below, Media Matters reports on how Newt Gingrich has become an
undercover, well-paid lobbyists for the industry.
In an April 14 article,
Politico's Carrie Budoff Brown reported that Newt Gingrich — identified
as "the former Republican House Speaker from Georgia and founder of the Center for Health
Transformation" — "argues that government intervention in the
financial and auto industries will sour voters on a deep reach into health
care." Budoff Brown went on to quote Gingrich's criticisms of the
inclusion of a public insurance plan option in a health care reform proposal,
including his remark: "There is always interest in it in general — until
you start describing it, then it collapses." But Budoff Brown did not note
that the Center for Health Transformation is a for-profit entity that receives
annual membership fees from several major health insurance companies, which
have a direct interest in whether a public insurance plan is part of health
care reform. Moreover, Gingrich himself reportedly profits from his involvement
in the Center for Health Transformation. Indeed, the group's website notes
that "[t]he Center for Health Transformation and The Gingrich Group are
corporate for-profit organizations not affiliated with any other
corporation or organization" [emphasis added].
According to the Center for Health Transformation's website, members pay
tiered annual
membership fees, providing varying degrees of "[a]ccess to
Newt Gingrich on your company's strategy," among other benefits.
Insurance groups UnitedHealth Group, the parent of UnitedHealthcare, and
WellPoint Inc. are listed as "Charter" members, BlueCross BlueShield
Association is listed as a "Platinum" member, and AHIP is listed as a
"Premier" member.
Additionally, Gingrich has reportedly profited from his work with the
Center. In a January 16, 2005, article,
The New York Times described Gingrich as "a well-paid broker of
ideas and influence in the field of health care policy" and reported that
"[b]ase camp for Mr. Gingrich's health policy work is his Center for
Health Transformation, a for-profit organization that occupies new office space
overlooking K Street, the main street for Washington lobbyists." The Times
also reported that the center's members "pay yearly fees of up to
$200,000." Further, The Washington Post reported in a
Nexis) that according to Gingrich aide Rick Tyler, the center's for-profit
status — as opposed to being a registered as a nonprofit lobbying group —
enabled Gingrich to operate " 'under the radar.' " The article
further quoted "former adviser Rich Galen" saying of Gingrich:
"He's making more money than he ever thought possible and doesn't have to
tell everybody where it's coming from."
From the Post article (accessed via Nexis):
Gingrich's center is a "brilliantly packaged way of offering his
services as former speaker and a man who can open doors to push along what he
calls health transformation," said Joseph Antos, a health policy expert at
the American Enterprise Institute. "In other words, lobbying."
Gingrich is not a registered lobbyist. The think tank is for-profit, he
said, because "you get more drive and energy" from employees when
money is at stake and "I believe in entrepreneurship."
Aide Rick Tyler, however, acknowledged there were political reasons for
diverging from the standard nonprofit lobby group model.
Having been formally reprimanded by the House in 1997 for violations
associated with the political use of tax-exempt organizations — which were
structured similarly to the new center — Gingrich decided that a nonprofit
would have invited enormous scrutiny. Organizing as a for-profit company,
however, permits him to operate "under the radar,"
Tyler said.
"He's making more money than he ever thought possible and doesn't have
to tell everybody where it's coming from," marveled former adviser Rich
Galen. "He has the amount of influence he chooses to have. I suspect there
is virtually no one in this town of either party who will not take a call from
Newt Gingrich, if only to hear what he has to say."
—M.W.
I will recommend, again, a viable alternative to a public plan versus the commercial insurers:
A properly implemented 501(c)(9) insurer.
You guys keep trying to reinvent the wheel, when it has been around a long time. The 501(c)(9) was placed in the tax code about 80 years ago.
Unfortunately, to my knowledge, they continue to look like commercial insurers.
They should lose their tax exempt status for doing so.
Don Levit
Don-
Can you name any good 501(c)9 insurers that deserve their tax exempt status?
Maggie:
Great question!
I have talked to sponsors and administrators of many of these entities across the country.
Not one of them provided unique products and services, in my opinion, operations different from those already available for the public.
Part of the reason may be that the advisers who deal with 501(c)(9)s either are not aware of the opportunities, or simply take the path the sponsors desire.
I will tell you that 99.9% of the advisers I have spoken to (probably over a few hundred) think the tax-exempt insurer is nothing more than a tax-exempt trust.
The fact that the knowledge and the will are not available to provide meaningful change is not only disturbing, but also very illogical.
I can provide a Biblical account to verify the logic portion, if there is demand for it.
Shalom,
Don Levit
What a chump! He should have gotten the deal that Sen. Dashiel got..$5.5 Million and a limosine.
I recall a Newt Gingrich speech in Lexington, KY, a while back. He said Canadians were streaming across the border to access our health care. Despite his background as an academic, Gingrich didn’t think to check the research on that one.
Hello,
In the present era, Health Insurance becomes the basic need for our life.We never protect our health completely from viral disease. We can only take precaution to avoid these diseases.
Thanks,
Mark Smith
The crux of your belief that a public plan is the way to cut healthcare cost seems to lie in the notion of bargaining power. The government will have the ability to mandate prices and providers will be forced to comply. Ergo, the “cost” of healthcare goes down.
What happens to private insurers who don’t have the same bargaining power? They are charged even higher prices by providers to account for the loss of income from Medicare. More private insurance is pushed out of the market as people move to the public option because premiums are lower. Eventually as more and more private insurance is crowded out, we develop a de facto public health insurance model and hospitals/providers who can not afford to operate with the low reimbursement rates go under. Why is this an issue? In a worse and more likely scenario, providers will cut corners and quality to keep up income or simply to stay alive. Is this the endgame—A reduction in the quality of care in exchange for minimally lower premiums? In part two of your post (https://healthbeatblog.com/2009/03/why-obama-should-stand-firm-on-a-publicsection-insurance-option-part-2-.html) you highlight exactly this issue due to the BBA of 1997.
The bottom line: Who pays the bill does not change the cost of a service or good. If I go to a restaurant and order a meal with friends, it does not matter which friend pays. The price is the same. If I go to the restaurant with 100 friends, then maybe I can bargain down the prices (like a government run health plan). But, the restaurant will never give me a price that is lower than what it costs to make the meals. This means that a government run plan could take down medical costs only by the amount of margin earned by providers. As margins differ provider to provider, some would die off before others and excess capacity would be taken out of the market. This would be the end of the cost cutting. Margin plus excess capacity would account for but a small percentage of overall healthcare costs, nowhere near the amount needed to make a real dent in the problem.
There are three concurrent issues in healthcare today: 1) Cost 2) Access and 3) Quality. Access should be sorted by government, but I believe in a different manner than a nationalized health insurer and this does come at an increased cost. Cost and quality are interlinked. Good quality healthcare is actually lower cost healthcare (as strange as that may intuitively jive with some). The right diagnosis in combination with the right intervention performed in the correct manner avoids cost. That said practice pattern variation is a huge issue and a source of significant cost. The best measure for improving care and decreasing cost is healthcare value, “the health outcome achieved per dollar of cost.” This view also addresses your comments about relative value (and subsequently comparative effectiveness). If we spend a lot of money for little medical outcome, there is no healthcare value. We need to address the delivery of care itself vis a vis the cost we pay for that care…not who pays the bill.
Dustin Lipson would be correct IF we didn’t have 47 million uninsured. And if insurance were’t so intimately tied to your particular employer who might be filing for bankruptcy.
Dr. Rick Lippin
Southampton,Pa
Don, Christopher, Harriet,
Dustin,
Don– I’m not famliar with 501 (c)9s either– and when I tried google them, I mainly found info about trusts . .
What do you think of non-profit insurers/providers like Puget Sound?
Christopher–I personally am very glad that Daschle is not a major part of healthcare reform.
Harriette– as you clearly know, the myth about Canadians coming here for care has been carefully promulgated by the U.S. healthcare industry (and ocnservatives who fear government involvement in health care–
As for Newt,I’m afraid you’re right– he often doesn’t check his research.
Mark– I agree that health insurance that actually provides acdess to good care is a basic necessiity-something that a civlized society has a moral obligation to provide to all of its citizens.
Dustin–
You write: “Good quality healthcare is actually lower cost healthcare (as strange as that may intuitively jive with some).
The right diagnosis in combination with the right intervention performed in the correct manner avoids cost.
That said practice pattern variation is a huge issue and a source of significant cost. The best measure for improving care and decreasing cost is healthcare value, “the health outcome achieved per dollar of cost.”
I completely agree–and so does the Obama administration.
The administration has made it very, very clear (both Obama and White House budget director Peter Orszag) that it believes that Medicare pays some doctors (primary care, and others) TOO LITTLE.
The administration would pay them more– both under Medicare and under the public sector option, paying for quality, not quanity of care.
The private insurance industry is trying to persuade people that the public sector option will pay all providers less, in order to scare doctors and patients. That just isn’t true.
Both the public sector option and Medicare (under Obama) wil be paying some providers more than Medicare does now, while paying other providers less. I expect Medicare will begin adjusting the fee schedule this year.
The administration believes that while Medicare pays some doctors too little, it pays some subspecialists too much for very lucrative services–and this leads to physicains doing more of those service (which leads, in turn to overtreatment).
Fees for diagnostic imaging, for example, are likely to be reduced.
In the meantime, there will be bonuses for quality -and value (better outcomes at lower costs).
As for regional variations, it’s likely that both Medicare and the public sector plan will measure the value (outcomes over costs) of the care that hospitals are providing against benchmark hospitals in low-cost regions that have excellent outcomes-and begin paying hospitals less if they don’t approach those benchmarks for efficiency.
Tate of readmissions is just one measure of efficiency.
This will put pressure on hospitals in high cost regions to lift quality and reduce costs (as you say, lower costs and better ourcomes go hand in hand.) And this, in turn, will put pressure on doctors in high-cost regions to become more efficient.
Dr. Rick–
As I said to Dustin, I’m not sure that a public sector plan is going to be significantly less expensive than private sector insurance–not if we are covering all of the often poor, often sick patients who are not insured today.
But I am very hopeful that a public sector plan could give us better value for our dollars than the vast majority of for-profit plans. public sector plan.
Honestly, I wonder what cause/event that Gingrich wouldn’t speak as long as you gave him a decent fee (and all he could eat).
Thank you for the additional commentary and the effort you put in to making this forum one for inclusive dialogue.
It seems like you are setting extremely high expectations for a new federal health plan. Medicare, as you have pointed out, is full of holes–if the government is unable to get it right for Americans over 65, why would a new plan get it right for those under 65? I am aware that there is progress at CMS, nonetheless it is slow and often hampered by the influence of politicians (not to speak of the short tenures of leadership due to administration turnover). I agree with Rick, access is an issue. Why not expand FEHBP to individual/small business and add subsidies for low income? Implement risk pooling for high risk groups? Mandate minimum coverages? Driving healthcare value (through CE, outcome reporting, reimbursement reform, etc.) on top of expanding access seems too big for a new agency to get off the ground in a reasonable amount of time at a reasonable cost. Positive sum competition where the players compete to improve the quality of a good or service relative to its price is the cornerstone of fast progress. This simply can’t happen if we put all of our eggs in a federal government plan. Of course, I recognize the zero sum competition of the past where players simply push cost back and forth, often at the expense of the patient. This is also unsustainable and intolerable, but can be addressed with suitable legislation (mandatory outcome reporting, price discrimination limits, re-underwriting, high risk pooling, mandatory reporting on premium differentials in the individual/SME market vs. large group etc.) rather than by nationalizing the health insurance industry. I would probably be far more open to the idea of nationalized health insurance (or a public health plan option) being the beacon of reform if Medicare were better managed, but it simply isn’t.
One more addition, Maggie:
You stated, “The private insurance industry is trying to persuade people that the public sector option will pay all providers less, in order to scare doctors and patients. That just isn’t true.”
There is consensus that on average medicare pays roughly 30% less than private payer. Studies also show that if Medicare reimbursement rates were used across the board most hospitals would be technically bankrupt (i.e. the government does not cover the cost of care it purchases, instead private payers subsidize).
Why would anyone believe that a new federal health plan will reimburse differently (more fairly) than medicare…especially when the effect would be a dramatic increase in cost?
Dustin–
You wrote “Why would anyone think that the public sector option woudl pay more?”
Because President Obama has said so. He has made it clear that Medicare will be paying primary care physicians more. Peter Orszag (the White House Budget advisor) has said the same thing.
The public sector option will follow Medicare’s pricing.
I’d like to see the study showing that hospitals would be bankrupt if private insurers scaled back on payments.
A great many hospitals are spending money lavishly–on exectuive pay as well as construction. They are extraordinarily wasteful–and they are overtreating patients.
The Mayo Clnic can make it while charging Medicare 50% less than many other hospitals– these other hopsitals need to learn how to become as efficient as Mayo.
Many hospitals actually make a profit on Medicare payments.
I’ll be writing about all of this soon. . .
Maggie:
I am not surprised that your search provided information on 501(c)(9)s primarily about trusts.
I spoke with Betty Clary at the IRS yesterday, whose name was provided as the VEBA expert.
She was not aware of 501(c)9)s as insurers, but rather as tax-advantaged trusts.
I tried to explain to her that they can be insurers, in that the link between employers and employees is needed only at plan inception.
The operation of the insurance trust can be completely independent of employer control.
The ultimate liability for payments cab reside with the VEBA, and not the employers.
Witness the VEBA with the GM retirees.
The 501(c)(9) is not however, in the business of insurance, as are their commercial counterparts.
Their reason for existence, in fact, is to distinguish themselves from commertcial insurers. If they resemble too closely the commercial insurers, they no longer would be considered VEBAs.
This is why they can be only in 3 contiguous states.
Being a nationwide entity would too closely resemble an Aetna, for example.
This is also why a 501(c)(6) cannot offer insurance benefits nationwide.
If you would like for me to provide some links with the IRS documenting my statements, I will be happy to do so.
I am aware of the Puget Sound non-profit.
As to how they distinguish themselves from commercial insurers, I am not aware.
Don Levit
Don,
I’m not sure you are aware of it, but employer contributions to a VEBA trust are tax deductible only if the VEBA trust is established in conjunction with a collective bargaining agreement. A trust for non-union employees could be established but there would be no tax deduction for the employer so nobody has those as far as I know. Large employers that have VEBA trusts for their union retirees are usually self-insured for both active and retired employees. Sometimes the VEBA trust is available to pay benefits instead of using current corporate cash flow but there are often restrictions based on funded status – percentage of projected long term liabilities that are currently funded. I don’t think their applicability is as broad as you think it is. As I understand it, the rationale for not extending the VEBA tax preference beyond collective bargaining contracts had to do with limiting the revenue loss to the Treasury. The feeling was that it would be better to use the resources for Medicare that would benefit the entire 65 and over population vs. the more limited segment of the population (non-union retirees of larger companies) that would benefit from a VEBA trust.
Dustin– responding to your first comment:
Medicare reform will be taking place this year. Both Persident Obama and White House Budget Director Peter Orszag have made that clear.
Medicare has already engaged in pilot projects which focus on paying for more effective care while
removing incentives for overtreatment.
The reason Medicare reform hasn’t taken place already is that President Bush opposed it. His goal was to privatize Medicare (paying private insurers a windfall bonus to do what Medicare could do for less.)
CMS director Mark McClellan expressed frustration that the Bush adminisration wouldn’t let him reform Medicare. Now it is happening.
In recent years, Medicare Payment Advisoroy Commission has written a series of long reports, laying out what needs to be done. The chair of the commission has testified before Congress. Many Congressmen (particualrly Demmocrats) understand what needs to be done.
Peter Orszag, the White House budget director also has written about Medicare reform, and largely agrees with the Medicare Payment ADvisory Commission.
When Medicare stops over-paying for marginally effective treatments–and pays more for what we know works–it will left the quality of care, and contain costs. As Marilyn Moon points out, it’s likely that Medicare will also put a cap on out-of-pocket spending.
Finally, it’s not that Medicare and progressive reformes haven’t been able to figure out how to fix Medicare, Bush and the conservatives wouldn’t let them fix it.
The conservatives wanted to abolish Medicare and let it become a for-profit private program.
Dustin–
On Federal Employoee Helath Plans, please see the guest post on “Federal Employee Health Plans: Part of the Old, Flawed System” written by someone who has Federal Employee insurance
Barry:
The employer deductions for union plans are not subject to the 419 limits.
There are 419 deduction limits for employers who sponsor non-union plans.
There are no 419 deduction limits for employee-pay-all VEBAs.
I can provide IRS citations if you need to see them.
Don Levit
Don–
It sounds as if very, very few people know much about these 501(c)(9) plans.
I wonder Why?
And could you direct us to an article that explains their potential??
Don–
I ocurrs to me that my last comment might sound skeptical.
I’m not. There are a great many very good ideas that very few people have heard of.
I’m just wondering about the politics of all of this
Maggie:
I have 3 links for you and others.
They all deal with the differences between commercial and non commercial insurers. Once a person realizes that a 501(c)(9) is a trust and an insurer (a non commercial insurer), these papers provide insight into fully earning tax-exempt status. I believe the tax-exempt designation applies to 501(c)(3), (4), (6), and (9)organizations.
http://www.irs.gov/pub/irs-tege/eotopicc88.pdf. Look at pages 5-6.
http://www.irs.gov/pub/irs-tege/eotopicl92.pdf.
Look at pages 1,4,5,11, 12,18,19.
http://www.legalbitstream.com/default.asp
Click on General Counsel Memoranda, and put 39817 in the box.
Almost halfway down, start at the paragraph which begins “Commentators have recognized” all the way down to “Issue 2: Inurement.”
Don Levit