Last week, I argued that the insurance industry had declared war on President Obama’s plans for healthcare reform because industry leaders sensed—or knew– that support for a federal public insurance option was building. A week earlier, I told an audience at a San Francisco screening of Money-Driven Medicine that I thought the odds were at least 60/40 in favor of a national public plan. They were surprised that I was so optimistic, and this was a very liberal audience in San Francisco.
At the time, most progressive pundits had declared the public plan moribund. Reading the political tea leaves, listening to “informed Congressional aides,” parsing the administration’s statements, they were convinced that the public plan was, as the Buffalo News put it “the rotting corpse of health care reform.” Why was I still hopeful? Because I continued to believe that, without Medicare E (for everyone) health care reform won’t be affordable.
Does that mean that Congress will do the rational thing and pass a plan that includes a public option? Not necessarily.
But when predicting what Washington will do, too many beltway reporters tend toward knowing, knee-jerk cynicism: “The White House made a deal.” . . . “The fix is in.” . . . “We’ve been betrayed.”
I have been told that when it comes to the politics of reform, I’m both ridiculously hopeful, and hopelessly naïve. (My opponent on Lou Dobbs Tonight said something to that effect following the debate.) I agree that, when it comes to predicting what Washington will do, optimism based on my hopes for the future is pointless. But fatalism, based on what has happened during the past eight years, or for that matter, during the past 29 years, is equally foolish.
We have entered what may well be a new era. (It will take more than 10 months to tell.) At this point in time, it seems to me far more constructive to let prophecy err in the direction of hope.
After all, politicians respond to the public’s expectations. If journalists continue to lower the bar, and voters expect little or nothing of elected officials, the very best legislators will simply give up, while the worst will take over Washington. To a depressing degree, this already has happened. But there still are legislators such as Senator Jay Rockefeller who have held on during some dark days in Washington, and who continue who demonstrate both integrity and remarkable tenacity.
Where Does the President Stand on the Public Plan?
And yet, and yet . . . Some of the most insightful progressives in the blogosphere still don’t believe the public plan will survive. Friday morning, Ezra Klein, for example, dismissed the possibility out of hand:
“Even if Nancy Pelosi does get 218 votes for a public option [that will pay providers] Medicare rates plus five percent, there's virtually no way any such bill gets signed into law. . . . The White House will probably kill any such attempt themselves, as they don't want to face the combined fire of the doctors, hospitals, device manufacturers, pharmaceutical companies, and insurers, all of whom will flip out in response to the version of the public option that will cut their reimbursement rates.”
Klein seemed very sure. (Though by the afternoon, as he responded to the many reports of “who had said what” swirling around Washington, he acknowledged: “Things have gotten real complicated, real quick, . . I've spent a fair bit of the day trying to figure out what went on in Thursday's endless series of meetings, and the best you can say is that, well, reports differ.”
Exactly. You really can’t trust the chattering classes to get the story right. Well-informed staffers are not reliable narrators—their blow-by-blow accounts provide only glimpses. They don’t paint the whole story.
Still, some remain convinced that the White House will oppose any public plan that doesn’t please Maine’s Republican Senator Olympia Snowe. Snowe is opposed to a national public plan. She would individual states create public plans only if private insurers in that state don’t offer affordable insurance. Unfortunately, those state plans would be too puny to compete in a way that would make the nation’s giant for-profit insurers take notice. And while I admire Senator Snowe for her courage in standing up to her party, I doubt that the White House will let one Senator determine the future of healthcare reform. It doesn’t make sense. And this White House is nothing if not pragmatic.
So when I predict that we will wind up with a strong public plan, I’m speaking of a national plan. It might well contain a provision that lets individual states opt out –if they choose. (Though, as I explain below, I doubt that, in the end, many states would take that route.) But what is important is that by virtue of its size, a federal public plan would have enough clout to make health care pricing more rational (note I said “rational”—that doesn’t mean “rationing”) by paying more for high quality care, less to suppliers who have been gouging patients.
Granted, any attempt to put a lid on health care inflation will make many in the industry unhappy. But I very much doubt that President Obama would “kill” attempts to revive a public plan because he is terrified of provoking the lobbyists’ ire. On more than one occasion, President Obama has made it clear that while he’s not willing to draw a line in the sand, he sees the public option as “the best possible choice.” Now that he has strong public support, and what appears to be a growing consensus among Democrats in Congress, why would he possibly switch sides?
Some progressives just don’t trust the White House. They point out that, even while Senate Majority Leader Harry Reid works to gather the votes for Medicare E, the press reports that the president is “noncommital.” He’s leaving the decision up to Congress.
Last week-end, Hot Air’s Ed Morrissey lashed out, accusing the president of failing to lead by refusing to call out for the public option: “It’s a passive-aggressive approach that leaves both progressives and moderates in Obama’s own party twisting in the wind. Obama wants his advisers to take all of the flak from progressive action groups that will result from a retreat on government-run health insurance, but doesn’t have the stomach to take that hit himself. The end result is confusion among legislators on Capitol Hill, and further entrenchment on either side of the issue.”
This notion that “the president doesn’t have the stomach to take the hit” seems to me a sophmoric reading of White House strategy. The president simply wants Congress to share responsibility for the final health reform bill. Wisely, he doesn’t want it to be “Obamacare.” That would make it too easy for anyone and everyone to blame the White House for anything they don’t like about reform.
The road ahead will be rough. Passing healthcare legislation is hard enough. Inevitably, preparing to implement such enormous changes will lead to many bitter debates over the next three years.
It is imperative that the president is not seen as imposing his ego on the nation. Consider how much damage was done when the Clinton healthcare plan became known as “Hillarycare.” Whenever the political becomes personal, the long knives come out.
In some circles, President Obama is just as controversial as Hillary Clinton was back then. He has enemies eager to demonize him, and then destroy him. It’s critical that the majority of Congress “owns” the final bill. This will give legislators a vested interested in making it work.
And it appears that the president’s strategy may be working. While Obama steps back, legislators are stepping forward. Appearing on the Rachel Maddow Show Friday night, The Nation’s Washington Editor, Chris Hayes estimated that there are 58 votes in the Senate supporting a public option that allows states to opt out. Hayes is a fair-minded reporter (which is why Maddow often has him on the show.) I would trust his guesstimate as much as anyone’s—which is to say that no one knows for sure.
Fifty-eight votes would not be enough to save Medicare E if moderate Democrats support a Republican filibuster. (It would take 60 votes to break a filibuster.) But I agree with Hayes and others, who speculate that while moderate Democrats may well vote with Republicans to block a health care reform bill they don’t like, when it comes to cracking a Republican filibuster, they will stand with the
ir party. First Democrats would break the filibuster with 60 votes, then when the vote came on a plan that contained a public plan 58 votes (or even 50 votes) would be enough to send it sailing through the Senate.
Looking Beyond the Politics
But assessing the public option isn’t just about counting votes. Too often, D.C. reporters become enthralled with the day-to-day political theatre of reform: Who’s winning, who’s losing? Who’s in, who’s out? What did Olympia Snowe say this afternoon?
No doubt, the daily action can fascinate. But health care reform is not a spectator sport. And writing about it is not about picking the winning team. Readers want to understand the substance of the public option: Why do we need a public plan? How would it affect the cost and quality of care?
On these issues I was startled to come across a refreshingly lucid piece by the American Enterprise Institute’s (AEI) Clark C. Havighurst on Politco.com’s new “Health Care Arena.” (Go to www.politico.com and click on “Arena” at the top of the page. Then, click on “Health Arena,” again at the top of the page.)
Politico.com editor Fred Barbash had excerpted the post from an essay by Havighurst in the AEI “Outlook” series. I say I was “startled” by the post because I normally wouldn’t expect the conservative AEI to back Medicare E. And, in truth, it’s not Havinghurst’s first choice. But, he is realistic:
“As long as health insurers' only significant function is the simple one of financing health care, government itself is probably capable of performing that role nearly as well as they do, without incurring competition's added costs. Moreover, a government-run plan would be, like Medicare, in a strong position to give consumers and taxpayers relief from very high prices by exercising its monopsony power vis-à-vis providers and suppliers. Indeed, it is this threat to health industry incomes that has naturally given rise to a strong coalition of special interests dedicated to the proposition that any reforms should create an even larger province for private insurers.
“Significantly, no one in this coalition is arguing with much conviction that private plans should be preserved because of their potential ability to control overall costs and to offer valuable economizing opportunities to differently situated consumers. It seems to be mostly special-interest politics keeping private health plans in the game.”
He continues:
“The question then arises why so many consumer-voters themselves seem to be wedded to a private system when a public one resembling the politically popular Medicare could yield significant price reductions (which might, of course, be offset by providers’ shading of quality or boosting of output, things Medicare has never been able to control). Some, to be sure, have purely ideological objections. Others may simply and reasonably fear that, in the long run, government would not meet their needs as well as the private plans to which they are accustomed. Still others may accept conservatives’ arguments that government-dictated low prices would have destructive long-term effects on the supply of health services and on the flow of therapeutic innovations. As noted above, however, circumstances (and some special interests) have long conspired to keep consumer-voters mostly ignorant about just how much they are actually paying for their current coverage with all its wasteful features. Naturally, few legislators and no special interests see any advantage in having ordinary consumers enlightened about how much skin they already have in the health care game.”
I should emphasize that this is only an excerpt from Havighurst’s essay. He would prefer to see creative private sector plans offering consumers choices and more reasonable prices. But he is does not believe that this will happen. Thus, he makes the case for a public plan.
Everything he says is true. A national public plan would be less expensive, both because it won’t incur “competition’s added costs” (it won’t need to market and advertise, trimming $2000 off the cost of a family plan according to the Commonwealth Fund. and because it will have the size needed to secure fair prices. Today, some marquee hospitals force private insurers to pay 15% to 20% more than it costs to care for patients.
As Havighurst notes, private insurers’ supporters have not even tried to argue that private plans will do a better job of controlling costs. Given recent history, it would be a hard case to make. For the past ten years private insurers have simply watched as the reimbursements that they pay to hospitals, doctors and patients rose by 8 percent a year, year in year out– and then passed those costs on to patients in the form of higher premiums.
Medicare’s pay-outs also rose, though by a lesser amount (around 6 percent a year). Meanwhile many within the Medicare administration knew that they could trim spending further, if only they were given the authority to being eliminating some of the waste in the system. In its twice-annual reports, the Medicare Payment Advisory Commission (MedPAC) continued to offer an excellent blueprint for doing just that.
But for eight years, the Bush administration was convinced that the problem of rising health care costs was best solved by privatizing Medicare. Let private insurers deal with it. (This ignored the fact, of course, that insurers had not been able or willing to rein in spending in the under-65 market.) Now, however, Medicare’s hands are no longer tied, and, as I mentioned in my October 16 post, it is beginning to cut fees in areas where it knows overtreatment may be exposing patients to unnecessary risks. A public plan would follow Medicare’s lead.
Why Medicare E is Inevitable
In the end, I would argue that health form legislation will contain a public plan because common sense dictates that it must.
This is not about how much power Olympia Snowe does or doesn’t have. It’s not about what Max Baucus said to Harry Reid. It is about the economics of health care reform.
As Timothy Stoltzfus Jost, a Law Professor at the Washington and Lee University who has written extensively about health care pointed out Friday on Politico.com’s Health Arena:
‘Republicans oppose [the public option] for many reasons, but in part because it is really necessary if the reform is to work–to bring down costs as well as to expand access.
In the end, am I certain that we will wind up with a public plan in the bill that passes Congress this fall? No.
But any realistic assessment of reform suggests that, ultimately we will require a government plan to rein in run-a-way reimbursements. This is why I am convinced that even if it is not part of this year’s legislation, it will be added sometime in the next three years. As it dawns on legislators—and the public—just how much universal care will cost, Medicare E , which will have lower administrative costs, and the clout to insist on better value for our health care dollars, is a no-brainer.
Finally, it’s quite possible that, this year, Congress will pass the version of the public plan that appears to be gaining votes, one that lets individual states “opt out.” Though I have to wonder . . .. How would a politician explain to his state’s citizens that they are going to have to pay $2,000 more for a family plan because when it comes down to it, their state puts the interests of for-profit insurers ahead of voters?
In the end, when it comes to a subject as important to voters as affordable health care, I suspect they will hav
e more power than the lobbyists. Even the most depraved politician understands that all of the campaign contributions in the world won’t help you if your constituents have decided to “vote the bum out of office.” As I have said in the past, I think that healthcare lobbyists are in for some surprises.
I appreciate your optimism.I do tend to think more support for a public option is very possible given the news that insurance companies were very upset with how things were going. All consumers have insurance horror stories, so when that is the upset entity people do take notice and seek the answer.
Public Option = Very Good
I’m a huge fan of the public option, but I’m wondering if it will make as much difference as we are all hoping? It will be available to so few people that I have doubts about how powerful the effect will be. Do you think there will be some kind of ripple effect throughout the insurance industry if it’s one of the options for those buying on the private insurance market? Will it have an effect on group insurance rates as well?
Maggie – I share your otimism. Once in a while stars align.(basic national morality and economic reality in this case)
This has finally happened in long overdue US Health care reform
Dr. Rick Lippin
Southampton,Pa
Sharon MD
You raise a good point.
Sharon MD–
I realize that many commentators have suggested that the public option will be available to only a few people.
But this just isn’t true.
The uninsured, the self-employed and those who work for very small companies will be eligible to sign up. (In the first year “small companies “means 10 or fewer employees, but by the second year, it includes companies with 30 or fewer employers–a large group of workers.)
Moreover–and this is what has been overlooked, the House bill (HR 3200, which includes the most detail on the public option) makes it clear that if you are temporarily uninsured (in between jobs, etc) you
are eligible to go the Insurance Exchange and choose a plan (either a private plan or the public option).
In addition–and this is very important– even if your circumstances change (you get a job and have access to good insurance) you can stay in the Exchange until you’re 65 and qualify for Medicare. (See section 202 of House Bill)
I plan to write a post about this . .. too many post topics, too little time.
A 2008 Commonwealth Fund Report reveals that in 2004, 11% of working households were without insurance at some point during the year. Today, given higher unemploymnent, that number must be significantly higher.
I calculate that this means that more than 30% of Americans would be eligible for the public plan (including the uninsured, the self-employed, those who work for small companies and the temporarily uninsured.)
Moreover, that number would grow each year. (A different set of families is temporarily uninsured each year. There is , no doubt, some overlap, but it isn’t complete. Famlies also move in and out of being self-employed–so in any given year, another group would be eligible for the Exchange where they could opt for the public plan.
Finally, yes, this will effect the premiums that private insurers charge.
First, they have already indicated that if a public plan and Medicare begin paying inefficient hospitals lower reimbursements (and lower fees to some specialitss for certain marginally effective services) they will follow suit.
Also, in order to compete with a public plan, private insurers will have to lower their premiums.
Hello
I think health care reform is a hot issue right now.I think many employers have stopped offering insurance to employees because of the high cost.You have given nice information.Thank you very much for sharing this information with us.
Maggie, I largely agree with the original article and your analysis here. A few responses:
I wish you would give private insurers more credit for having done the heavy lifting to control costs during the managed care “revolution” of around 92-98. The reason they ultimately failed is because of a backlash from the people for whom healthcare expenses are revenues, influencing a public that didn’t understand it was saving money and was thrown too quickly from no utilization control to pretty strict controls in some cases. The same for forces that have stopped insurers from keeping costs down are the ones stopping Medicare from negotiating with pharma, extracting the physician fee cuts legislated in 95, and doing UM except on a trial basis.
I haven’t gone into the details of the Commonwealth report, but I stongly doubt that sales and marketing costs alone are over 10% of premium.
Last thought: like you, I have become a fan of the opt-out version of the strong public option as the best thing apparently on the table right now. I’m a fan for two reasons. One, it will immediately force insurers to match Medicare’s rates resulting in a basically flat growth curve even before the legislation is fully enacted a few years from now. It would bend the trend more quickly than private insurers alone, burdened by distrust and inevitable sensationalist news stories. Private insurers will be able to deflect charges of gouging providers and profiteering by pointing to the fact that the public plan will pay the same rates. The public plan, in turn, won’t be monolithically imposing rates as the single payer and can point to private insurers as competitors making the insurance market healthier.
However, I think you’re wrong to suggest that a new public payer is necessary to control costs. As I’ve argued with you before, once everyone is in the system and there are both subsidies and mandates, pressures will dramatically increase to get costs Under control. Much as in Hi and now MA, and the rest of the world.
jd wrote:
“The public plan, in turn, won’t be monolithically imposing rates as the single payer and can point to private insurers as competitors making the insurance market healthier.”
I believe in Canada, the providers group together to bargain for prices from the single payer provincial payer. Both these large entities have the knowledge and leverage to minimize caveat emptor forces on the relatively vulnerable individual patient. In other words, I believe a divide and conquer strategy has/is at work by those who want individuals to face prices set from providers on their own as much as possible. What would be so bad about a system where prices were set for all by top level powerful social forces with all the info and leverage in their corners? Having the payer force in this critical area accountable to the electorate would also be quite helpful in the future??
I have read the full information regarding public opinion on economic reforms.From this information,I come to know the main idea of public welfare and some facts of economic reforms.Do you think there will be some kind of ripple effect throughout the insurance industry if it’s one of the options for those buying on the private insurance market?
I was amused over the weekend by the tv commercial reminding us competition in the health insurance market shows a tightly concentrated field of companies with the majority of metropolitan areas dominated by two, or in many cases, just one health plan. Over 90% of America’s commercial markets are highly concentrated. How is this “competition?”
The government option without the ability to charge Medicare-like rates is not going to make much of a difference.
jd, you suggest that people will be more determined to cut costs once more lives are added to the system. Unfortunately, I disagree with you. We have a tendency to kick the can another 10 years whenever there is a chance to balance the federal budget. Given that there will be twice as many seniors on Medicare not too far in the distant future, seniors combined with special interests will be an effective voting block that will continue to make it hard for politicians to cut Medicare and other government reimbursement to physicians and hospitals. The situation in Massachusetts might result in a transformative reimbursement system, but it is equally likely that the solution will involve a combination of higher taxes and lower quality. More distortions and inefficiency. Not what I would call good thing for society.
A single payer system could result from cost pressures, but it is not necessarily the case. Some European countries are looking at private-based solutions.
By the way, I read some of Maggie’s work on Wennberg variations. I would rather err on the side of caution given that the work on Dartmouth variations is based on so-called state-of-the art econometric analysis. One thing for sure is that there are plenty of unobservables that don’t end up in the data set that is used in retrospective / observational analysis. Second, variations might promote positive derivative effects, such as innovation, which is difficult to assess in any empirical analysis. Third, Wennberg variations are driven by a political agenda. Fourth, I see this [reducing Wennberg variations] extremely hard to implement on any serious level.
If the MedPAC reform doesn’t happen, all of this seems moot as far as containing costs. The public option wouldn’t be necessary at all if Medicare could move forward with payment reform, because you know the commercial insurance industry follows whatever Medicare does if it involves paying less for things.
But Medicare hasn’t been able to live up to that responsibility fully. They only recently stopped paying for never events. Medicare won’t be able to do much more unless MedPAC is an independent commission with real ability to change payment models.
A public option without MedPAC reform is a failure in my eyes, because the public option won’t be able to do a better job reining in rates either.
jd writes: “The reason they ultimately failed is because of a backlash from the people for whom healthcare expenses are revenues”
So true, and it was a calculated thing in some health system providers. I once did an analysis of “price to cost” at a major supplier with their internal numbers. Bewteen 1997 and 2004 price went from 3 times cost to more than 4 times cost.
The 3xCost=Price had been the scheme for quite a while, then around 1998, the escalation from 3x to 4x started in a methodical way, small increases each year.
It seemed to me that this wasn’t aimed at the uninsured or self-pays, they aren’t a big market. It seemed instead that it was aimed at inching up medicare reimbursement rates.
Does anyone know enough about how that works to comment?
Random Walk–
First, the number of medicare patients will not
double any time soon.
The oldest boomers are just approaching 63. And boomers will age, as they were born, over a period of decades.
Too often, people exaggerate the aging of the boomers–we will not be hit by a tsunami.
Secondly, raising health care costs–now and for the next couple of decades, will be driven by expanded use of medical technology and higher prices (if we let both continue) Aging of boomers will be a minor factor.
Third there is no “political agenda” behind the Wennberg research When Jack WEnnberg started it in the 70s, he was looking for information to answer some puzzling questions. He didn’t have a thesis.
The Dartmouth reserach remains extraordinarily objective.
Reading a bit of what I have written about it doesn’t give you the full picture. Go to http://www.dartmouthatlas.org and
read as many of the studies as you can.
While we continue to slowly pull the healthcare bill away from the death grip the insurance companies have on it – Olympia Snowe – who cares – the fact remains the insurance companies have been living off of blood money and ripping us off for decades.
We’re pissed and the party is over – even their ultra hush, hush anti-trust exemption from 1945 is finally being talked about.
They are scum (that’s not hyperbole)and do not care about the economy as a whole or the damage and pain and suffering they have caused regular people. They don’t care – too bad you made a typo – have fun dying. We’re not sorry YOU got sick – thanks for the policy payments! That’s whats going on people and they are finally being called out on their bizarre behavior. They gilded the lilly for so long pushed the premiums up too high. Those of us who have been saying WTF for decades are finally seeing some action on the HILL not because its the right thing to do but because its a huge drag on the economy – freakin’ geniuses no duh.
Public Option is No Panacea or Actuarial Magic Wand
Insurance companies pay claims and pass thru costs. Yes, they can be mean and nasty, by denying claims. But most of their tools for saving money have been pilloried as bad medicine: doctor referrals, limited provider networks (HMOs!), case management, cutting doctor’s fees, charging extra for brand name drugs, higher copays, etc.
Yes a public option can save some money on administrative costs, like state premium taxes and some marketing. (Although I don’t know of many gov’t entities that save on admin costs). The government plan can also save money by paying hospitals less money, but that does not address the REAL PROBLEM, which is MEDICAL TREND.
Let’s say that the admin savings and hospital cost savings is 20% of premium. We still have a 10% medical trend issue and have merely kicked the can down the road 2 years. Now what!? We have not addressed the tough issue of how do we tame runaway cost trends.
It’s already failed Mike. The hospitals negotiated an exemption from Medpac. If you have a Gallbladder done and the hospital makes 10,000 no matter what because they are exempt, while the surgeon is cut from medpac from 800 to 400 a procedure ultimately there will be little effect on total cost. The hospital will just employ the surgeon, pay for them to take call, make them a medical director, or pay them to take Medicaid. They will do what ever it takes to keep those high reimbursing procedures going through their doors.
Bill S – I agree with some of what you say, that many of the cost problems will only be partially addressed by these reforms (what is really needed in my opinion is a culture shift, both within and outside of medicine, and changing some of the perverse incentives in medicine), I don’t agree with your assessment that most of the cost-saving methods are bad medicine. Charging copays that are too high are not good for patient care, as it discourages both improper *and* appropriate use of such care. Charging more for “brand name” medications when an appropriate generic is available certainly isn’t a bad medical practice.
Some of the practices you mentioned are actually good. For instance, case management is vital to helping keep the sickest patients out of the hospital. I wish I had more access to this for my patients, it could make a huge difference for some of them. Having someone call my patient every week or two to check in on them and encourage them to come in to see me if necessary is extraordinarily helpful, and for multiple reasons I simply cannot do this myself for all those who could benefit from it. Case managers often help to troubleshoot some of the situations that come up that lead to discontinuity of care and worse outcomes.
Requiring referrals to specialists, while occasionally problematic, generally help make sure people are getting the best care. It has been shown time and again that care for the same conditions costs more when provided by specialists than by primary care providers, and the primary care provider is less likely to order treatments or medications that may interact poorly with a patient’s other medical conditions, so seeing one’s primary care provider first is the best first step. In addition, people who self-refer don’t always go to the right specialist. For instance, some people with a cough will get better quickly with minimal treatment by their primary care provider, some need to see a pulmonologist, and some need to see a cardiologist.
Finally, while limiting providers covered by insurance is frustrating when someone needs to see a provider out of network (I wish it were easier to get this approved when necessary), in some ways it leads to improved continuity of care because specialists and primary care providers often work together and have better communication. I can tell you that my patients who go to physicians in other hospital networks don’t get as good care from me because it’s so hard to track down their test results and their treatment records.
I am hopeful that a public option would offer some transparency so that when more costly, non-generic drugs are needed, or when referrals are needed to out of network specialists, or certain imaging studies are needed that there is a clear process to get approval.
Kristi, Ed, Dr. Rick, j.d. NG, autism, Gregory, Mike C.
& NOTE TO All COMMENTERS : I haven’t been responding because I’ve I’ve been traveling and landed in a hotel in D.C. where the interent connection doesn’t work.
On top of that, early this morning, the hotel’s fire alarm went off. Soon found myself on the street wearing the hotel’s robe (In an other tasteful hotel, the robes are fake leopard skin.) I was barefoot and it was raining.
Quite unbelievably, the day went downward from there.
But will be back to respond to futher comments tomorrow.
Kristi—I think you’re right. News that insurers are fiercely opposed to the idea of competing with a public plan made people stop and think. Why? Is it because they know that Medicare E would be less expensive, and might well provide better coverage?
Ed—Yes, a public plan could play a central role in reform.
Dr. Rick—Yes, at this point our sense, as a nation of what we should do and economic realitly—telling us what we must do—seem to be coinciding.
j.d.—When a group that has the reputation that the Commonwealth Fund has—for doing non-partisan, serious, in-depth research—comes out with a finding, and you respond “I strongly doubt that’s true” (though I haven’t taken the time to really read the report) all I can say is: that’s an opinion, not an argument. I hate to be blunt, but: Why would anyone care? Your response is interesting only insofar as you have an argument, facts, reasons. (As you usually do.)
Here’s a quick, back-of-the envelope explanation of Commonwealth’s calculation: -When insurers and others talk about their “administrative costs” they are including not just marketing advertising and lobbying but 7-figure salaries for executives and profits for shareholders. In other words, we’re talking about the percent of premiums that insurers don’t pay out in reimbursements to doctors, hospitals and patients. We know that insurers generally pay out 80% to 84% of the premiums they collect—this means that they keep 16% to 20% for administrative costs. And we know that premiums for the average family plan now run $13,500. 16% to 20% of $13,500 is roughly 2100 to $2700 dollars. Finally we know that Medicare’s administrative costs run about 3% to 4%. (No advertising, lobbying or marketing, no huge salaries, no profits for shareholders.) This is why a public family plan could cost $2,000 less.
And that doesn’t include the fact that, unlike a for-profit plan, it wouldn’t be tempted to over-pay certain brand name hospitals just so it could beat competing for-profits.
In terms of what private insurers did in the 1990s: they did Not do the heavy lifting. They tended to do what would be popular with the majority of patients why denying care to a very expensive minority.
Sometimes they were right in denying care; sometimes they were not. They usually made these decision based on price rather than really analyzing the medical evidence as to whether this particular patient would benefit from the treatment.
Even worse, for-profit insurers covered treatments that it knew it must—in order to retain market share even if it knew they might be dangerous. Vioxx was a very popular drug, so for-profit insurers continued to cover it –even though it was becoming known that it caused heart attacks and strokes. (The VA, Kaiser and the Mayo Clinic all stopped prescribing Vioxx for most patients more than a year before the manufacturer was forced to pull it from the market. )
Once the media threw a spotlight on bone marrow transplants for breast cancer patients, demanding taht they be covered, for –profit insurers also covered these extremely painful, totally useless and very expensive treatments.
In other words, for profit insurers were not making coverage decisions based on medical evidence and benefit to the patient. They were doing a cost-benefit analysis: how much does this treatment cost; will I lose market share if I refuse to cover it? How much would that cost? How much would covering it cost? How do I best add to my bottom line?
Face it, a for-profit insurers’ first allegiance is (by laws) to this shareholders. His first duty is to try to maximize profits.
As for whether a public plan would cause private insurers to begin paying Medicare rates—it’s not that simple. As I mentioned above, in order to keep customers happy (and attract market share) private insurers need to have certain brand-name hospitals—and even brand-name docs—in their networks. This means agreeing to pay them more.
If they don’t, the hospitals and docs can always find an insurer who will. Couldn’t all of the insurers in a given market get together and agree not to pay the marquee-hospitals more? That’s called price-fixing. It’s illegal.
If ]a public plas is competing with private insurers won’t “the market” just naturally cause prices to come down to Medicare levels? It certainly hasn’t happened in the parts of Florida where Medicare is a major, major player. Private insurers over-pay many hospitals and docs.
And some docs are now refusing to take Medicare. Some docs will also refuse to take the public plan.
No doubt some private insurers will respone to competitoin from a public plan by reducing payments to providers and premiums for customers. But keep in mind, private insurers don’t want total health care spending to come down. They want total spending (and premiums) to grow. That’s the only way that the 16% to 20% of premiums that they keep can grow.
Government (taxpayers) and patients want total health care spending to shrink or at least slow significantly. But that is not in the interest of for-profit insurers.
Bottom line: as I said in the post, in some cases insurers will follow Medicare and the public plan’s lead. But in some cases, they won’t. Still, over a period of 4 or 5 years everyone will be eligible to go to the Exchange and pick the public plan, if they choose.
If private insurance continue to over-pay, and their premiums continue to grow ultimately their market share will shrink.
Finally, costs are Not under control in Mass. It remains the most expensive place on earth to receive health care.
NG—Yes, that is essentially what happens in Canada. And it sounds much like the rate setting that occurs in the state of Maryland. Maryland has a highly regulated market. The state essentially tells hospitals-this is what you can charge. . . I need to learn more about this. Someone at MedCAP was talking about it recently, and I believe that Uwe Reinhardt and Paul Ginsburg have written about it. Sounds much more rational than letting different insurers negotiate different rates with hospitals—depending on which insurer has more clout.
Autism—Yes , I do think a pubic plan would have a “ripple effect” on the insurance industry . . –
Gregory—Having only one or two large insurers in a market does not represent competition for the insurers. But it does bring health care prices down. When insurers are very large and have most of the customers, hospitals have to negotiate with them . When there are too many relatively small insurers in a market, hospitals play them off against each other, and prices are higher.
Mike C.—
I’m wondering if you read the whole post. . . As I explainedm during the past 8 years Medicare was not able to implement MedPAC’s reforms because the Bush administration wouldn’t let Medicare do this. Former CMS director Mark McClellan has complained about this. It’s not that Medicare itself can’t or won’t listen to MedPAC.
Now that Medicare’s hands are no longer tied, it is beginning to do things that follow MedPac suggestions (i.e. cutting fees for tests administered by a doctor who has bought or leased the testing equipment. We know that when a doctor has the equipment ,he prescribes on average, twice as many tests.
I agree that it would be ideal if MedPAC or a similar independent entity regulated Medicare spending. But this does not have to be part of the reform legislation (nor is it.)
White House Budget director Peter Orszag has read all of the MedPAC reports and understands what needs to be done. Once we have a new CMS (Centers for Medicare and Medicaid) director, I suspect that we will see more MedPAC suggestions becoming realities–
Even Congress understands that in 7 years Medicare will beginning running out of the money needed to pay hospital bills. However beholden legislators may be to various health care lobbies, no one wants to be held responsible for letting Medicare run out of money. They know they have to rein in Medicare spending.
Ed—No, I don’t know enough about how this works to comment
Maggie wrote to Gregory:
Having only one or two large insurers in a market does not represent competition for the insurers. But it does bring health care prices down. When insurers are very large and have most of the customers, hospitals have to negotiate with them. When there are too many relatively small insurers in a market, hospitals play them off against each other, and prices are higher.
Maggie, this seems to be a fundamental problem of the for-profit system. While we can say on the one hand, prices are lower in an “uncompetitive market,” prices are still way too high.
It seems to me that it would be much more efficient to abolish negotiation, and establish set prices based on Medicare reimbursements.
Don Levit
It’s amazing that reporters can’t take the time to report what’s really happening instead of all the speculation that normally comes with reports. Came across this article the today and hope it’s not true that people will have to wait until 2014. Is it? http://cli.gs/BMABst
Stephanie– Beginning in 2011, states can expand Medicaid coverage; beginning in 2014, it becomes the law that anyone earning below 133% of Federal poverty guidelines becomes eligible–including childless adults. And the federal government will give the states money to defray the expansion.
Why the delay? In the midst of a recession, it will take time to find the moeny to do this. Most states are close to broke.
I realize that everyone now wants heatlh care reform to happen as soon as possible (and I agree that we should address the problem of the poor first.)
But if people wanted health care reform Now, then what were they thinking when half (or nearly half) of all voters elected George Bush–twice?
It seemed that people didn’t want “government interference” in healthcare.
Now they’ve change their minds–which is great. But
one cannot expect this administration to be able transform an enormous health care system on a dime, while trying to dig us out of the huge economic hole that the Bush administration left us with . . . .
I wish Medicaid had been expanded long ago–back in the 1990s. But then, I was part of a very small minority concerned about the problems of the poor. I wish more people had been calling for Medicaid expansion back then, when we actually had the money–and the federal government was running a surplus!
Don–
I agree. It does not make much sense to let individual insurers negotiate different rates with hospitals.
If I’m not mistaken, the state of Maryland has established flat fees for all hospitals for all services. Recently, I was talking to someone at MedPAC about this. I need to look into it and write about it.
Bill Stapleton, Paul, jenga, Sharon
Bill Stapleton–
Actually, both the House and SEnate bills do address the medical trend problem.
But the media–which is either too lazy to read the bills, or too cynical to acknowledge the cost savings in the bills– has done a very poor job of reporting this.
We know that about 1/3 of health care dollars are wasted on unnecessary tests, unproven procedures that provide no benefit to the patient, unncessary hosptialsizting and surgeries and over-priced drugs and devices that are no better than the products that they are trying to repace.
The Obama administratoin’s visoin of health care reform includes endorsing “comparative effectivenss reserach” that be used to set guidelines (not rules) for most effective treatment.
Obama funded this program in his fiscal stimular package at the beginning of the year. The IOM appointed a comparative effectiveness panel months ago.
Medicare will no doubt be looking at this reserach when setting co-pays and fees–using higher co-pays and lower fees to steer patients and doctors away from less effective treatments for patients who fit a particular profile. (This year, Medicare has already announced that it is slashing fees for CT scans, MRIs and tests done in doctors’ offices using the doctors’ own equipmeent. We know that when doctors buy or lease the equipment, they do twice as many tests.)
The cost trend is tied to the fact that, every year, doctos and hostpials and doing more– and patients are taking more drugs and using more devices. We’re also paying more for many of these services and products. Yet, there’s no evidence of a parallel improvment in outcomes or health of the population.
Both the House and SEnate bills contain provisions that would change the way we pay for health care–moving away from fee-for-service (which encourages volume) and instead paying bonuses for better outcomes at a lower cost.
We’re also aiming to pay for better-coordinated, more efficient (and thus less costly) care, offering financial incentives to doctors who join accountable care organizations where docgtors and hospitals works together.
A public plan will use a netowrk of doctors who have agreed to the plan’s fees–and who will be offered similar financial carrots–and sticks– to improve the quality of care while lowering costs.
Already, Medicare has announced that it will no longer pay hospitals for an excessive number of preventable readmissions.
Medicare (and the public plan) will be holding hospitals to benchmarks– exepcting them to begin to approach the efficiency of benchmark medical centers which manage to achieve better outcomes at a lower cost, by avoiding errors, doing fewer tests and procedures, getting the diagnosis right in the first place (usually by talking to and listenign to the patient before running a battery of tests) etc.
You are right that HMOs were unfairly pilloried for things that they did right (networks, sending patients to primary care docs first, case management etc.)
But the problelm is that too many fo-profit insurers did many things wrong: too often, they refused to cover a treatment simply because it was expensive, without looking at the medical evidence to see if it would actually benefit that patient; in other cases, insurers continued to cover dangerous new drugs, devices and procedures simply because they were popoular and the insurer didn’t want to lose market share. (I think of Vioxx: the VA, Kaiser and Mayo all stopped prescribing it more than a year before the company was forced to pull it from the market. For-profit insurers continued to cover it.)
Under the reform bills, Medicare (and the public plan) are expected to “manage care” the way that Dr. Paul Ellwood (the father of managed care) envisioned when he came up with the name. At the time virtually all health insurers were non-profits, and Ellwood assumed that they would compete with each other on quality, not cost–and that they would make managed care decisions based on quality, not cost.
Unfortunately, in the 1980s, as for-profits began to take over the health insurance industry (in part because Reagan withdrew federal financial support for non-profit HMOs), they competed on price, not the quality of care provided, and the whole idea of “managing care” was distorted.
See what I have to say to Paul below about the cost trend– reimbursements up 8% a year.
Paul– The problem with healthcare insurers is that they have been shunning the sick, cherry-picking and sometimes have refused to pay for needed treatments.
However, they have not been makign huge profits. That is a myth.
Their profit margins are 3%–and they haven’t been very profitable for years. (Take a look at the stocks.)
For-profit insurers have had a hard time making any money because the cost of health care has been spiraling. For the past 10 years, the amount that private insuers pay out in reimbursements to doctors, hospitals and patients has been rising 8% a year, each and every yeaar.
Of course, they pass these costs along in the form of higher premiums, as fast as they can, but they’ve had a hard time keeping up. That’s why their profit margins are only 3%, making them one of the least profitable industries in the U.S.–they rank 87th.
Meanwhile, drug companies enjoy 16% profit margins.
jenga– you’re mistaken.
Sharon-
Thanks for a thoughtful response.
I agree that networks –and requiring referrals–are helpful. Primary care physicians can diagnose and even solve many problems–though they need to be paid for the time it takes to do this.
At the same time, I, too, would hope that there wer ebe clear procedures for exceptions.
For example, at places like Kaiser, a doctor can go outside the drug formulary, and prescribe a drug that isn’t on the list– he just needs to note why he is doing this on the chart.
Obviously, if a doctor is making a great number of exceptions, this will be noticed, and someone will want to know why.
Similarly, in cases where an a very sick patient needs a doctor who is not in the network, an in-network doctgor shoudl be able to make a referral out of network. But again, there should be a procedure for explaning why this is necessary–and investigation if it is happening often. (There is of course always the danger of fraud: out of network docs paying kickbacks to in-network docs.)
It will take time to work all of this out. But I think reformers within in the administration understand that reform will need to be open to constant revision as we learn what works and what doesn’t.
As I keep saying, reform will be a process, not an event.
Maggie:
If the reimbursements were already pre-negotiated for all, this would take away the advantage the large insurers have over the smaller insurers.
And, it would take away the luxury that providers have in having to deal with only a few insurers in their market, to the consumers’ disadvantage.
Insurers need to compete on a level different than who has the healthiest pool, and who has the lowest reimbursements.
A level that would be worth competing on is “Who satisfies its customers the best, and retains them the longest?
This is an area for non commercial insurers, the tax-exempt insurers, such as 501(c)(9)s, 501(c)(12)s, 501(c)(3)s, and 501(c)(4)s.
To fully earn their tax-exempt status, they are to compete on different levels, they are to distinguish themselves from their for-profit competitors.
Don Levit
Don–
I agree that, at least on the face of it, “same reimbursements for all” makes sense.
Though I would add financial carrots snd stick for hopstials– based on quality.
I still have to look into what Maryland is doing . . .
Best, Maggie