The Truth about the Public Option
For reasons I don’t understand, progressive pundits have been swallowing Congressional Budget Office Director Douglas Elmendorf’s dispiriting speculation about the public plan, hook, line and sinker.
Elmendorf claims that in 2019 (six years after reform begins), less than 10 percent of the population will be shopping in the Insurance Exchange where there can choose between private insurance and the public plan. Few will choose the public plan, Elmendorf asserts, and many of those who do will be in poor health. The government plan will be puny—giving it little market power when negotiating with providers. Thus, he declares, the public plan will be more expensive than private insurance. (This may be why Senator Joe Lieberman has claimed that the public option will somehow add to the deficit)
What is remarkable is that if you read Elmendorf’s commentary you will find that he has no hard evidence to back up his claims. His assessment is based on “probably’s.”
By contrast, what we actually know about who will be eligible for the Exchange, and what reform legislation says about the goals of the public plan, suggests that the public option will be much stronger, more attractive, and less expensive than the CBO director suggests.
Pundits who buy into the notion that the public plan will do little to reduce health care costs also have ignored the spending cuts that Medicare has proposed for 2010. These are not pilot projects; these are targeted changes in the fee schedule. Medicare would pay cardiologists less—while paying primary care doctors and nurse practitioners more.— In addition Medicare would slash fees for certain tests that many physicians say have led to an “epidemic of diagnosis.” Too often asymptomatic patients are diagnosed with “pre-disease,” and then are subjected to treatments that they don’t really need—products and procedures that expose them to the risks of side effects, with little or no benefit. Here, Medicare is paving the way for a public plan that will offer better, safer care at a lower cost.
Elmendorf Reads Minds
Elmendorf laid out his assessment of the public option in an October 29 letter to Rep.Charles Rangel. There, he offered his opinion that “in 2019, only 30 million Americans” will “be enrolled in the Insurance Exchange” where they can choose between the public option and private insurance plans. And only about “one-fifth of the people purchasing coverage through the Exchanges” would enroll in the public plan, meaning that total enrollment in that plan would be “roughly 6 million.” In that same letter the CBO director also speculates that the public plan would “attract a less healthy pool of enrollees” than private insurers.
How does Elmendorf know that only 20 percent of those shopping the Exchange for insurance will pick the public plan?
He doesn’t. No one knows what people looking for insurance will be thinking in 2013. None of us know what the public plan will look like, how it will be priced, or how it will compare to the competition. As I noted in part 1 of this post, Elmendorf is simply pretending that he can read the minds of millions of Americans and divine what they will choose.
Consider the reasons Elmendorf gives to back up his claim:
“That estimate of enrollment reflects CBO’s assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and [probably] attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the ‘risk adjustment’ procedures that would apply to all plans operating in the exchanges.”)
Elmendorf’s assessment is studded with “probably’s.” He offers no argument, no evidence, just one man’s guess as to how the public plan will operate. To assume that, because it is a government plan, it will make little effort to control costs and contain utilization simply ignores Medicare’s efforts to rein in spending. (Over the past 10 years, Medicare has held health care inflation down to under 6 percent a year—doing much better than private insurers who allowed reimbursements to soar by roughly 8 percent, each and every year for the past decade. (See chart on page 2 of my report on “Getting More Value from Medicare.”
Six percent annual increases in the cost of care is still far too high, but the difference between Medicare and the public plan does show that government plans are interested in controlling costs. Unlike private insurers, they can’t simply pass spiraling premiums along in the form of higher premiums. And, under this administration, both President Obama and White House Budget Chief Peter Orszag have made it very clear that Medicare must do more to contain spending.
Moreover, as HealthBeat reader Dr. Fred Moolten observed when commenting on Part 1 of this post, Elmendorf completely ignores what the legislation says about the public plan: “I find the CBO assumption that the Public Option would make no attempt to increase efficiency somewhat puzzling,” Moolten observed, “given that increased efficiency of care was one of its expressed purposes. In section 324 of the House version [of the bill], this intent is stated as follows:
“’The Secretary may utilize innovative payment mechanisms and policies to determine payments for items and services under the public health insurance option. The payment mechanisms and policies under this section may include patient-centered medical home and other care management payments, accountable care organizations, value based purchasing, bundling of services, differential payment rates, performance or utilization based payments, partial capitation, and direct contracting with providers.’”
In other words, the Secretary is expected to use financial carrots and sticks to insist upon more efficient collaborative care, rewarding providers who offer better outcomes at a lower price. Dr. Moolten concludes: “Why the CBO wants to dismiss these intentions is something they haven't chosen to explain.”
Here, I would point out that this is not the first time that Elmendorf has cast a cold eye on health care reform. As I noted in an earlier post, back in 1993 Elmendorf was part of a CBO team that nixed the Clinton Health Care Package on the grounds that it was too expensive and would involve too great an expansion of government. (Imagine how much cheaper universal coverage would have been back then.)
Elmendorf’s Guesses Are Accepted
Despite the holes in his logic, Elmendorf is, after all, the Congressional Budget Director, and, as a result, most who read his assessment of enrollment in the public plan assumed that there must be facts and figures behind his so-called “analysis.”
Thus, his words have had a powerful influence both in the mainstream media and in the blogosphere. Virtually no one has questioned his assumptions. At the end of October even the Washington Post’s estimable Ezra Klein quoted Elmendorf concluding that the public plan will be expensive. “It will pay prices equivalent to those of private insurers and may save a bit of money on administrative efficiencies. But because the public option is, well, public, it won't want to do the unpopular things that insurers do to save money, like manage care or aggressively review treatments. It also, presumably, won't try to drive out the sick or the unhealthy. That means the public option will spend more, and could, over time, develop a reputation as a good home for bad health risks, which would mean its average premium will increase because its average member will cost more. The public option will be a good deal for these relatively sick people, but the presence of sick people will make it look like a bad deal to everyone else, which could in turn make it a bad deal for everyone else. . . .
“This, in sum, is why I'm pessimistic on the chances for the public option to substantially affect the insurance market,” Klein wrote. “That isn't to say that the public option can't still do some real good, as I argue here. But there's also a chance for it to become a real disaster.”
Who Will Be In the Exchange?
The Real Numbers Elmendorf’s assessment of the public option begins by assuming that six years after reform begins only 30 million Americans, or one-tenth of the population, will be shopping in the Insurance Exchange. This assumption flies in the face of everything we know about who will be eligible for the Exchange.
Reform legislation makes it clear that, from the very first year, the Exchange will be open to three groups: the self-employed and others who now buy their own insurance in the private market for individuals; the uninsured; and the owners and employees of small businesses.
- Today, 7 percent of all Americans (or 21 million people) pay for individual insurance out-of-pocket. (Elmendorf confirms this number in his letter to Rangel.)
In the individual market, they pay sky-high rates. If they enter the Insurance Exchange, they automatically become eligible for group rates. According to MIT economist Jonathan Gruber, under the Senate Finance Committee’s reform plan, those who move from the individual market to the Exchange’s group market will enjoy savings ranging from several hundred dollars (for the youngest in the individual market, who get the best deal from private insurers) to over $8500 for families. It’s hard to imagine why any of these 21 million people wouldn’t join the Exchange in 2013.
- Add the uninsured– some 25 million Americans, according to Elmendorf’s own numbers, minus 8 million who will wind up in Medicaid when it expands in 2013,
- Finally, the Exchange will open its doors to the owners and employees of small businesses (In the 2013, according to the House bill, this will include companies with up to 25 employees; in 2014, firms with less than 50 employees will be eligible, and in 2015, the tens of millions of Americans who work for companies with up to 100 employees will be able to join the Exchange.)
Moreover, “in subsequent years, “the House bill suggests, the Exchange will continue to expand. If all goes well, ultimately all Americans—including those who now have employer-based insurance through a larger employer—will be able to join the Exchange, and, if they wish, choose the public option. .
Of course, the fact someone is eligible to go into Exchange doesn’t mean that she will. Some will elect to pay the penalty rather than buy insurance. But when I look at the numbers, I cannot imagine how Elmendorf arrives at his prediction that only 30 million Americans will be in the Exchange six years after it opens.
Moreover, he is wrong when he suggests that this will be a sickly pool of relatively poor Americans. The 21 million who now buy individual insurance must be quite healthy; if they weren’t, carriers in most states would refuse to cover them. And, if they can afford the sky-high premiums that carriers charge for individual insurance, they must be quite wealthy.
Meanwhile, the poorest of the uninsured will be siphoned off by Medicaid. Here, it’s worth noting that not all of the uninsured live in low-income households. More than 14% of those Americans who choose to “go naked” earn $75,000 or more. Many don’t buy insurance because they don’t consider it a good value. They just don’t trust private insurers to deliver on what they promise. Many might well choose a public plan. And finally, the many Americans who work for companies with up to 100 employees will represent a cross-section of the population.
I wouldn’t even try to predict how many will chose public plan. But it seems safe to assume that it will be a large, diverse group. Both hospitals and most doctors will want access to these customers. Make no mistake, when the public plan negotiates rates with providers, it will have muscle.
In Part 3 of this post, I will expand on how Medicare is already paving the way for a public plan that will lift the quality of care while reining in costs—and why cost-containment doesn’t have to be spelled out in the reform legislation. .
All sides are speculating on the ramifications of this reform and regardless of who it is the numbers and percentages always seem to favor their interests. What I do know, however, is that individual insurance is always less expensive than group insurance because group is guaranteed issue and, regardless of health status, you have to be accepted. The only reason why an individual health insurance policy would be more expensive than group would be the result of not being able to change to a less costly policy due to a pre-existing condition. In this respect the public option may be an option. All I know is asserting that group insurance is less costly than individual insurance is far from the truth!
an interesting, even startling comment that individual insurance is cheaper. if so, why don’t workers drop out and buy coverage themselves? anyhow, would love to see documentation of this assertion, which is pretty provocative
Jim:
I can send you an attachment supporting my information. And, there are several reason’s why workers don’t drop their group coverage. First, most employers pay the majority of cost for single coverage and some even pay 100% of the premium, so it’s cheaper than paying for an individual policy. Most employee’s don’t have a clue what health insurance costs until they ask for COBRA. Secondly, they may have a pre-existing condition which could preclude them from qualifying for an individual policy. Third, their portion of the group insurance premium may be under a Section 125 and thus pre-tax and again would be cheaper than purchasing a policy outside of a group setting.
Maggie,
You are likely right that the public plan will have much more than 30 milliion members over time. The fundamental problem is that it will not be able to control costs better than private insurers unless it reduces provider payments or rations care.
Medicare’s cost trend is less than private insurers because it pays less to providers – that’s it. Period. Medicare does nothing on utilization review or case management. Private insurers cannot get the discounts that Medicare dictates. Hence, cost shifting from Medicaid and Medicare to private. Most providers cannot survive with Medicare, nor can they survive without private.
If the public option or private insurance accept all comers (guaranteed issue), prices will go way up. Insurance is intended to be for future events. If you ask a health person to help pay for a very sick person, he/she may not do it. As healthy people forego insurance, prices get higher, and the cycle continues. For evidence of this check out the New York or New Jersey health insurance markets. Prices in NY are 3-4 times that in bordering Connecticut, or the rest of the country.
The reason cost containment is not spelled out in the legislation is because it will be demagogued and fail, e.g. death panels. Medicare is bankrupt in 6 years – let’s focus on it and fix it now.
I am particularly blown away by the fact that we are saying individual insurance is cheaper?? :/ I just don’t agree, my experience tells me otherwise, need to see documentation.
Shoulder Exercises and Jim Jaffe:
In the post, I write: “Today, 7 percent of all Americans (or 21 million people) pay for individual insurance out-of-pocket. (Elmendorf confirms this number in his letter to Rangel.)
In the individual market, they pay sky-high rates. If they enter the Insurance Exchange, they automatically become eligible for group rates. According to MIT economist Jonathan Gruber, under the Senate Finance Committee’s reform plan, those who move from the individual market to the Exchange’s group market will enjoy savings ranging from several hundred dollars (for the youngest in the individual market, who get the best deal from private insurers) to over $8500 for families. It’s hard to imagine why any of these 21 million people wouldn’t join the Exchange in 2013.”
Where do you find any suggestion that indivdual insurance is cheaper? Perhaps this is a typo somewhere else in thet post???
begging indulgence for a clarification. in my earlier post, I was responding to henry’s assertion that individual coverage is typically cheaper than group coverage — an assertion I continue to doubt.
but I certainly didn’t mean to suggest that Maggie said that. she didn’t and she wouldn’t. and I apologize if I inadvertenly misled into thinking she did
Maggie said: “What is remarkable is that if you read Elmendorf’s commentary you will find that he has no hard evidence to back up his claims. His assessment is based on ‘probably’s.'”
But the CBO estimate of the cost of “Defensive Medicine” is accurate????????
Good critique. CBO is often off-base, as Jon Gabel documented in a great NYTimes op-ed last August, and usually in the direction of under-estimating the positive impact of reforms.
One correction — Elmendorf was appointed by Democrats — Sen. Kent Conrad and Rep. John Spratt, head of the two Congressional Budget Committees. They are Dems, not Rs.
To All:
I assure you that after 30+ years in the insurance business when I state that individual as opposed to group is less expensive I can back it up. The “researchers” and “educators” with the degree’s cannot and never have. Everyone just believes what they tell them. Logic should tell you that when you “guarantee issue” coverage and it covers all pre-existing conditions that it’s going to be more expensive than an individual policy that is not guaranteed issue and does not cover any pre-existing conditions for at least one year. If the reform measure’s mandate that all individual health insurance policies are guaranteed issue and have to cover all pre-existing conditions than they will be as expensive as group coverage and, yes, then people with gravitate to the public option, which is really the ultimate goal of the current administration.
Henry wrote:
“Logic should tell you that when you “guarantee issue” coverage and it covers all pre-existing conditions that it’s going to be more expensive than an individual policy that is not guaranteed issue and does not cover any pre-existing conditions for at least one year”
——
My logic says it would depend on adverse selection in the individual market. If the group market is large and contains many healthy folks, as it most likely would from an employed pool, then the sick may not be that big a share of this pool. In the individual market, the sick may seek out insurance while the well would do without, maybe. If that was so, individual insurance over time could be much more. There also could be a purposeful disincentive possibly put in there by insurance companies if they did not want to deal in the individual markets for some reasons?
NG:
You bring up some good points about individual insurance.
But Henry is correct, all things being equal, individual insurance is cheaper than group insurance, for people typically must prove their health.
In states, such as New York, in which premiums are community rated and policies are guaranteed issue, the premiums are enormously high.
The same for New Jersey.
What individual policies can do over group policies is provide real ownership.
However, as time goes on, insurers have creative ways of exacerbating adverse selection, so that the longer-time policyholders would need to prove health to get similar rates as those just coming on board.
I had a policy for 11 years through Pyramid Life.
My premium in the 12th year was 40% higher than a similar policy through the Texas Risk pool.
So much for long-term loyalty.
Don Levit
John, Henry, Bill
John– Recently, I met a Congressman from N.J. who assured me that Elmendorf was appointed by Republicans.
But when I Google his appointment, I discover that he was appointed by House Speaker Pelosi and Rep Spratt, after “bi-partisan consultation).
(The House and Senate take turns appointing the CBO director. This time it was the House’s turn.)
Spratt is, as you say, a Democrat, though not a liberal Democrat. (Blue Dogs have praised him for his stance on the budget.)
So perhaps the “bipartisan consultation” played a large role in choosing Elmendorf.
I don’t know–I have to get back to the Congressmen who told me Elmendorf was appointed by the Republicans.
But for now, I’m going to delete “appointed by REpublicans” from the post.
Thanks.
Henry
You are mistaken.
When an individual purchases his own insurance in the individual market it is always more expensive than it would be if he got group rates.
This is in part becaause the costs of administering an individual plan are higher.
Whether or not a state has “guaranteed issue” (which means that insurers must cover anyone who applies for insurance, regardless of pre-existing conditions) is a Completely Separate Matter.
You are right that when sick people are included in the pool (as they will be under health care reform) and when insurers cannot charge them more because of pre-existing conditions, then insurance becomes more expensive for everyone in the pool. We all share in the cost of
covering people who are sick. (And if you or I become sick, everyone in the pool helps cover us.)
Under health care reform, BOTH the public plan and private insurers will take anyone who applies, and if they have a pre-existing condition, they will not pay more than a completely health person.
This applies both to the public option and to private insurers. The public option has no advantage in this regard.
Bill–
Yes, Medicare pays providers less. In particular, it pays hospitals less. (Private insurers pay some hospitals as much as 15% to 20% more than it costs an efficient hospital to pay for patients. In other words, they are being rewarded for inefficiency.)
Under the Bush administration, Medicare was not able to try to control utilization. Bush was only interested in privatizing Medicare–he wanted to hand it over to private insurers.
But now, under the Obama administration, Medicare can begin to implement the many recommendations in the Medicarey Payment Advisory Commission reports.(MedPAC)
These recommendations call for reducing waste in the system by steering patients and doctors away from less effective treatments–and toward more effective treatments.
Medicare can do this by raising co-papys–and lowering fees–for treatments that we know offer little or no benefit.
This is why Medicare plans to slash fees for MRIs adn CT scans next year. We know that we are doing way too many of these tests–exposing patients to risks without benefit.
Here, we’re not talking about “rationing” care. We’re talking about making care more rational.
I’ll write more about this in part 3.
Maggie:
While you are correct that the cost of administering an individual plan is higher, that does not mean that the premiums are higher.
In addition to proving health, individual premiums are based on one’s age, rather than community rated as in group insurance,
Thus, until one reaches around age 50, individual policies are less expensive, at least in the first year.
Refer to my previous comment, in which long-term loyalty is penalized.
Regarding Medicare reimbursements being lower than private insurers, here is an interestring comment from the healthinsurancecolorado.net blog.
“Working at a doctors office, we deal with Medicare all the time. Our profit margin from Medicare is similar to that from private insurance even though Medicare pays 20 to 40% less than the private insurers. The reason for the similar profit margin is the low overhead asociated with Medicare. They do not require referrals, authorizations, etc. Our nurses spend 40% of their day working on referrals and authorizations. Nurses are our single biggest expense past doctors’ wages. That’s why we would be willing to accept lower reuimbursement rates if the proposed public option is run similar to Medicare.”
It seems like he is suggesting that since Medicare gives them no hassles (due to lower overhead), they are willing to accept lower reimbursements.
Does this actually lower the total costs?
Don Levit
Don–
In New York state, where I have had individual insurance, age is not considered when pricing the insurance. See http://www.manhattan-institute.org/html/mpr_10_slideshow.html
Legacy–
All CBO numbers are guesstimatse.
Everyone–
Let’s clear up the question about the individual market once and for all. (And then move on to talk about the public option.)
This is from the Campaign for American Progress (they are very accurate):
“The federal government projects that Americans will spend over $2.5 trillion on health care in 2009 alone; roughly $100 billion of this goes to the cost of administering private insurance. And nowhere are those costs higher than in the individual market—that is, when people purchase coverage directly through the insurer and not through an employer.
There are a variety of reasons why the individual market is more expensive, including that [in many states–but not all] insurers screen those applying for individual insurance to make sure they are a “good risk.” In other words, the insurers spend a significant amount of money to insure only the healthiest people. Sometimes called the nongroup market, more than 14 million Americans get their health coverage on the individual market.
“Health reform is an opportunity to drastically reduce administrative costs in the individual market. Progressives have called for health reform where all individuals would be able to purchase coverage through an exchange in which individuals could be pooled together to purchase insurance through a common marketplace. This could greatly reduce—if not eliminate—the individual market’s extra costs. In fact, the Center for American Progress Action Fund projects that it is possible to reduce health care administrative spending by more than $3.0 billion in 2009 and more than $40 billion over 10 years if all Americans had the option—and chose to—purchase coverage through a group market, such as an exchange or an employer.
“The Individual Market’s High Administrative CostsL
“Most Americans obtain their insurance through the “group market” where employers work with an insurer to offer coverage to employees and dependents. This leverages economies of scale and allows for those covered to share health risk broadly. In contrast, the individual market does neither. As a result, insurers work hard to attract and enroll only the lowest risk individuals.
“The Congressional Budget Office estimates that 29 percent of premium dollars in the individual insurance market go toward administrative costs on average. This is more than double the average rate in the group market, where roughly 12 percent of employer-sponsored insurance premium dollars are spent on administrative costs.[1] This has a real cost: The average policyholder on the individual health insurance market will spend roughly $300 more on administrative costs each year than if they purchased coverage through a group policy.
Some of the specific insurer activities in the individual market that drive up administrative costs are:”
To read the rest of the article, go to http://www.americanprogressaction.org/issues/2009/03/administrative_costs.html.
Maggie:
When I said I understood New York had community rating on their individual products, I meant that age was not a factor.
That means the young are way overpaying according to their risk.
Again, we are giving you the fact that individual products have higher administrative costs.
Why do you want to discontinuie the discussion of individual products.
It’s just getting juicy!
Don Levit
Don–
Sorry I misunderstood you.
But I disagree that the young are “way overpaying” in New York.
When I was young and living in New York, I paid more for insurance than I would in many other states, and I didn’t mind.
I’m glad to live in a state where people are not penalized for pre-existing conditions–or for growing older.
I belive that health care should be like Social Security– we all pay the same percentage of our income into the fund, and when we grow older, we receive benefits.
Ultimately, we’re all in the same boat. We’re mortal, we will age, and we are vulnerable to all of the ills that flesh is heir to.
We need to pull together.
Maggie: “I belive that health care should be like Social Security– we all pay the same percentage of our income into the fund, and when we grow older, we receive benefits.”
Isn’t this the same thing the single payers want? I thought you disagreed with them?
Lisa–
I don’t disagree with single payers about whether all of us should realize that we are in same boat together.
We are–and we need to think collectively– about “we”–not just “me and my family.”
But I also think that we never know who the American public will elect. Sometimes we are wise and elect a good government. Sometimes we don’t. Over the past 30 years, I have been stunned by some of the people we have elected–both to the White House and to Congress
(I have an Op-ed coming out about this in the Washington Post’s “Outlook” section this Sunday.)
So I wouldn’t want to have only one insurance system run by the government.
Bottom line: since I don’t know who will be in the White House or running Congress in 2020, I don’t want the govenrnment plan to be the only game in town.
I would like to have alternatives–particularly non-profit plans like Kaiser.
Maggie, I guess you are now in the minority.
http://www.gallup.com/poll/124253/Say-Health-Coverage-Not-Gov-Responsibility.aspx
Lisa:
I agree with you that everyone should pay based on their ability to do so.
But don’t you think the benefits should have some relation to the contributions, as in Social Security, rather than similar benefits as in Medicare?
Subsidizing an out-of-control system simply postpones drastic changes.
Don Levit
I read your Washington Post piece. I’m starting to get very confused. Don, which “out of control” industry are you referring to? Medicare? Insurance? Or health care? I think the health care industry is out of control. I think before anybody tells me I have to finance the health care AND insurance industries, both need to have their houses cleaned. Back to the Washington Post, Maggie, am I understanding correctly you think a “public option” should pay for IVF? You think that I should go to work every day and pay a portion of my salary (and/or my employer contribute a portion of their profits) into a fund so Jane Doe can get an embryo emblanted in her uterus? Really? Aside from the obvious reasons why this is totally unfair, have you seen the news stories coming out about the “mix-ups” where women have been emplanted with the wrong embryo’s? There have been several in the past few months. In one recent scandalous case the doctor was accused of emplanting his OWN sperm! (I guess he couldn’t find anybody to take it any other way. Ba-da-bing) Court documents were shredded. The Connecticut State Health services closed their investigation without getting to the truth, and the doctor is still practicing with an unrestricted license. http://blogs.chron.com/deadbymistake/2009/11/greenwich_doctor_uses_wrong_ma.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DeadByMistake+%28Dead+By+Mistake%29 And this is just one case that finally made the news.
Posted by: Don Levit
“I agree with you that everyone should pay based on their ability to do so.
But don’t you think the benefits should have some relation to the contributions, as in Social Security, rather than similar benefits as in Medicare?
Subsidizing an out-of-control system simply postpones drastic changes.”
———-
In healthcare, no, the benefits should be the same! They should be what is needed for that patient as defined by an evidenced-based system with the competent patient having the power of refusal or choice of acceptable options. Social security provides funds to be spent by the individual on many things with no system dictating what those many things are. The critical aspects of healthcare are a top-down endeavor where patients put their lives in the hands of professionals (and why is that?), so the system has to define good care. Then providing those good care options to all is a moral necessity. Now spending great effort to figure out what those good care option should be for everyone, well that IS the essence of reform, or at least should be!
Very good blog post. I would like to just make one comment. Never and I mean never has the government done anything better than the free market. Healthcare that the government is involved in will be no exception. How many times must we have to see this to stop it. The healthcare system is in need of serious overhaul but as usual, the government will only make it worse.
I am in general agreement with you about the potential good that a public option should create. However, I think you are off on your criticism of Elmendorf and the CBO. The CBO’s purpose is to conservatively project spending and revenue impacts based on current conditions. IMHO, that is a good thing: it would do health care reform no good if the CBO was used to over-promise the benefits of the reform bill.
You have some good objections to the CBO pricing assumptions, but the CBO is only projecting current behavior. Private insurance companies currently spend a lot of effort in denying payments while Medicare does not. Others (not you) often claim that Medicare engages in NO utilization review and that is not true; but it is true that they do this much less and mostly focus on provider fraud. Combining these current practices, I think it is reasonable for the CBO to assume that a public option will cover disproportionately more sick people. In fact I think one of the important takeaways from the CBO letter is that private insurance will continue excluding sick people even with health care reform.
And while I believe that the “innovative payment mechanisms” (medical home, accountable care organizations, bundled services, etc.) will improve health care AND moderate health care costs. I think you believe that as well. But this is only our belief; we (as yet) have no proof. That is why the bill includes such a grab-bag of options to try. It is probable that some of these mechanisms will not work. And while I think it improbable, it is possible that none of them will work. The CBO is correct to not make assumptions about the cost saving from these reforms. It gets back to not over-promising.
We should be having lots of discussions about why the proposed payment innovations such as accountable care organizations will help us improve our health and reduce health care costs. These are going to be a tough sell to most Americans, so it is important that we understand how they will work and how they should benefit us.
Lisa–
In most developed countries, national health insurance pays for IVF–at least for women under 40.
In some countries the law says that only one embryo can be implanted at a time–to avoid multiple births.
In some countries there are limits on how many times you can try IVF–usually up to three times.
It is an extrememly safe procedure with over a 50% success rate for healthy women.
It is also very expensive because the mother requires extensive testing to see what is causing the problem, monitoring of the mother for 30 days before the procedure, and monitoring throughout the
pregnancy. All very labor intensive.
Cost $12,000–or more. This is more than many working class families can afford.
Or shall we say that only the rich have a right to have children?
And for the mother, it is not an easy procedure. She has to make a real committment-.
But for the many men and women who want to get pregnant and can’t, having access to IVF is terribly important. It’s priceless, and I wouldn’t deny it to any woman who stands a good chance of having a healthy child.
This is why 12 states require that insurers cover it.
I’m surprised by your lack of compassion for someone you refer to as “Jane Doe.”
As you may know, it can be very difficult to adopt. (And very expensive.) And since you are a mother, you know the pleasures of pregnancy and having a child.
Not long ago, I did quite a bit of reserach on IVF for a friend. These “mix-ups” are extraordinarily rare. Saying no one should have IVF because of these “mix-ups” is like saying that no one should have surgery because, very rarely, someone becomes the victim of “wrong-site surgery.”
NG– I agree. AS a civilized society we have
an obligation to provide
effective,needed comprehensive health care for all Americans.
This is a necessity.
When I think of the things that our healthcare system spends money on: viagra, PSA tests, diagnostic testing for the worried well, etc. etc. . . . (Actually I don’t begrudge anyone the viagra–but if men can have Viagra, women should be able to have IVF.)
I’m not saying nobody should have IVF because they might have a mix-up, I’m saying why aren’t we shining the light on why health care costs so much money in the first place and fix that first before we start mandating everybody has to finance the industry? Mistakes and carelessness are big cost drivers.
I’m not suggesting anybody be “denied the right” to be a parent. It’s not up to me to decide who gets to be a parent and who doesn’t. It’s not up to Uncle Sam, either. A better way to frame my question would be, do you think elective procedures should be funded from public money? My salary? My employer’s profits ? I’m 40 now, where do I get in line for my government face-lift? Preventative care, disease management, treatment for sickness and/or injury, sure everybody should have access to quality health care. Maybe I live under a rock. I guess I thought keeping the private industry intact, coupled with a public option, the private industry would move towards elective procedures. As I said I’m starting to get very confused by the entire debate.
Lisa–
Having in vitro fertilization so that you can have a baby is quite different from a face-lift.
It could be compared to othet elective procedures that Medicare and most private insurers cover like
knee replacements, hip replacments, etc.
There is no reason that older people with bad knees and hips “must” have these operations.
In many cases they are no longer working–no longer adding to GDP. They could just sit in a chair or lie in bed all day.
But we, as a society, have decided that older people– and those who have been damaged in accidents– should have access to these procedures.
Similarly IVF is an “elective” procedure that is not cosmetic (we’re not talking about skin grafts), but that allows women access to becoming mothers.
I think public services should cover “needs” not “wants.” Face lifts & IVF’s are “wants.” Joint replacements are “needs.”
If you can’t afford or have the financial disipline to save up 12 grand to have IVF, maybe you can’t afford to have a baby in the first place. The cost of IVF is a drop in the bucket compred to the total cost of raising a child. So if we all pay for someone’s IVF, they then change their mind and want an abortion you would pay for that as well. Burger King Reform “Have it your way”.
Just a brief comment regarding Dan Whalen’s thoughtful remarks on the prospect for cost competitiveness for a public option. I believe Maggie, here and elsewhere, has already described examples of some of the alternative payment mechanisms that reward value rather than volume and thereby increase efficiency. In addition, Medicare will have a three year headstart in further experimenting with them before the Exchange begins its operations in 2013, and so it’s premature to dismiss the possibility or even likelihood that some will prove worth extending to a larger patient population by then.
I think Dan’s point that the private insurers would try to game the system to reduce their burden of sick subscribers is valid, but their latitude will be more limited in the future, at least based on HR3962. All plans, private or public will be required to achieve the same actuarial value for the subscriber pool they compete for. In the case of the basic plans, that value will be 70 percent, and it might be difficult to deny too many needed services and still meet the benchmark. In addition, the bill includes a modest risk adjustment mechanism to compensate for unequal insurer burdens.
There’s still reason to be hopeful a public option, if included, will be a cost saver for its subscribers. Even more important, it should drive down the costs of competing plans from private insurers, and so all subscribers would be likely to benefit.
Fred, Dan, Lisa, Jenga
Fred: You write: “All plans, private or public will be required to achieve the same actuarial value for the subscriber pool they compete for. In the case of the basic plans, that value will be 70 percent, and it might be difficult to deny too many needed services and still meet the benchmark.”
That’s a very good point.
I’m glad we have three years to figure out how to regulate insurers so that they don’t game the system. But other countries do it, so it can be done.
There is every reason to think that the public plan will save money. Lower administrative costs alone will make a family plan cost $2,000 less than private insurance according to the Commonwealth Fund. (They do excellent nonpartisan research.)
Dan–
Here is why I (and many members of Congress) are critical of Elmendorf.
He is using his position as CBO director to make flat statements such as “20% of the people in the exchange will go into the public plan” with Absolutely No Basis for that statemet.
It is a completely wild guess. (I talked to a Congressman from New Jersey about this recently. He cofirmed that many legislators realize that Elmendorf is just trying to undermine the public plan and reform legislation.)
Yet, because Elmendorf is CBO director, pepople assume there must be facts, numbers, analysis behind that statement. It’s so specific.
So the newspaperes pick it up, and repeat it, as fact.
Compare his CBO reports to the CBO reports that Peter Orszag wrote as CBO director.
Orszag always said “we don’t know.” “We can’t know.”
He would add something like “based n this reserach, we could reduce costs without harming the quality of care.”
Elmendorf takes the stand that none of the proposals for changing how we pay for care will save Any mmoney. No savings.
And the assumption that the public plan will be filled with poor, sick people completely ignores the fact (which he admits) that the 21 miltion people who are now affluent enough and healthy enough to be able to buy individual insurance in the private market will all be in the Exchange.
If you look at the legislation and see what the publci plan will cover–it covers evrything that very good employer-based insurance covers, plus vision and dental for children– it would seem that many if not most of those who now buy their own insurance would choose the public plan.
In addition, because it won’t have to spend a fortune on marketing, advertising, 7-figure exec salaries, underwriters who are still figuring out a way to cherry-pick (even if we block them) lobbying and profits for investors, the public plan begins by being $2,000 less expensive for a family plan (based on Commonwealth fund analysis of real numbers.)
And that’s before it tries to reduce utilization.
So why wouldn’t a self-employed, healthy affluent person pick the public plan? Most people distrust and dislike for-profit insurers. Most people like Medicare. The public plan will look a lot like Medicare.
Finally, Elmendorf knows–just as everyone in Washington knows–that MedPAC has written thousands of pages explaining how Medicare could control utliziation, and that the Bush administration refused to implement these suggestions.
Bush just wanted to privatize Medicare.
Mark McClellan, Medicare director under Bush, has complained about this and has said, publicly, that Medicare could achieve real savings by reducing unnecessary utilization.
If Elmendorf were not trying to undermine reform, he wouldn’t be saying that there will only be 30 million people in the Exchange in 2019.
He would be saying that in 2013, there will be over 40 milion in the Exchange (those now buying their own insurance, the uninsured, and those working for small businesses.) –and that’s a conservative estimate which assumes that many of the 17 million uninsured elilgible for the Exchange decide to pay the penalty and not buy insurance–even though many lower-middle-class and middle-class insured will be eligible for good subsidies.)
If he were trying to provide an honest assessment, he would point out that the poorest of the uninsured would be in Medicad, not in the Exchange. (His own chart suggests that 8 million of teh poorest uninsured wind up in the expanded Medicaid in 2013)
He would point out that each year after 2013, more people would be eligible for the Exchange. By 2016,
we’re talking about a huge number of people (who work for employers with up to 100 employees).
They are not sick (they can hold down jobs); they are not all poor (a cross-section of incomes).
To say that there wil be only 30 million people in the Exchange three years later is simply a lie.
We don’t know exactly how many, but we know it will be far, far, more than 30 million.
Elmendorf should then would say “we just don’t know how many of those will pick the public option.”
But we know that the public plan will try to reduce costs and utilization because that is what the legislation says.
That would be honest. Orszag was a very honest CBO director–as was Alice Rivlin. (Over the years, I’ve read a great many CBO reports.) Elmendorf just isn’t.
Also see Fred’s very good point on how it will be difficult for insurers to cherry-pick.
Jenga–
No woman would go through IVF –and then decide to abort, unless the child’s health was threatened.
Let’s face it, Jenga, you’re an idiot.
And since a great many middle-class families live on $40,000 to $45,000 a year joint, before taxes, saving “$12,000” is not a matter of discipline. It’s all but impossible.
The cost of raising chldren is spread out over 18 to 21 years. And for working-class or lower-income middle class people it’s not nearly as expensive as it is for people who feel a need to buy expensive toys, strollers, prams, bikes, gadgets, clothes, cell phones , private shcools, etc. for their kids.
In lower-middle class and middle-class families, Kids share bedrooms, parents sleep on pull-out couches, everyone “makes do,” kids have jobs after school, the family doesn’t hire someone to mow the lawn . . etc.
Ron–
Thanks.
On whether the govt can do things as well or better than the private sector . .
Don’t know if you have tried the post office’s over-night service. I have.
It’s as good as Fed Ex–and much less expensive.
Both patients and physicians express greater overall satisfation with Medicare than with for-profit private insurance (despite the fact that
Medicare generally pays providers less. It’s much less hassel for doctors.)
Schools like Berkely,
SUNY Binghamton, U. of Wisconsin, U. Cal. at San Francisco Med School,, Stuyvesant High School in New York City, etc. etc. etc. are better than a great many private universities, med schools and high schools.
Fred Moolten wrote:
All plans, private or public will be required to achieve the same actuarial value for the subscriber pool they compete for. In the case of the basic plans, that value will be 70 percent
————-
I read all the time about this actuarial value concept, but I cannot make sense of its meaning when fee schedules negotiated by insurers differ so, especially from the full charges of most providers. Medicare and Tricare often have fee schedules which are reduced 80% from what providers charge on paper, and the difference is written off. Now obviously the cost of a plan with an 80% reduced fee schedule will be a lot less than one paying close to what providers would like to charge at full levels. Indeed based on Medicare/Tricare fees, it would appear a single payer monopsony type payer system could achieve great savings just be getting the fee schedules down to their lowest possible levels for everyone.
Comments?
“below the level of discussion here on healthbeat”
Being called a idiot for pointing out your position, I would consider that a badge of honor coming from a hypocrit the likes of you.
I paid for IVF on a 40000 dollar combined salary. It is by no means impossible. We drove 1500 dollar cars and saved like crazy, so when we had twins we could easily handle it. Those that don’t learn such skills will have no idea how to handle multiple births financially.
Jenga–
If I am not mistaken, you are an M.D.
So when you were earning $40,00- you were probably a resident and could look forward to making a much, much higher salary.
You really can’t compare yourself to the average household making $40,000. .
I’m very, very glad that IVF worked out for you–and that you had twins! a double blessing.
Sorry for calling you an idiot.
It’s just something that I’ve been wanting to say to you for such a long time.
And you’ll note I didn’t go on and on–just one word where, as you point out, I slipped form the level of discorse that we expect on HealthBeat.
Lisa:
The health care industry is out of control, which is reflected in the rise of health insurance premiums.
I have thought much of the benefits of the out of control costs accrue to the higher income households.
In particular, if the benefits are relatively the same in group insurance, the older and wealthier employees benefit due to their potential risk of assets without the insurance.
The younger and poorer households have less financial assets at risk without the insurance.
Community-rated type premiums in group health insurance also favor the older and wealthier households.
In effect, the poorer households are subsidizing the wealthier households, at all age levels, in group insurance.
Thus, having the bottom 95% of households in a public option-type plan is just what the upper 5% would like to have, to subsidize the already bloated premiums.
Don Levit
No problem. I do enjoy your website. Our society is way too slanted toward finding people that think just like you, whether it’s the right with talk radio or the left with the Daily Kos and Huffpost. It is all too easy. I couldn’t stand going through every day, and only talking to people that agree with me. You probably wouldn’t either, that’s why there is a comments section. If you thought that for awhile, it’s probably a good thing. I don’t think your a hypocrite, either. If you talk long enough we are all prone to hypocrisy now and then.
As far as the salary I think it is legit, we did it for 5 years and there were no guarantees that I would eventually make a higher salary, Residents get fired, Residencies close. I guess the crux of the argument boils down to, as always, personal resposibility vs. social stewardship or to turn up the volume “fend for yourselves” vs. “Cradle to grave nanny state”. The most shocking thing is I’ve agreed with Lisa the last couple of topics and we usually always disagree.
Hi Maggie,
I hope my comment is not too late, but another problem I see with Elmendorf’s assumptions is that the cost of the public option will be higher because it will enroll sicker individuals. I thought that issue was supposed to be neutralized by the risk adjustments that the exchange(s) would handle. Risk adjustment is not perfect, but actuaries do a pretty good job of it. According to an interview in the Nov. 10th NY Times with the Dutch health minister, they have a good handle on risk adjustments, and I am sure we could learn from their experience. So the idea of sicker enrollees driving up costs should be irrelevant.
Hi Maggie,
I appreciated reading your arguments in this post and the comments on the previous post re covering IVF. I was previously of the opinion that IVF (and Viagra, which you previously mentioned) should be among those things considered unnecessary, and could be part of an extra package consumers could pay for, either through additional insurance or cash fee-for-service to providers. You argue that people paying cash are incentivized to have multiple embryos implanted, adding to the morbidity, mortality, and rising cost of premature multiple births. So, two alternatives both seem reasonable to me: have the mandated insurance pay for it, or forbid implantation of more than one embryo at a time. Primarily because many Americans will object to the latter as pesky government interference with their freedom (think motorcycle helmet laws), the former solution is probably politically the most practical.
Your argument that “for some women, not being able to have children leads to deep, chronic depression” is not very convincing. Though I lack statistics (do you have any?), I have always assumed that post-partum depression and post-partum psychosis are much bigger problems. Also, though I am neither an Obstetrician nor a Psychiatrist, my understanding is that most chronic depression comes from within rather than as a result of unhappy life circumstances, including infertility. Nevertheless, your first argument wins for me, primarily because it might decrease the suffering and disability of premature birth resulting directly from carrying artificially implanted multiple embryos. Secondarily, the thousands spent per implantation might save $millions per severely disabled child.
Richard
Richard and George
Richard–
I agree that there is no way we can tell women how many of their own eggs they are allowed to implant.
This would never fly!
And yes, I agree that avoiding the suffering and risks of premature birth and risks of severely disabled children is the most important factor.
On depression: We’re quite sure that some people are born far more vulnerable to depression than others. And what happens in those first few years of life are terribly important.
But so is life experience. If you are vulnerable to depression, and your child dies, chances are you will sink into a severe, and perhaps chronic depression.
If you have good luck and no tragic losses in life, you may well manage to keep
severe chronic depression at bay–particuarly if you have some psychiatric help.
There is a large body of medical literature about infertility and depression among women.
Often, women who have a hard time getting pregnant the regular way have a series of mis-carriages.
This can be devastating. Not just the crushing disappointment and grief, but the hormonal flip-flops.
Adoption would seem to be the solution, but many men (more men than women) just can’t accept the idea of an adopted child. (I’m not sympathetic to this point of view, but if that is how your husband feels I can see why you would be reluctant to adopt.)
Also adopting can be very hard depending on your income, race, age, living situation.
I have to say that, for my own part, if I hadn’t been able to have children (either my own or by adopting) I would have felt a huge and perpetual hole in my life.
If I had siblings living nearby, I can imagine filling that hole by being a favorite aunt. But I don’t, so if hadn’t had or adopted children, I believe that would have led to lasting sadness.
According to the medical research, med are less likely to suffer depression due to infertility.
George–
Welcome to the blog–
and yes, risk adjustment should help.
Thanks for the reference to the NYT interview with the Dutch Health Minister. We shoudl be able to learn from the Dutch–and probably others–about risk adjustment.
We really don’t have to reinvent the wheel.