Sunday, May 31, 2009

NEWS UPDATE 5/30: THE KENNEDY PLAN? this weekend includes news of what it describes as Senator Ted Kennedy’s “reemergence” in the debate on health care reform with proposals that are distinctly to the left of those of Senate Finance Committee Chairman Max Baucus. It also includes the staff working paper being circulated among members of Kennedy’s Senate Health, Education, Labor, and Pensions Committee, and which presumably reflects Kennedy’s positions.

The Politico report and a parallel piece in the New York Times both emphasize significant policy differences between Kennedy and Baucus. The writers of the two pieces stress Kennedy’s liberalism and Baucus’ more moderate (or conservative, depending on one’s viewpoint) policies. The New York Times article focuses on the inclusion of a public plan as the key difference between the two senators, and notes Baucus’ committee efforts to develop compromises with ranking Republican Senator Chuck Grassley, which would presumably move the Senate Finance bill further to the right. So, what’s the truth?

Comparison of Finance Committee comments with those of the HELP Committee working paper does show differences, but in most cases these are ones of nuance. Much of the working paper reads like a campaign manifesto, and is correspondingly vague about details—and silent on financing. (What are “reasonable limits” for premium variations? Is there any real evidence of the effectiveness of “medical homes”?) On the other hand, it is also quite comprehensive in scope, including a major section on long-term care, something that has been almost totally ignored in the reform debate.

The HELP paper does call—as reported by Politico and the Times—for creation of a public plan. However, no specifics are provided, and the words used could be as applicable to the “weak” models suggested by Senator Charles Schumer and the New America Foundation’s Len Nichols as to the “strong” Medicare-based models suggested by liberals.

The conclusion: obviously there are differences between Senators Kennedy and Baucus and between their respective committees, (notwithstanding the two senators’ latest joint announcement but there is certainly no deal-breaker at this point.

Friday, May 29, 2009


Things have been quieter on the health care reform front this past week, as the two biggest current fights—over the public plan proposal and over taxation of health care benefits—moved behind closed doors on Capitol Hill.

Both of these fights are still generating visible heat—literally visible, in fact—with television commercials from conservatives attacking the public plan (“the government is going to control your medical care”) and unions attacking the proposal to tax health benefits (“the government is going to slash our paychecks”). Neither issue will be settled soon, and either could derail reform permanently.

There are more battles coming, too, as lobbyists for insurers, drug manufacturers, providers, businesses and unions try to fight off any proposal that might curtail their incomes.

The next one is likely to be over coverage mandates, imposed on individuals or employers or both.

There were some hints of the upcoming clash in recent comments by Senate Finance Chair Max Baucus. In a breakfast meeting sponsored by the Kaiser Family Foundation, he estimated that only 94 to 96 percent of Americans would be covered by the reform model he expected, then was forced later to amend his remarks to “as close [to 100 percent] as we can.” The gap between Baucus’ two estimates could be critical, since AHIP has publicly agreed to eliminate medical underwriting only if universal coverage is achieved—and a mandate is the obvious way to do so.

Whether imposed on employers or individuals, or both, coverage mandates will be a political hot potato. Small businesses will fight a play-or-pay mandate (and one that they are willing to accept may leave a big hole in reform financing), while conservatives will undoubtedly battle any attempt to require individuals to carry a prescribed level of insurance. An individual mandate may have been—for the moment, at least—successful in Massachusetts, where the percentage of uninsured was low, but it will present severe problems in states like California and Texas, with very large numbers of uninsured who would be expected to contribute towards coverage.

Mandates also face other problems. Tying them to income tax filings—as Massachusetts has done—will not make them more attractive, and will open up questions of how to determine compliance, what penalties to impose for non-compliance, and how to relate a retroactive process (tax filing) to a current requirement (insurance coverage).

Given these difficulties, an alternative that may get more attention is some form of voucher, as suggested by Fuchs and Emanuel. While the VAT levy that they proposed is almost certainly not politically viable as a funding mechanism, building some part of the coverage cost into the tax system, as in the Wyden-Bennett Healthy Americans Act, might gain support. From an administrative viewpoint, guaranteeing coverage to everyone who files a tax return is simpler than a mandate-penalty model, and could be more politically acceptable.

What’s clear is that insurance system stability depends on getting very, very close to universal coverage, and that either an individual mandate (most likely combined with an employer mandate) or a quasi-voucher system is the only way to get there.

Wednesday, May 27, 2009


It turns out that the hospital, insurance and pharmaceutical organizations who announced with great fanfare a couple of weeks ago their plan to cut/maybe think about cutting* $2 trillion/maybe nothing* from their costs may have been even more devious/disingenuous/stupid* than was apparent at the time. [*choose one]

The New York Times points out today that any such organized effort to reduce prices could face antitrust charges. In the Times’ words: “Antitrust lawyers say doctors, hospitals, insurance companies and drug makers will be running huge legal risks if they get together and agree on a strategy to hold down prices and reduce the growth of health spending.

The drug manufacturer lobbyists who so eagerly participated in the May 11 meeting with President Obama, when the cost-cutting promise was made, should have been especially aware of the issue. Back in 1993, it was their trade group that, in an effort to soften the threat of Clintoncare, offered to limit pharmaceutical price increases to the CPI rate, then were told by the Justice Department that this would violate antitrust laws.

And, again according to the Times, it was the AHA who complained recently to the Federal Trade Commission that antitrust laws make it difficult for providers to collaborate and lower costs.

So, first these organizations promise to cut costs by $2 trillion, then they say they didn’t really mean it, and now it turns out that it would probably be illegal (which they should have been fully aware of, anyway). Who’s trying to fool whom?

Monday, May 25, 2009


At a time when too many political staffers and ivory tower academics are presenting themselves as health care experts, it’s a pleasure to read the words of someone who actually has the expertise to justify the term.

Dr Jaan Sidorov writes a terrific health care blogthe Disease Management Care Blogfocusing primarily on disease management, but also ranging across much of the spectrum of health care policy.

Two things set Dr Sidorov’s blog apart. First, he has real world experience—including serving as Medical Director of the Geisinger Health Plan, where he initiated Geisinger’s disease and case management programs. Second, he writes one of the most literate—and often witty—columns in the blogosphere. If you want to track what’s really working or not working in the area of care coordination and disease management, or just get a different view of the health care world, take a look at DMCB.


One of the continuing themes of the health care reform debate over the past weeks has been the opportunity for cost savings in treating the chronically ill.

It seems like a no-brainer. Close to 90 percent of Medicare spending is for just 25 percent of beneficiaries, with almost half of the expenditures due to the top five percent of those covered. Three quarters of these high-cost patients suffer from multiple chronic conditions, with the number of physicians involved in a patient’s treatment typically more than the number of conditions. So, efforts to manage and coordinate care should show significant savings, right?

Not so, if the federal government is involved. A MedPAC report summarizing the results of four Medicare chronic care demonstration programs concluded: “Costs: Little evidence of cost neutrality or savings…Quality: Scattered evidence of success improving process, satisfaction, outcomes…”

None of this bodes well either for further chronic care demonstrations or for the great white hope of many Medicare policymakers: the medical home model, with—as defined by CMS—twenty-eight specific capabilities including electronic medical records, care coordination, treatment planning and reporting.

Aside from the lack of success so far, why should we be skeptical about savings from care coordination in Medicare? There are two simple answers.

First, the process of demonstration and evaluation is so lengthy that—even when an approach can reduce costs—general implementation may not occur for years.

Second, in order to encourage providers to participate, CMS has discovered that additional payments are necessary, thereby eliminating most or all the potential savings.

The attitude of physician organizations is clear. In announcing their support of the medical home model, the American Academy of Family Physicians (AAFP), the American Academy of Pediatrics (AAP), the American College of Physicians (ACP) and the American Osteopathic Association (AOA) demanded: “additional reimbursement for participating practices to adequately compensate for the increased physician and administrative staff time necessary to provide care…” In other words, if you want us to do things right, you’ll have to pay us more.

Monday, May 18, 2009


Over the past three weeks, a procession of health care experts have wended their way to the halls of Congress to testify before the Senate Finance Committee. Collectively, the testimony (available on the Senate Finance website) looks at almost every aspect of health care reform. There’s plenty for any one person to disagree with, but—overall—it’s like having a free subscription to Health affairs.

If one had to pick just one paper to read, an excellent choice would be Len Nichols’ testimony on expanding health care coverage. It’s better written than most of the others, and far more objective than the self-serving comments from industry insiders. Here are my own comments on Nichols’ recommendations:

1. Elimination of the employer coverage tax exemption – Not only is it probably key to financing reform, it removes the unfair advantage that large employers have over small ones, and also potentially moves coverage choice and payment to those who will actually be covered. Allowing ERISA and other large employers to continue to offer direct coverage is a reasonable compromise, and one that would reduce the risk of destabilizing the insurance industry (and alienating big business). It’s also consistent with the successful Dutch system, which uses an insurance exchange model but allows large employers to contract directly with insurers.

2. Separate pricing of a minimum benefit package – I think this is essential, and I would much prefer to see price competition based on fixed benefits than benefit competition based on a fixed budget (as Fuchs and Emanuel have suggested). I don’t see how we can be confident about controlling costs if purchasers can’t see which choices are less expensive. Models like FEHBP that offer different benefits at different prices are the worst possible combination.

3. Risk adjustment – We clearly have to have some form of this, and again the Dutch system offers an example (as does Medicare Advantage – hah!). However, I wonder if a reinsurance approach might be simpler.

4. Play-or-pay – Eliminating the employer coverage tax exemption would remove the need for play-or-pay, which has inherent problems of unacceptability to smaller employers and also is liable to manipulation (Hawaii’s employer mandate is a good example of how this kind of approach can be finessed to a point at which it is meaningless).

5. Medicaid – Not only do we have a separate health care program for the poor, it’s one that too often limits access to care. It may not be politically feasible currently, but turning Medicaid into a wraparound subsidy program (as the Wyden-Bennett Healthy Americans Act proposes) would also achieve continuity of care.

6. Medicare – It’s essential that we wring some savings out of Medicare, but I’m not hopeful about the Finance Committee staff’s proposals for using payment changes to make delivery systems more efficient. So far, it hasn’t worked in the chronic care demonstrations and I’m always skeptical about CMS’ ability to make things happen. The one essential change is neutrality between Medicare Advantage and FFS, and this would be even more effective in terms of cost control if MA savings were shared with beneficiaries directly as offsets to Part B premiums.

7. Public program option – The self-funded state employee program option is a reasonable compromise. An alternative that I’ve proposed is a combination of a trigger (the public plan is only implemented in certain circumstances) and the availability of public plan payment rates to all private plans (in effect, a PPO-for-all).

It would be nice to think that common sense and experience will trump industry lobbying and political timidity, but meanwhile it’s a pleasure to read such a thoughtful and articulate paper as that of Nichols.

Sunday, May 17, 2009


Putting the political cart firmly before the horse, the Senate Finance Committee heard testimony last week on how to pay for reform—before they had reliable estimates of how much it is likely to cost.

It’s not that there aren’t plenty of estimates to choose from. A recent Associated Press report offered ten-year forecasts ranging from “the president’s $634 billion…is likely to be the majority of the cost” (White House budget director Peter Orszag) to “$125 billion to $150 billion a year” (New America Foundation economist Len Nichols) to “$1.5 trillion to $1.7 trillion would be a credible estimate” (Lewin Group consultant John Sheils). Take your pick.

What’s really the number that Senate Finance members must find a way to fund?
Leaving aside mythical savings like the $2 trillion sort-of promised by health care industry bigwigs, and the almost as questionable cost reductions for delivery system tweaks offered at previous Senate Finance sessions, the question becomes: how much new spending will universal coverage add?

Despite the willingness of numerous experts to offer estimates, only one detailed study has been published. Urban Institute researchers projected in 2008 that additional spending would have been $122 billion, in 2008 dollars, if universal coverage had been in place in that year. At current health care cost growth rates, this would equate to $135 billion in 2010 and a ten-year estimate of close to $1.5 trillion, both in 2010 dollars.

But could this number be too high?

Maybe. Here are some reasons:

1. The Urban Institute study projected a total of 54 million uninsured in 2008. The Census Bureau CPS estimate for 2007 was 45.7 million. The current CBO estimate for 2009 is 45 million. Using the lowest of these estimates would reduce the ten-year cost projection to $1.25 trillion.

2. The Urban Institute study assumed that the newly-insured would be split between public and private insurance in the same ratio as lower-income individuals already with coverage. If reform were based on private coverage expansion, the ten-year estimate could fall by another $250 billion, to around $1 trillion.

3. A combination of the effects of insurance exchange price competition and some taxation of employer-paid benefits could further reduce the projection, perhaps by another $100-200 billion.

Unfortunately, the Urban Institute estimate could also be too low:

1. Continuation of the recession combined with possible CPS undercounting could put the actual number of uninsured close or even above the number projected by the Urban Institute. (This would be consistent with Massachusetts’ reform experience of the actual uninsured count proving to be significantly higher than estimated by state analysts.)

2. The Urban Institute study did not include the underinsured, estimated to be as many as 16 to 25 million, who might be expected to incur additional costs if they had better coverage. (Both estimated counts are from Commonwealth Fund papers, which defined underinsured as expending more than 10 percent of income on out-of-pocket health care costs.)

3. In addition to those counted as underinsured, many others individuals might also incur additional costs with improved coverage.

It’s your choice, Senate Finance Committee!

Saturday, May 16, 2009


Jeff Goldsmith has a new piece on the Health Affairs blog listing reasons why he opposes the public plan. It's worth reading whether you agree or not.

Here are my own reactions:

I agree with Jeff’s conclusions about the risks of a “purely public” plan for both political reasons (it has become a lightning rod for anti-reform sentiment) and pragmatic reasons (it could destabilize the private insurance structure). However, a number of the points that he makes need some comment.

The Lewin estimate of public plan premiums 30 percent below those of private plans is almost certainly exaggerated, due to its dependence on raw payment rates. The 30 percent figure is at odds with the experience of Medicare Advantage, in which the average differential is only 14 percent and some plans’ initial bids are below FFS projections. It also overstates private sector administrative costs (insurance exchange pools should be similar to large groups) and understates or ignores differences in utilization due to private plan UR and other controls (a point that Jeff makes in the context of his remarks about the Kronick paper).

Kronick’s spending growth numbers, taken from CBO data, seem to be at odds with CMS national health care expenditure figures and also (as he notes) with other researchers’ figures. And, as always, it is possible to select a different span of years for data analysis and reach a different conclusion. Even assuming that the CBO growth rates are accurate, some part of the differential may be due to differences between the two populations and the resulting medical trends in the care provided.

One risk not mentioned by Jeff is that of implementing a public plan in combination with a play-or-pay mandate (still the political favorite, in various guises). The more financially attractive the public plan, the more employers who will dump their group coverage. Since almost all play-or-pay proposals assume that players’ premiums will be higher than payers’ payments, the result is likely to be a further shortfall in reform funding.

In spite of my agreement with Jeff’s basic conclusion about the risks of a public plan, I found his suggested alternative options a little puzzling.
Allowing the over-55s to buy into Medicare sounds like a public plan to me, while expanding SCHIP puts more pressure on private plans that already charge below market rates for SCHIP eligibles. It’s hard to disagree with his recommendation for on-line enrollment in an insurance exchange, but the real savings from an exchange will come from price competition, not IT (and as a former CIO, I wouldn’t want to bet health care reform on a government-inspired electronic exchange).

Thursday, May 14, 2009


As Republicans gear up to attack Democratic-sponsored reform proposals as “putting the government in charge of your health care,” today’s closed-door Senate Finance Committee meeting is focusing on the controversial public plan issue.

Senate Finance members will be looking at four specific options:

1. A single national Medicare-like plan, administered by a new agency within HHS, and most likely with start-up funding from a separate appropriation. All Medicare providers would be required to participate in the plan, and payment rates would probably be tied to those of Medicare.

2. A single national plan, established and administered by regional private sector TPAs, who would also determine provider payment rates. Generally this plan would be required to comply with the same regulations as private sector plans.

3. Multiple state-operated plans, perhaps based on existing state employee plans.

4. No public plan.

It’s anyone’s guess which, if any, of these options will find its way into the final bill, but with Finance Committee chair Max Baucus still proclaiming his desire for bipartisan support, the third option may have a lot of appeal, especially if the decision to offer such a plan is left up to the states.

On the other hand, the second option will attract more enthusiastic support from Democrats, with new-Dem Senator Arlen Specter—previously a strong anti-public-plan voice—already saying that it’s a possibly acceptable compromise.

Don’t expect a final decision anytime soon. As the Committee and the Obama administration grapple with issues of how to finance reform, it’s still possible that cheaper (like option number one) may trump political acceptability.


The target date for passage of health care reform just got a little clearer—and perhaps earlier.

After meeting with President Obama yesterday, House Speaker Nancy Pelosi and Majority Leader Steny Hoyer announced their intent to pass a reform bill in the House no later than July 31.

Senate Democrats are hoping for a similar schedule, but with October 15 as an absolute drop dead date, already written into the budget as a reconciliation process cut-off date. However, Senate Democratic leaders are still making optimistic sounds about producing a bill that will attract enough Republican votes to avoid the battle that reconciliation would involve.

Friday, May 8, 2009


(A previous version of this recipe was published in The Health Care Blog.)

One thing about Washington DC, there’s never a shortage of diverse ideas, and with the possibility of passage of some version of reform, there’s an especially impressive number. The problem is how to pick and choose among them.

Every reform plan—whether from Baucus, McCain, Obama, Clinton, Wyden-and-Bennett, Kennedy, Stark, Dingell, or elsewhere—comes with its own strengths and weaknesses, and cross-aisle consensus is certainly missing. But maybe it’s possible to take a little of this plan, a little of that, and so on, to create the magic mixture that can reform our system and achieve the critical sixty vote support in the Senate.

Perhaps it’s time to consider a recipe from Macbeth:

Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder's fork, and blind-worm's sting,
Lizard's leg, and howlet's wing…

Shakespeare’s witches didn’t provide precise measures, and we may have to substitute for some of the ingredients, but we’ll go ahead and start adding items to our cook pot anyway...

Eye of Newt—

Well, it’s more like website of Newt. Former Speaker Gingrich is promising his own reform plan, but we can’t wait, so in our magical broth we’ll use his statements supporting an individual mandate and the development of a national electronic medical record system.

We’ll take a large cupful of individual mandate, since it’s hard to see how reform can succeed without it. No mandate means some non-covered population, and experience shows such a population can only grow as health care costs increase. However, we’ll use just a small amount of EMR, because although we want to include it in our broth, it’s a very expensive ingredient.

Toe of Frog —

There was always something tentative—a toe in the water?—about Senator’s McCain’s reform plan, but his proposal to eliminate the tax deduction for employer health care payments earns a big tablespoon’s worth in our broth. The present deduction creates a huge inequality among large and small employers and individuals, while a play-or-pay alternative is likely to result in an employer coverage death spiral as current players rush to the less costly payer option.

Wool of Bat—

It’s really wiles of Baucus, with our ingredient taken from the Senate Finance Chair’s recent carefully-crafted policy paper. Because the flavor is so much like that of our next ingredient, we’ll use only a few teaspoonfuls, to include the Health Coverage Council that would set minimal coverage levels, the prohibition on pre-existing condition exclusions, and increased funding for primary care. We’ll make sure that our teaspoon avoids the proposal to allow buy-in to Medicare, since this would add adverse selection to a program that is already a fiscal disaster.

Tongue of Dog —

Or, at least, the tongue of Daschle, in his book Critical. Our spoonful will avoid his proposals for play-or-pay and the expansion of Medicaid, but we’ll make sure our broth includes turning FEHBP into a health insurance marketplace. FEHBP has political credibility, an existing administrative mechanism, and the appeal of a program that is offered to members of Congress.

Adder’s Fork —

Bennett added to Wyden has produced a particularly well-flavored ingredient, so we’ll take a large forkful of their Healthy Americans Act, including replacing the employee health care tax deduction with employer contributions tied to business size and payroll, establishing a basic set of benefits but allowing insurers to offer separately-priced additional benefits, and rolling much of Medicaid preventive and acute care into the overall system—a big help to cash-strapped state governments in a recession.

We’ll stir the contents of our pot at this point, since the most flavorful ingredients have been added.

Blind-Worm’s Sting —

Lower-income people might well feel stung by Ezekiel Emanuel’s proposal to fund health care through the inherently regressive and recession-vulnerable mechanism of a VAT, but we’ll take a teaspoonful from his plan for a voucher system. With our national emphasis on buying things, a tax-funded voucher that forces a deliberate choice among carriers and coverage is likely to be a more effective tool for informed purchase of individual insurance than alternatives like tax deductions and tax credits.

Lizard’s Leg —

With lizard’s legs unavailable, even via the internet, we must make a complete substitution, and use instead a slice from Elizabeth Swartz’s book, Reinsuring Health. Reinsurance is unlikely to make any significant difference to total costs, but it is less complex than risk-adjustment and could be funded through a separate catastrophic coverage program to reduce insurer premiums.

Howlet’s Wing —

Our final ingredient, (h)owlet’s wing, turns out to have flown a long distance, from the Netherlands, where we’ll take a pinch of the recent Dutch reforms. Since they have the experience and the purchasing power to demand lower premium rates, large employers are allowed to negotiate with insurers in order to offer discounts to their employees, thereby providing continuity from the prior system and reducing the administrative burden on the individual marketplace.

So, how does our magical broth taste?

It’s one that could appeal to both liberal and conservative palates. It establishes an individual mandate but guarantees issue and portability of coverage, shares responsibility more equitably among all employers and all individuals, encourages price competition by requiring insurers to offer a basic set of benefits but allows them to offer additional coverage, and eliminates the Medicaid “second class care” that is bankrupting state governments, while building on the strengths of the present administrative capabilities of FEHBP and large employers.

Will everyone love the result of our classic cookery? It should please many diners, but there will be some who will resist such a recipe. No matter how good the final mixture, Shakespeare also anticipated the political stewing process of the congressional debates:

“…For a charm of powerful trouble,
Like a hell-broth boil and bubble."

Wednesday, May 6, 2009


The Senate Finance Committee held another session on health care reform issues this week, focusing on ways to move towards universal coverage.

The major news—at least as reported—was the non-event of total lack of agreement on the public plan option.

Most Dems on the Committee are for it, the Republicans are opposed. Senator Charles Schumer attempted to offer a compromise which would allow creation of a public plan, but with a more level playing field than prior proposals. Schumer’s suggestion, for a plan subject to the same regulatory requirements as private plans and with no government subsidy (for example through an initial appropriation), produced little enthusiasm. AHIP’s Karen Ignagni reiterated the insurance industry’s position that any public plan would overpower the private market, force insurers out of business and reduce coverage options. Given the skepticism already expressed by newly-minted Dem Arlen Specter and a number of other centrist Dems, the public plan concept appears to be in trouble.

As with the previous session on improving the efficiency of health care delivery, the Committee invited a dozen or so representatives of insurers (including Ms Ignagni), employers, consumers, and policy groups to provide their—very disparate—opinions. Not surprisingly, most of these individuals pressed their own agendas: The Chamber of Commerce, Business Roundtable, and NFIB representatives supported universal coverage but were appropriately conservative about changes to the insurance system. The AARP representative focused on Medicare affordability and subsidies. The representative of the Kaiser Commission on Medicaid and the Uninsured focused on Medicaid expansion. And so on.

The more interesting testimony was provided by two policy experts from different ends of the political spectrum: Stuart Butler of Heritage Foundation and Len Nichols of the New America Foundation.

Butler expressed the usual conservative fears about government involvement. He then proposed putting much of the burden for reform onto states, but in accordance with federal guidelines and with some federal funding, along with the replacement of the current employer coverage tax exemption by an individual tax credit. Nichols also (but much more cautiously) expressed concerns about employer-sponsorship, along with (in the long run) replacement of Medicaid by subsidized insurance exchange coverage. Butler (obviously) was opposed to the public plan option, while Nichols suggested a softer option akin to self-insured state retiree plans.

With the next Finance Committee session devoted to funding, we are likely to see more discussion of the elimination of the employer tax exemption. ( If reform is to happen, funding has to be convincing, especially now that the Administration has expressed support for pay-as-you-go legislation.)

Monday, May 4, 2009


Health care policy consultants Lewin and Associates have just released a new working paper, “Harmonizing the Obama, Baucus and Wyden/Bennett Health Reform Proposals: Technical Feasibility,” pointing out the common features of the various proposals.

Given Senator Baucus’ hope for seventy votes for reform in the Senate, there is obviously political appeal in trying to combine two purely Democratic proposals with one that has achieved a degree of bipartisan support. However, while emphasizing the commonalities has obvious merit, it is disappointing that the working paper doesn’t quite live up to its billing.

Despite the title, there is no discussion of the plan that President Obama proposed during his campaign (although this now seems to be a dead issue). More importantly, there is no analysis of the major differences between the Baucus and Wyden-Bennett proposals, and certainly no suggestions for “harmonizing” them. These differences include:

Insurance exchange role – The exchange concept is central to the Wyden-Bennett bill, offering coverage to everyone, but in the Baucus plan is only an add-on to the present structure, serving individuals and small groups without other coverage. The weakness of Wyden-Bennett is the potential destabilizing of the insurance system due to the changeover to individual coverage, while the Baucus plan perpetuates many of the problems of today’s system.

A harmonized solution might take the Wyden-Bennett approach as a starting point, allowing self-funded groups and other large employers (as in the Netherlands) to arrange their own insurance, consistent with national standards, with all other employees and other individuals purchasing coverage through the exchange.

Financing – Wyden-Bennett provides for a mix of employer levies and personal income taxes, coupled with removal of the tax exemption for employer-paid insurance. Baucus proposes to continue the tax exemption (and enhance it through Section 125 plans), to offer tax credits to small employers, and to impose levies on employers not providing coverage. One problem with Wyden-Bennett is in the transition from (mostly) employer-paid coverage, requiring employers to increase wages by the value of prior coverage, while the Baucus plan has the disadvantage of perpetuating the unlevel playing field of non-taxed benefits.

A harmonized solution may be impossible, given the differences between these approaches. Wyden-Bennett offers a much simpler structure that would remove a burden from employers and make for fairer tax treatment, but could be further simplified by requiring only that employers report the value of employee benefits during the transition period, leaving it to employees to determine if their wages were fair.

Medicaid – Wyden-Bennett would incorporate Medicaid coverage into the exchange mechanism, with subsidies for deductibles and co-pays. Baucus proposes to expand Medicaid and to make it more consistent across states. The problem with Wyden-Bennett is that although it would allow individuals to remain in the same health plan if they become Medicaid eligible, and would provide more budget stability for states, it could create insurance instability and high premiums if all Medicaid eligibles are channeled into the exchange structure.

A harmonized solution might be to enhance the present Medicaid program for an interim period and then to transition eligibles to the exchange structure.

Public Plan – Wyden-Bennett includes no provision for a public plan option, while Baucus would allow individuals aged between 55 and 65 to buy in to Medicare during a transitional period.

A harmonized solution could allow some form of temporary Medicare buy-in, but provided that Medicare provider payments are more tightly controlled.

While the similarities noted in the Lewin paper are valid, philosophically the two proposals are very different. The Baucus plan accepts most of our present system and attempts to fix the biggest problems, while Wyden-Bennett attempts to create the health care system that we might have if we could start with a clean sheet. The weaknesses of the two proposals flow from these two philosophies: the transition to Wyden-Bennett is a risky one, while Baucus leaves us with many of the problems of the present system. Consensus (or at least compromise) may lie in trying to incorporate features of the Baucus plan into the Wyden-Bennett model, rather than the other way round.

Saturday, May 2, 2009


Health Affairs blog recently posted the transcript of a roundtable discussion of public plan issues, featuring Len Nichols (New America Foundation), Stuart Butler (Heritage Foundation), and Jacob Hacker (University of California, Berkeley), with Health Affairs’ John Iglehart and Chris Fleming as co-moderators.

Most of the participants’ comments were predictable, given their prior public statements, but made rather more interesting by the discussion format that forced them to respond (at least sometimes) to criticisms of their positions.

Hacker was a strong proponent of a Medicare-like public plan, Nichols reiterated his proposal of a couple of weeks ago for a public plan similar to existing self-funded state employee plans, while Butler described the whole idea as “a nuclear minefield on the road to getting agreement on universal coverage.”

The transcript made one thing clear: there was no “Ah-Hah” moment when any of the participants produced a proposal that responded to the others’ concerns.

Hacker emphasized that a public plan was essential since “the private insurance market, even if regulated, is not going to have enough pressure on it to provide affordable quality care without a public plan competing with it,” but failed to explain exactly how this could be achieved without giving a government-sponsored plan an unfair advantage in a government-regulated competition.

Nichols pressed the advantages of self-funded plans administered by insurers, but failed to quantify the extent to which such plans—which typically utilize the insurers’ own networks—would serve as effective controls over the same carriers’ insured products.

Butler condemned the public plan concept as being incompatible with a level playing field, but failed to explain how private plans would control increases in provider rates without a public plan comparison.

So, given these divergent opinions, is there some compromise that would ensure true competition without threatening the future of the health insurance industry and risking the failure of reform legislation?

One possibility might be to combine one of Hacker’s roundtable suggestions—to give private plans the right to pay providers using the public plan’s rate structure—with some form of delayed-action trigger.

In this model, private plans would be able either to pay providers at rates set by the public plan or to negotiate their own contractual agreements. The trigger implementing the public plan could be tied to average insurer premiums (do they exceed a level set by government actuaries?), or to premium increases (do they exceed CPI increases?), or simply to time (perhaps with the public rates implemented only in year two or three of the reform structure), and could be either regionally- or nationally-based.

A second possibility is to establish “public plan rates” without necessarily implementing a public plan. This should further remove insurers’ objections, and provide a structure comparable to that of the much admired Netherlands system, where price competition among insurers has been especially effective.

In either case, tying a public plan to a trigger should alleviate some of the publicly-expressed concerns of insurers, but still provide an effective mechanism to control insurers’ desire for profitability, while the establishment of public plan rates—regardless of plan implementation—would impose similar controls over providers.