Tuesday, June 23, 2009

Pssttt! Mr. President. We Have A Health Reform Bill For You

President Barack Obama said at his press conference today that the most important health care reform is reducing costs. Mr. President, do I have a plan for you. There's actually one in the Senate that answers your criteria that includes kind of a public option, a hybrid, one could say.

For more than a year, the U.S. Senate has had a universal health care reform plan before it that could be revenue neutral in 10 years compared to other plans that carry a $1 trillion price tag over the next decade.

Mr. President, you might not like it. Your Democratic leadership may not like it. But, if all else fails, what the hell? As you say, it's better than nothing. It might work. Take a look at it as we did today.

New York Times columnist David Brooks, who I consider one of the more responsible conservatives, wonders where's the love for the Wyden-Bennett bill known as the “Healthy Americans Act” (S. 334). The Congressional Budget Office and Joint Committee on Taxation have estimated that its budgetary effects would not increase the deficit within five to 10 years after its enactment.

Brooks argues that with some fine tuning the bill authored by Sen. Ron Wyden (D-Ore) and Sen. Bob Bennett (R-Utah) is the answer to overhaul health reform senate chairmen refuse to consider. The reason is that the plan would be paid for in large part by eliminating the tax-exempt status of health insurance coverage now offered to employers and its work force under company plans.

Brooks noted that at a May 12 Senate hearing, a panel of 13 experts gave reasons for supporting the tax exemption because it represented a giant subsidy to the affluent. It drives up health care costs by encouraging luxurious plans and by separating people from the consequences of their decisions. Furthermore, repealing the exemption could raise hundreds of billions of dollars, which would be used to expand coverage to the uninsured.

Now that we have your attention, Mr. President, read on.

When Wyden piped up and noted that he and Bennett have a plan that repeals the exemption and provides universal coverage, the Finance Committee’s chairman, Sen. Max Baucus, "looked exasperated," Brooks noted. "With that haughty and peremptory manner that they teach in Committee Chairman School, he told Wyden and the world that this idea was not going to happen."

Brooks argues that Baucus, other committee chairmen and their staffs are trying to fix the health care system by building on the current system and cutting costs arbitrarily, a practice unchanged since the Nixon administration. Writes Brooks:

The problem with the committee plans is that they don’t do much to change the underlying incentives, and consequently don’t do much to control costs. “The single most expensive option is to build on the existing system,” says the health care costs guru John Sheils of the Lewin Group... Now you might think that in these circumstances someone might take a second look at the ideas incorporated in the Wyden-Bennett plan, which already has a good C.B.O. score, bipartisan support and a recipe for fundamental reform. If you did think that, you are mistaking the Senate for a rational organism. For while there are brewing efforts to incorporate a few Wyden-Bennett ideas, there is stiff resistance to the aspects that fundamentally change incentives.

Mr. President, we think you are a rational man.

Okay, let's take up Brooks' offer. The Washington think-tank Center on Budget and Priorities gives the Wyden-Bennett bill good marks in addressing the 46 million without health insurance and the eroding decline of employer-based coverage which insures about 59% of all Americans.

The report, in part, says:

The Wyden-Bennett plan seeks to achieve universal coverage by creating a new private insurance system for the United States. It would establish state-based purchasing pools, with nearly all Americans (except those in Medicare and the military) required to enroll in a private insurance plan made available through their state’s pool. Employer-based coverage would likely be reduced substantially over time (few, if any, small employers likely would continue to offer coverage although a number of large employers probably would do so, at least initially), and Medicaid and SCHIP would be converted into supplemental insurance programs that “wrap around” the private insurance plans offered through the new pools. Premium subsidies would be provided on a sliding scale based on income to help make the coverage provided through the new purchasing pools affordable for low- and moderate-income families.

Among positive attributes it cited:

Coverage could be extended to 99% of Americans. It would rely on group health insurance run by state-based purchasing pools rather than an unregulated private plan market. Coverage would be the same no matter what the individual health conditions. Premiums for the poor would be subsidized based on income but still require a co-pay. It attempts to cut costs incorporating financial incentives to encourage individuals to enroll in cost-effective plans to slow the rate of health spending.

It asks serious questions the plan does not answer:

Would state-based purchasing pools reduce the risk of "adverse selection" -- that is, the separation of healthier and less healthy people in different insurance plans that may make coverage unaffordable for those in poorer health. Would access to needed health care for low-income Medicaid and SCHIP (children) beneficiaries — particularly those with disabilities and special health care needs — be protected adequately if these public programs are converted into supplemental programs that “wrap around” the new private insurance plans? Would the subsidies provided under the plan be sufficient to make the private health insurance coverage provided through the new purchasing pools reasonably affordable for the many low- and moderate-income families who are currently uninsured?

The Center on Budget and Priorities offers these modifications to the Wyden-Bennett bill:

  • The plan could be modified to better minimize the risk of adverse selection. The plan could preclude the state-based purchasing pools from offering high-deductible plans attached to HSAs (Health Savings Accounts), since those plans would primarily attract people who are healthier than average. Equally essential to minimizing adverse selection would be greater standardization of the benefit packages the plans can offer; this is necessary to limit the otherwise relatively unconstrained ability of insurers to design benefits in such a way as to “cherry pick” — that is, to encourage enrollment by the healthy and deter enrollment by those in poorer health. These steps would significantly improve the long-term ability of the new purchasing pools to pool risk effectively.
  • The Wyden-Bennett plan could better ensure that Medicaid and SCHIP beneficiaries actually receive the supplemental benefits for which they would be eligible, both by placing additional requirements on private insurers participating in the new purchasing pools to improve access to care and by assigning vulnerable beneficiaries to plans that best meet their health care needs. The plan also could be modified to establish explicit new funding streams to support the integrated state services for vulnerable low-income populations that now receive funding through Medicaid, and it could provide financial incentives to states to encourage them to maintain adequate Medicaid and SCHIP eligibility and benefit levels over time, thereby preserving access for vulnerable low-income people to needed supplemental coverage.
  • The plan could better ensure affordability by increasing the subsidies it provides to low- and moderate-income individuals. In addition, an overall limit on total out-of-pocket costs (premiums, deductibles and co-payments) as a percentage of family income could be established, at least up to certain income levels. The mechanism for adjusting the value of the benefit package each year also could be modified so that low- and moderate-income individuals do not increasingly become underinsured over time. These steps to ensure affordability would add to the legislation’s costs and would likely require additional revenues beyond the existing financing sources the Wyden-Bennett plan now taps.
This may not be the best plan, Mr. President. But it is the best one on the table that answers all your criteria. Call it a fall-back plan if all else fails. The political risks I need not point out since you are on top of that game. A tax on the affluent? You're in favor of that since you plan to end the Bush tax cuts for those above $250,000 next year. Besides, with this plan you circumvent a single-payer or public option plan that drives the Republicans nuts, and, perhaps, even gain five or 10 of their votes who co-sponsored the Wyden-Bennett bill.

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