Rep. Weiner withdraws single payer amendment

Posted by on Friday, Nov 6, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Rep. Weiner Withdraws Single Payer Amendment from Current Health Care Debate

Representative Anthony Weiner
Press Release
November 6, 2009

Today, Representative Anthony Weiner (D – Brooklyn and Queens), a member of the House Energy and Commerce Health Subcommittee, released the following statement on his decision to withdraw his single payer amendment to H.R. 3962, the House health care reform bill:

“I have decided not to offer a single payer alternative to the health reform bill at this time. Given how fluid the negotiations are on the final push to get comprehensive health care reform that covers millions of Americans and contains costs through a public option, I became concerned that my amendment might undermine that important goal.”

“I am going to continue to press the case for health care reform in every venue I can. And I also will continue to press for a smarter, less-expensive, more-comprehensive alternative to the employer-based health insurance system we have today.”

“I’ve discussed the issue with Speaker Pelosi, Chairman Waxman, and agree with them that the health reform bill is so close it deserves every chance to gain a majority.”


Pelosi Statement on Congressman Anthony Weiner’s Single Payer Alternative

Speaker Nancy Pelosi
Press Release
November 6, 2009

Washington, D.C. — Speaker Nancy Pelosi issued the following statement today on Congressman Anthony Weiner’s single payer alternative:

“Within the next few days, the House will vote on the most comprehensive health care legislation in our history. Our bill will provide affordability to the middle class, security to our seniors, and responsibility to our children by not adding a dime to the deficit. While our bill contains unprecedented reforms, including an end to discrimination for pre-existing conditions and a prohibition on raising rates or dropping coverage if you become ill, our bill cannot include provisions some strongly advocated. The single payer alternative is one of those provisions that could not be included in H.R. 3962, but which has generated support within the Congress and throughout the country.

“Congressman Anthony Weiner has been a forceful and articulate advocate for the single payer approach and our legislation. His decision not to offer a single payer amendment during consideration of H.R. 3962 is a correct one, and helps advance the passage of important health reforms by this Congress. While single payer, like other popular proposals, is not included in the consensus bill we will vote on this week, Congressman Weiner has been a tireless and effective advocate for progress on health care, and his work has been a vital part of achieving health care reform.”


Chairman Waxman’s Statement on Rep. Weiner’s Single-Payer Amendment

Chairman Henry A. Waxman
Committee on Energy and Commerce
November 6, 2009

Today Chairman Henry A. Waxman released a statement in response to Rep. Anthony Weiner’s decision not to offer a single-payer amendment to the House Democratic health care legislation.

“Rep. Anthony Weiner has been one of the most tireless and effective advocates for health care reform. His decision not to offer his amendment on the floor was a difficult one for him, and for supporters of the measure. I believe Rep. Weiner’s choice will be enormously helpful in passing the health care reform package. His step is a correct and courageous one. I thank Rep. Weiner for it, and look forward to working with him closely. Rep. Weiner deserves a great deal of credit for helping to make quality, affordable health care more available to millions of Americans.”

Comment by Ida Hellander, M.D., Executive Director, Physicians for a National Health Program:

Next steps and interpretation –

1) The fact that single payer got so far along in the House is a testament to the strength of our single payer movement. The huge number of calls by single payer advocates in support of single payer and the Weiner amendment in recent days have been noted by several members of Congress.

2) It appears that nobody, particularly the President, expected our single payer option to be alive in the Congress for so long. As you know, they attempted to keep it “off the table” from the very beginning.

3) The President was directly involved in the decision to not hold a vote on the Weiner single payer amendment, and Weiner will be meeting with him later today. Stay tuned.

4) We need to increase pressure on the Congress and the White House for Medicare for All through lobbying, civil disobedience, media outreach, and grassroots organizing. Sen. Sanders will call for a vote on single payer in the Senate – this could come up anytime in the next month. Encourage your Senator to support the Sanders bill and also an amendment he will offer for a state single payer option. The California Nurses Association/NNOC has already started lobbying visits in the Senate in D.C.

5) We have been asked how to tell members to vote on the House bill. Our response is that the bill is “like aspirin for breast cancer.”

Harvard Professor William Hsiao on effective reform

Posted by on Thursday, Nov 5, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Health Care Abroad: Taiwan

An interview of William Hsiao, Ph.D., Professor of Economics at the Harvard School of Public Health
The New York Times
November 3, 2009

Q. What’s the most important lesson that Americans can learn from the Taiwanese example?

A. You can have universal coverage and good quality health care while still managing to control costs. But you have to have a single-payer system to do it.

William Hsiao, Ph.D.

There is no person more qualified to discuss health system design than William Hsiao (see the link above for his qualifications).

If you were to believe the hype that accompanied its release, you might think that it would be as important as Medicare and Social Security. The New York Times concluded that “This bill will take a long stride toward universal coverage while remaining fiscally responsible.” Nobel laureate economist Paul Krugman added: “The political environment is as favorable for reform as it’s likely to get. The legislation on the table isn’t perfect, but it’s as good as anyone could reasonably have expected.”

But this bill is not good enough to pass. It will not make a big enough difference in addressing the three main problems requiring reform–containing the spiraling costs of health care, providing universal access to affordable health care, and improving its quality. If we look at the provisions of this 1,990-page bill concerning just the first two of these three goals, we see that it will fail to deliver real reform.

After all of the political compromises along the way that have led to the introduction of the new bill (HR 3962), on the positive side we can say that it will introduce some limited reforms to the health insurance market, expand health insurance to some of the uninsured (primarily by expansion of Medicaid and by often-inadequate government subsidies to individuals and small employers for the purchase of private insurance); and help to address some other problems, such as the growing shortage of primary care providers.

But the negative side far outweighs the positive:

• Although supporters of the new House bill claim that it would expand coverage for as many as 30 million uninsured, we are actually likely to see an  increase in the number of uninsured in coming years for these kinds of  reasons—as costs keep going up, many Americans will be forced to drop  their present coverage because of inability to afford rapidly rising costs of  premiums, deductibles and co-payments; there is no guarantee that the  uninsured will be able to afford new private coverage (even with subsidies, which won’t kick in for another four years); and expansion of Medicaid will  not take place until 2013 (many states are already pushing back with  concerns that the their recession-strained budgets will not allow them to pay  their share in adding to their Medicaid programs, potentially leaving millions of the poorest Americans uninsured.

• There are no effective cost containment mechanisms built into the bill, either for the costs of health insurance or for health care itself. As it whines about weakening of the individual mandate that will likely limit some of its big increase in the insurance market, the health insurance industry is already warning that sharp premium increases will result. The most the bill will do is to require disclosure and review of premium increases, without any regulatory teeth. Although the bill would set up a Health Benefits Advisory Committee to recommend a minimal essential benefits package (with four tiers), insurance industry lobbyists will argue for the most minimal levels of coverage, and we can anticipate an exponential growth in underinsurance. Moreover, there are no price controls to be applied anywhere in the system, except perhaps in authorizing the government to negotiate drug prices with manufacturers. But that provision will almost certainly not clear the Senate, where we can expect even less concern for affordability and prices.

• Although the public option has been the target of intense controversy, it will play a negligible role in health care reform. The CBO has concluded that it would cover no more than 6 million Americans, just two percent of the population, in 2013, and will cost more than private programs, mostly due to adverse selection in attracting sicker individuals and its inability to set reimbursement rates for physicians and hospitals as is done by Medicare. Moreover, middle-income families may be required to spend 15 to 18 percent of their income on insurance premiums and co-payments.

• HR 3962 will not result in making health care more affordable, despite allocating some $605 billion over ten years for subsidies to low- and middle-income Americans to buy insurance on Exchanges. We can count on continued increases in the cost of health insurance as far as the eye can see, together with less actuarial value of coverage.

• Buried in the fine print of this monster bill are many provisions that will benefit corporate stakeholders in the medical industrial complex on the backs of patients and their families. These examples make the point:

• Although medical loss ratios (MLR) (the proportion of premium revenue actually spent on medical care) are specified at a minimum of 85 percent, this loophole has been added–”while making sure that such a change doesn’t further destabilize the current individual health insurance market.” By way of comparison, the Senate Commerce Committee has found that the average MLR for the largest insurers in the individual market is only 74 percent, with 26 percent of premium revenue going to marketing, administrative overhead and profits.

• Although the bill would create a much-needed Center for Comparative Effectiveness Research, it would have no say over reimbursement and coverage policies. As the bill says, it “contains protections to ensure that research findings are not construed to mandate coverage, reimbursement or other policies to any public or private payer.”

In sum, this $1.055 trillion plan over ten years will not fix the major problems of cost and affordable access to health care in our deteriorating system, will add new layers of bureaucracy and complexity to the present system, is not fiscally responsible, and is not sustainable.

What to do now? Rather than accept an unworkable bill that is politically  expedient, we would be better off to make a major course change. That vote could take place as early as tomorrow.

If that fails, shelving this bill would be the best option. Until a few days ago, I would have added that lawmakers should be pressed to retain the amendment proposed by Dennis Kucinich (D-Ohio) to allow states to experiment with single-payer plans, as a number of states would like to do (e.g. California, Colorado, Illinois, Maine, New Mexico, New York and Pennsylvania). Although that amendment had already been passed by a rare bipartisan vote of 27-19 in the House Education and Labor Committee, it has been stripped from the bill.

The best first option would be to call for a floor vote, as originally promised by the House Speaker Pelosi, for  the amendment proposed by Anthony Weiner (D-NY) to substitute HR 676, a single-payer proposal, for HR 3962. If that fails, shelving this bill would be the best option, but if that is not possible, lawmakers should be pressed to retain the amendment proposed by Dennis Kucinich (D-OH) to allow states to experiment with single-payer plans, as a number of states would like to do (eg. California, Colorado, Illinois, Maine, New Mexico, New York and Pennsylvania).

That amendment has already been passed by a rare bipartisan vote of 27-19 in the House Education and Labor Committee.  Whether a health care bill survives the end game in both chambers of Congress in this session is still up in the air. If a bill is finally enacted into law, however, it will be ineffective in remedying the big problems of cost and access to health care. We should be gearing up for an intense effort in 2010 to push for real health care reform–Medicare for All.

Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.” Buy John Geyman’s Books at:

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CBO on premiums and cost sharing of the House bill

Posted by on Wednesday, Nov 4, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Letter from CBO Director Douglas Elmendorf

Congressional Budget Office
November 2, 2009

This letter responds to questions about the subsidies that enrollees would receive for premiums and cost sharing and the amounts that they would have to pay, on average, if they purchased a relatively low cost plan in the new insurance exchanges to be established under H.R. 3962, the Affordable Health Care for America Act, as introduced in the House of Representatives on October 29, 2009.

The enclosed table focuses on enrollees who purchase a “reference” plan (the premiums for which equal the average of the three lowest-cost “basic” plans, as defined in the bill), because federal subsidies would be tied to that average. Such a plan would have an actuarial value of 70 percent, which represents the average share of costs for covered benefits that would be paid by the plan.

Although premiums under H.R. 3962 would vary by geographic area to reflect differences in average spending for health care and would also vary by age, the table shows the approximate national average for that lower-cost reference plan — about $5,300 for single policies and about $15,000 for family policies in 2016. Enrollees could purchase a more expensive plan or more extensive coverage for an additional, unsubsidized premium — and CBO anticipates that many enrollees would do that, so the average premiums actually paid in the exchanges would be higher (although average cost-sharing amounts could be lower than those shown in the table).

Estimate for “Reference Plan” in 2016 — Average of 3 Lowest-Cost Basic Plans:
Family Policy:
70% – Actuarial value
$15,000 – Average premium
$5,500 – Average cost sharing

One example – a family of four at a higher income level:

400-450% – Income relative to the federal poverty level
no cap – Premium cap as a share of income
$102,100 – Middle of income range
$15,000 – Enrollee premium in reference plan
0% – Premium subsidy (share of premium)
none – Average cost sharing subsidy
$5,500 – Average net cost sharing
$20,500 – Enrollee premium + average cost sharing
20% – Premium + cost sharing as a percent of income

Of the many flaws in the very expensive and highly inefficient model of health care reform that Congress has selected, one of the more important is the financial impact that it will have on middle- and upper-middle income individuals and families. Let’s look at the example of a family of four with a very good income: $102,100.

The premium ($15,000) and average cost sharing ($5,500) that that family would have to pay would leave them with a net income of $81,600. That is not bad, but it certainly falls short of the $100,000 plus income that no doubt the family believes they should have.

Also that family would likely want coverage beyond the average of the three lowest-cost basic plans. They would want coverage greater than an actuarial value of 70 percent, especially since employer-sponsored coverage now provides an average actuarial value of 80 percent. They would also want more protection should their out-of-pocket medical expenses exceed the $5,500 average net cost sharing. Even with caps on cost sharing, the family would still be responsible for non-benefit products and services and for often-unavoidable out-of-network health care. Take those costs out of the $81,600 balance and that one-hundred-thousand-dollar-income family is going to be very unhappy with this reform legislation.

Do you think that they know about this? Do you think that maybe we should tell them?

The Philly 13

Posted by on Wednesday, Nov 4, 2009

On October 30, thirteen brave people sat in front of the entrance of Independence Blue Cross (IBC), in order to demand that IBC change its practice of pretending to be a non profit, while spending millions lobbying against real health care reform. They were arrested for exercising their constitutional right to protest. A hundred more chanting protestors singing “We Shall Not Be Moved” circled in front of Independence Blue Cross, the largest insurer in the Delaware Valley. About half of those arrested were students active in the Student Healthcare Action Network. Among those arrested were Jeff M., an organizer with Healthcare NOW, Rhone F., an organizer with PDA, and Paula B. with Health Care for All Philadelphia. Their letter to Joe Frick, CEO of IBC said the following:

Dear Joseph Frick,

We recognize that Independence Blue Cross was founded with the social mission of providing affordable healthcare to citizens in the Philadelphia area. We know Independence Blue Cross is concerned about the 200,000 Philadelphians and 46 million Americans who cannot afford health insurance. We also know that you’re concerned about the rapidly rising costs of healthcare in this country.

We are concerned, however, with the fact that Independence Blue Cross continues to deny its members life-saving care and is currently funding efforts to kill meaningful healthcare reform in this country, which would bring more affordable healthcare to more people. You have done well at cloaking your efforts behind the slogan “get healthcare reform right,” but your scare tactics and accusations that even a public health care option will have “dangerous consequences” are not benefiting your policy-holders. You are using millions of dollars worth of our insurance premiums to spread that message, too.

The information is in, and it shows that the best option to insure all Americans and provide the best quality care is a single -payer universal healthcare plan. The time has come for Independence Blue Cross to stop blocking the meaningful reform that Americans need and to carry out its mission of serving the “public good”, not its own bottom line.

We are demanding, therefore, that you agree to the following:

1. Until the passage of either a nationwide or statewide single-payer healthcare system, Independence Blue Cross will agree to cover all doctor-ordered procedures and care.

2. IBC will immediately stop using our insurance premiums to fund efforts to quash meaningful reform, such as the fake grassroots (“astroturf”) organization

3. You will join us at a press conference in one week to announce IBC’s support for both state and national efforts to create a single-payer health insurance system.


Student Healthcare Action Network
Healthcare NOW!
Mobilization for Healthcare for All

I, Joseph Frick, in order to fulfill Independence Blue Cross’ mission to provide affordable healthcare to residents of the Philadelphia area, agree to the aboe demands. I will join you at a press conference in front of Independence Blue Cross offices one week from today to confirm that we have met your demands and to announce Independence Blue Cross’ support for a single-payer healthcare system.


__________________ (Frick never came down to sign this)

Today thousands more called Speaker Pelosi’s office demanding that the Kucinich and Weiner amendments be put forward for a vote as previously promised. Their office was apparently instructed to transfer all such calls to an answering machine. We should be appalled at this effort to dismiss single payer advocates. Short of single payer, this 1,990 page effort to reform health care will be indecipherable for the American public and will quickly become unaffordable. We will be trying to build a house on a crumbling foundation. It will not work and we will be back here again in four years asking what went wrong.

Drew Altman on Americans affording health care

Posted by on Tuesday, Nov 3, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Interviews with Washington’s power players

Drew Altman, President and CEO of the Henry J. Kaiser Family Foundation
The Washington Post
November 2, 2009

MS. ROMANO: In your view, what must a bill have in order to be a step forward in health care reform.

MR. ALTMAN: Well, you know, we’re having this debate because the American people, average working Americans, became really worried about and are having real problems just paying their health care bills, and that’s having a real impact also on their family budgets and their ability to pay for other things, pay their rent and mortgage or put a kid through college.

We’ve forgotten a little bit that that’s where this came from. That’s why health got traction again as a political issue.

So the main thing I actually want to see–us health care people tend to talk about this in terms of health care goals, access to care and the quality of care. The first thing I look for is, is this legislation actually responsible–responsive in a meaningful way to the meat-and-potatoes pocketbook problems that average Americans are having, paying for their health care which brought us this debate in the first place. That’s number one for me.


MS. ROMANO: With President Obama trying to cap the cost of these plans at $900 billion over ten years, does that make the discussion about subsidies very important?

MR. ALTMAN: It is a really important discussion, and one of the things that’s happened is, as so much of the debate lately has focused on this hot-button issue [of] the public option. Flying under the radar screen and not getting as much attention are these bread-and-butter consumer issues about will the policies be affordable for people who now have to buy health insurance coverage, are the subsidies high enough, is the coverage that people are going to get going to be adequate.

And I think, as we get to two bills and then one bill that the country can really focus on and that people in the media can really focus on, that issue of the affordability of the coverage will rise to the surface and will become a really big issue.


MR. ALTMAN: I think the public option issue has diverted attention from lots of other issues, and I think this issue of affordability will emerge as a big issue. And there’s a tradeoff as they design this legislation between keeping the overall sticker shock, the price tag of the legislation down and the generosity of the subsidies they can give to people and the comprehensiveness of the coverage that people get, how high–how big those deductibles will be that average middle-class families are going to be asked to pay.

And that’s a very big issue. It’s going to be a big issue not just for the people who are in these exchanges, who get these policies, but for the American people generally who look at this and say is this a fair deal, is this a good deal for people who now have to have health insurance coverage.

I think this is the sleeper issue still. This affordability issue.

And it’s hard to understand. They’re focused on the public option. They haven’t gotten to it yet. So this issue of affordability, I think, is a sleeper issue because it’s complicated, hard to understand how coverage works, what an actuarial value is, how the subsidies work at different income levels, and because they’re focused on the public option. Everyone is so focused on the public option right now, but I think as they get to one bill that everyone can put under a microscope, then this issue of the subsidies and the coverage will really rise to the surface, and we’ll have a much bigger debate about that.

And that’s the consumer issue. It’s the real meat-and-potatoes consumer issue in this legislation.


MS. Romano: Is there a way to hold private insurers accountable on costs other than a government option?

MR. ALTMAN: Well, you know, there are comprehensive reforms of the insurance industry in the legislation, but the one thing they didn’t do in this legislation which was proposed in the Clinton health reform plan, which as we all know failed, they did not propose this time around caps on the increases in insurance premiums. They didn’t say, “Your premiums can only go up two times inflation in the general economy.” That–those–that kind of price controls or regulation, they just didn’t think that would work this time, or they didn’t think it would fly. Anyway, it’s not in the legislation this time.

So, no, there aren’t–I mean, one of the characteristics of the legislation this time is there are not strong controls over the increases that can occur in premiums in the future.


MS. ROMANO: Health care costs are a huge burden on American businesses. Are there enough incentives in these different legislations to help the businessmen pay for this, pay for it for employees, or are we fast approaching a point where businesses will be no longer offering health insurance to employees?

MR. ALTMAN: Well, it’s a big problem in this. The reason we’ve seen a sort of slow drip-drip-drip of coverage out of the employment-based health care system is simply that business can’t pay the cost any longer.

I did a projection the other day that showed that if current trends continue, in 20 years the average cost of a family premium could be 30,000 bucks a year. So we’re not on a good trajectory.



MS. ROMANO: Do you see a time when the U.S. will ever drift towards a single-payer system?

MR. ALTMAN: You know, I don’t know for sure, but I certainly think it will be a long time, and I know the single-payer people, you know, don’t like to hear that because they believe so strongly in that approach, but we’re at a point in time now when the approach is favored by the two wings, an all-market approach–people get a voucher, and they shop for themselves–and a single-payer approach are not in the cards.

And so what we’re really looking at, if you view it through that lens, is we’re looking at some form of a centrist deal that brings together elements that the right likes and that the left likes and builds on the existing system. It’s a little bit messy, but that’s all that can fly right now in our political system.


MS. ROMANO: Is the U.S. obligated to provide every citizen with health insurance–health care–let me ask that again. Is the United States obligated to provide health care to all of its citizens?

MR. ALTMAN: The way I would answer that question is to say that it is certainly something that we should do. And I don’t know anybody–you know, right, left, or center–who doesn’t believe that at some level. The debate is about how we get there, and, unfortunately, that debate about how we get there has been a really bitter and difficult debate in our country. And the tough part of it is, if you scratch beneath the surface and look at the difficult part of it, it is fundamentally about redistributing wealth in our country; that, ultimately, it means, as some of us who have more, have to pay, you know, a little bit more, so that others who have less can have health care. You can slice it and dice it a million ways with this kind of tax or that kind of mandate, but, at the end of the day, that’s what’s involved, and we don’t do that too easily in our country, too happily, or too willingly.

Drew Altman is a very intelligent and very well informed advocate of a health care system that works well for all of us. His only handicap is that, as President and CEO of the Henry J. Kaiser Family Foundation, he must maintain his reputation as a highly credible but impartial voice on health care reform. That requires diligently negotiating his way through the minefield of Washington politics.

Setting ideology and politics aside, Altman makes it clear that wealth redistribution is absolutely essential if everyone is going to have the health care that they need. By far the simplest, most efficient, and most equitable method of doing that would be to enact a single payer system. But this is where ideology and politics enter.

How do you meld the ideology of single payer with the ideology of consumers shopping in a market of private health plans? After all, there’s that redistribution problem. The solution currently being advanced is to perpetuate the market of private health plans while superimposing government policies to achieve redistribution of wealth, without which it would be impossible to finance care for everyone.

The combination of private health plans and government policies requires a complex, difficult balancing act. Some of the variables that must be brought into balance include the package of benefits to be covered by the plans, the premiums to be charged for the plans, annual premium increases not limited by regulation, actuarial values of the plans, eligibility for the insurance exchanges, the value of the vouchers used to purchase the plans, the eligibility for the vouchers as related to income or as to wealth as some suggest, the size of the deductibles, copayments and coinsurance, financial support for out-of-pocket expenses, caps on yearly or life-time spending, payment for non-covered or out-of-network products and services, the variable contribution rates for employers, caps on federal and state budgets that limit the level of government funding, extensive corrections in the Medicare program, eligibility for and financing of taxpayer-financed Medicaid programs, financing the complex administrative services for a program in constant flux because of ever-changing eligibility status and contribution levels, balancing income taxes, payroll taxes, possibly VAT taxes, payroll deductions, taxes on health care products, taxes on insurance plans… (continue with your own additions to this list).

Once you have the full list, just try changing any variable and see what happens to the rest of the variables. What will be the most shocking is to observe what happens to middle-income Americans. They will be clobbered by health care costs!

The primary reason for these complex adjustments is that health care is now so expensive that redistribution is essential if everyone is to have the care they need. The private insurance market by itself is totally incapable engineering redistribution. Drew Altman says that this would be “a little bit messy,” and that, at the end of the day, we won’t do it “too easily, too happily, or too willingly.” But that’s as far as Drew Altman’s job description will allow him to go.

We are not so constrained. Soon we will have “one bill that the country can really focus on and that people in the media can really focus on; that issue of the affordability of the coverage will rise to the surface.”

We can take Drew Altman’s astute observations on “the meat-and-potatoes pocketbook problems that average Americans are having in paying for their health care,” and we can run with it. We know how to fix it, even if he can’t publicly endorse our model of an improved Medicare for all. When we succeed, Drew Altman certainly will be at least a little bit smug. Let’s go!

Expanding Medicaid to save money

Posted by on Monday, Nov 2, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Changing Numbers Make Meaning Even More Elusive

By David M. Herszenhorn
The New York Times
November 1, 2009

Once Ms. Pelosi realized that she could not get a robust public option, she needed another way to reduce the bill’s cost. The answer was a wider expansion of Medicaid, the state-federal insurance for the poor.

In just one of the counterintuitive concepts in the health care debate, enrolling more people in Medicaid saves money because it is cheaper than subsidizing private insurance, and because states share the cost.

The House bill would increase total Medicaid costs for states by $34 billion. States, of course, object to such added expenses.

The version of the House health care reform bill released last week would further expand Medicaid eligibility to individuals with incomes up to 150 percent of the federal poverty level. This expansion was prompted by the self-imposed requirement to avoid any deficit spending as a result of this legislation. It will cost the government less to enroll these individuals in Medicaid than it would cost to provide them with subsidies to purchase private health plans.

Some implications of this policy:

* Medicaid benefits are more comprehensive than private plans and cost sharing is negligible, unlike private plans. Medicaid patients have more care covered with much less in out-of-pocket costs.

* Taxpayers will be paying less to provide these individuals with Medicaid than they would have paid in subsidies to purchase private plans. Private plans are more expensive even though they provide less coverage.

* As a welfare program, representing a population without an audible political voice, Medicaid is chronically underfunded.

* Inadequate reimbursement rates due to inadequate funds results in a lack of willing providers. Too many physicians are not willing to accept the losses under this program. This lack of providers impairs access to care.

* Many states are struggling with budgets burdened by massive Medicaid spending. Although this expansion would use federal funds initially, some of the financing burden would be shifted to the states even though they do not have the budget flexibility of the federal government.

On paper, Medicaid looks like a great program. It provides a generous benefit package for lower-income individuals who cannot afford to purchase private health plans. In reality, most Medicaid patients do not have the same access to essential specialized services that wealthier privately insured individuals do, and access to even basic services is often compromised.

Expanding the Medicaid program further locks in a tiered health care system, effectively providing less for the least amongst us. In health care, that’s simply not acceptable.

By Iyah Romm, Sylvia Thompson, MD and Elizabeth Wiley, JD, MPH

I want to cover everybody. Now, the truth is that, unless you have a single-payer system, in which everybody is automatically covered, then you’re probably not going to reach every single individual. ~ President Barack Obama, July 22, 2009

As future physicians, ensuring that every single one of our patients has unrestricted access to health care is a core tenet of our professionalism. President Obama has affirmed what many of us know to be true – a single-payer system is the only responsible solution to our health care crisis. The vast majority of our seniors are satisfied with Medicare; in fact, many patients anxiously await Medicare eligibility because of the security and stability provided by the program’s guarantee of coverage and access. Labor unions and advocacy organizations across the United States support a single payer system as do the majority of health care providers. These groups – these constituencies – recognize that single payer is the best system in which to guarantee quality, affordable, health care for all.

On July 31, 2009, Representative Anthony Weiner (D-NY) introduced an amendment in the House Energy & Commerce Committee to replace key provisions in the House health reform bill with language modeled after HR 676, the Expanded and Improved Medicare for All Act. House Speaker Nancy Pelosi (D-CA) guaranteed a floor vote on single payer if Rep. Weiner withdrew his amendment. Under good faith, Rep. Weiner assented. Now, Speaker Pelosi is reneging on her promise not only to Rep. Weiner, but to the American people, many of whom believe that we need to have a true debate on the merits of a single-payer health care system. We write today calling for an end to these games. Our legislators must stop politicking with the most valuable resource available to them – the lives of our patients, their constituents.

In the long history of single payer advocacy, there has never been such a momentous time – never have Americans had the opportunity to hold their representatives accountable to the people on this issue – rather than to the powerful lobbies that pervade the beltway. According to the Kaiser Family Foundation, nearly one in two Americans support a system of publicly funded, privately delivered, Medicare for all – will the floor vote reflect this statistic? We will only know if Speaker Pelosi upholds her promise.

The American people should be able to trust members of Congress to stand by their promises – both to them and to each other. In the health care debate, the needs of average Americans must come before special interests and politics. Our friends, family, and patients deserve to a true, honest debate. Denying that chance through lies and broken promises is an anti-democratic betrayal of trust that will not easily be forgotten – now or at the polls in November. The Weiner amendment presents a historic opportunity for members of Congress to document their support for single-payer national health insurance as the best way to solve the U.S. healthcare crisis and provide a vote that Members can proudly stand by when approached by constituents.

We see everyday how budget shortfalls result in staff reductions that ultimately threaten the quality and availability of care. Single payer would provide universal and comprehensive coverage for all medically necessary services. Unamended, HR 3962 (formerly HR3200) would leave millions uninsured or with skimpy coverage. Single payer would allow patients free choice of doctor and hospital. Under HR 3962, insurance companies would continue to deny care and restrict access to providers. Single payer would pay for itself by eliminating $400 billion in insurance company administrative waste and redirecting these savings to patient care. HR 3962 would require $1 trillion in new revenue over the next decade. Single payer would establish proven and effective cost-containing mechanisms to ensure that benefits are sustainable over the long run. HR 3962 lacks effective cost control measures by maintaining the primacy of the private insurers.

The private insurance industry has had eight decades to lead change, to shift from a world predicated upon a race to the bottom-line to a culture of innovation and care. But their time has passed. Speaker Pelosi must offer the leadership necessary to truly reform our system and to address one of our greatest moral failures of the last fifty years. Only a single payer system can provide the change President Obama has championed, the change we need – simplifying payment, eliminating unnecessary bureaucracy, and investing the subsequent savings into a solitary goal, providing care to all. The math is simple, the morality pure, and the passion of single payer advocates indefatigable. As future physicians, this is the type of system in which we aspire to practice medicine.

Iyah Romm, Sylvia Thompson, MD and Elizabeth Wiley, JD, MPH are physicians-in-training and PNHP members as well as national leaders in the American Medical Student Association (AMSA).

By Kip Sullivan, JD

Executive summary

Both the Senate and House versions of the proposed “public option” require that corporations with expertise in health insurance “administer” the “option.” This fact received no attention until October 24 when the Washington Post reported that the “option” would “likely” be run by insurance companies. Several bloggers attempted to assure readers that this news was nothing to be concerned about. They asserted that Medicare has always contracted with insurance companies to process claims, and then leaped to the conclusion that the role of insurance companies within the “option” will be no more significant than it is within Medicare.

But this conclusion is clearly wrong if the Senate version of the “option” becomes law, and almost certainly wrong if the House version becomes law. This conclusion rests on the widespread belief that the “option” will “look like Medicare,” which is not accurate. The most important differences between Medicare and the “option” are size and the environment within which the programs will function. While Medicare enrolls 15 percent of the population, the “option” is projected to enroll somewhere between zero and 2 percent. While Medicare is a single-payer system, the “option” will function within a multiple-payer environment.

These two differences, plus provisions in the Democrats’ legislation authorizing the federal government to hire private corporations to administer the “option,” create a high risk that insurance companies and other types of corporations will play a role in the “option” that greatly exceeds the limited role they play in the traditional Medicare program. Private-sector firms will probably play a role within the “option” that closely resembles the role that defense contractors play in the production of weapons for the Pentagon. Just as Northrop Grumman, for example, carries out all tasks necessary to create a fighter plane, so private corporations (not public employees) will carry out all tasks necessary to create the “option” health insurance programs. Carrying out virtually all of the tasks necessary to establish and maintain “option” health insurance plans is obviously very different from, and more significant than, merely processing claims.

To comprehend the more dominant role insurance companies will almost certainly play within the “option” we must first disabuse ourselves of the myth that the “option” will “look like Medicare.” Although leaders of the “option” movement have vigorously promoted that claim, the claim has been demonstrably false since at least June when Democrats introduced legislation that would create tiny “option” programs that would, according to Congressional Budget Office estimates, insure no more than 10 million Americans.

Once we have determined that the “option” will be tiny, we must then ask whether a tiny “option” can be implemented as easily as Medicare was in 1966. Using just our commonsense and a rudimentary knowledge of the health insurance industry, it becomes obvious the answer is, No, a tiny “option” cannot be implemented as quickly and easily as Medicare was. Unlike Medicare, which was implemented at the national level using a few relatively inexpensive methods (such as press conferences and a public education campaign), the “option” will have to be implemented on a market-by-market basis. The “option” program will have to create one “option” program or plan for the California Bay Area market, another for the upstate New York market, and so on.

Of course, stating that the “option” will consist of numerous local plans and will, therefore, be harder to implement than Medicare was, sheds no light on whether public employees or private corporations will create and run those plans. For information on that issue, we must turn to the Democrats’ legislation. According to bills written by the Senate Health, Education, Labor and Pensions (HELP) Committee and by the House leadership (HR 3962), the Secretary of Health and Human Services will be authorized to contract with corporations “for the purpose of performing administrative functions … with respect to the public health insurance option” (as HR 3962 puts it; the HELP Committee’s bill uses nearly identical language). How we interpret the phrase “administrative functions” depends on our understanding of what has to be done to create the “option” program.

To sum up: The tasks required to implement a small “option” are quite different from the tasks required to implement Medicare; the Democrats’ legislation indicates these tasks will be carried out by insurance companies and corporations with similar expertise. When we piece these facts together, we must conclude that private-sector corporations will very likely play a much greater role in the “public option” than they do in Medicare.

Newsflash: Corporations will administer the “option”

On Saturday, October 24, the Washington Post published an article which said in passing that the “public option” will be run by insurance companies. “The public option would effectively be just another insurance plan offered on the open market,” said the article. “It would likely be administered by a private insurance provider, charging premiums and copayments like any other policy.” To my knowledge, that is the first time any media outlet or blog, with the exception of the blog maintained by Physicians for a National Health Program, has warned the public that the “public option” will be run by private corporations, not public employees.

Within hours of this article’s publication, blogger John Byrne at “the raw story” reported that insurance companies will run the “option.” Byrne quoted the Washington Post article and three paragraphs from one of two papers I wrote on this issue. Byrne’s piece generated a minor ruckus in the liberal blogosphere. By Sunday October 25, a half dozen other blogs had posted it, and hundreds of visitors to these blogs had posted comments.

The great majority of the comments expressed outrage over the fact that the “public option” won’t be a publicly run program. But a few sought to minimize the importance of Byrne’s article by assuring readers that Medicare has always had contracts with insurance companies to process claims. For these people, this fact allowed them to jump to the conclusion that the role of the insurance industry in the “public option” would be no more significant than its role in Medicare – insurance companies would be mere claims processors. According to these people, insurance companies wouldn’t create the “option” plans and would not run them. Here are two examples of those comments:

Calm down everyone – let’s unknot those drawers. Private insurance companies have been running the Medicare system for years and years. They are called fiscal Intermediaries. …Please let’s all understand the way Medicare works before going off.


…. Medicare is already administered through private insurance companies and it works very well. Those companies already have the systems set up for tracking and billing and they do the Medicare administration for a minimal cost.

On Monday, October 26, Susie Madrak posted a comment on “Crooks and Liars” in which she described Byrne’s article as “news that really isn’t such a big deal.” Madrak said the insurance companies that get contracts to run the “option” will be “third party administrators” whose only job will be to process claims for the “option.”

Seduced by the “option” campaign’s misinformation

These comments are mistaken. Their authors have been seduced by the “option” campaign’s constant comparison of the “option” to Medicare. The comparison to Medicare leads the unsuspecting to think the “option” will be a uniform program, administered directly by public employees, like the traditional Medicare program, that is, a program with no insurance companies parked between the federal government and the doctors and hospitals that treat Medicare beneficiaries. It leads the unsuspecting to think that public employees will create and directly administer the “option” and that the role of corporations in the “option” will be limited to the role they play in the traditional Medicare program, which is to process claims.

This excerpt from an April 2009 paper entitled “Healthy Competition” by Jacob Hacker, the author of the modern version of the “public option,” illustrates how aggressively contemporary “option” advocates sell the notion that the “option” will resemble Medicare. Notice that Hacker states clearly that the “option” will not contract with “private plans” and “nonprofit insurers.”

In most discussions of the public plan [i.e., the “option”], the phrase “Medicare-like” is used to describe the new plan…. When people say “Medicare-like,” … they are referring to the traditional portion of Medicare that directly pays doctors and hospitals for care delivered to elderly and disabled Americans. A “Medicare-like” plan is a public health insurance plan that pays providers to deliver care, rather than a government contract with private plans to provide insurance. More specifically, the new public plan should be national (with the same basic terms nationwide for patients and providers), governmental (a true public health insurance plan, not, say, a nonprofit insurer operating under federal charter), comprehensive (providing defined benefits on the same basic administrative platform), and built on Medicare’s infrastructure. … [P]lan offerings and pricing can and should differ regionally, but the public health insurance plan should be a single national plan with its own risk pool separate from Medicare’s that is available with the same benefits and coverage terms in all parts of the nation. (page 7)

But Hacker’s description of the “option” bears no resemblance to the “option” in either the Senate Health, Education, Labor and Pensions (HELP) Committee or the House bill (it used to be HR 3200, now it is HR 3962). The “options” in these bills will not resemble the traditional Medicare program but will in fact consist of numerous insurance programs (or plans) functioning at the level of individual insurance markets, that is, at the level of states and regions within states. Once you understand this, you begin to grasp what it means to say that private corporations will “administer” the “option” program. You begin to comprehend the possibility that the multiple local “option” programs might actually be owned by, or administered by, privately owned corporations, possibly health insurance companies. You begin to understand, in short, that the role of corporations in the “option” could be much more substantial than that of a mere claims processor.

To offer an analogy, the role of private corporations in the “option” will probably resemble the role that Northrop Grumman, Boeing and other defense contractors play in the production of fighter planes for the Pentagon. Through contracts with these corporations, the Pentagon sets the terms under which contractors are supposed to produce the planes, but the actual production of the planes is done entirely by private corporations. If and when the “option” program as it is now described in legislation pending in Congress is implemented, private-sector control in that program will almost certainly resemble the private-sector control of the production of military hardware for the Pentagon far more than it will resemble the level of private-sector involvement in the traditional Medicare program.

Review of the “public option” bait-and-switch campaign

Prior to last spring, the possibility that private corporations might play a dominant role in the “option” was not obvious. But some time during the spring, and by no later than June, it did become obvious, at least to those with eyes to see. Last spring Democrats took the large original “option” proposal and shrank it down to a tiny program.

As I have explained elsewhere, the original version of the “option” proposed by Hacker and endorsed by advocates of the “option” was huge. Hacker and others predicted it would enroll 130 million non-elderly Americans, or about half of the non-elderly population. It was reasonable to predict that a public program of that size would either possess many of the features of Medicare, including its uniform benefits, or would soon acquire those features as it grew bigger at the expense of the insurance industry. It was reasonable to predict it would grow bigger because its huge size would give it the advantage of lower overhead and lower provider costs and, therefore, lower premiums.

But after the Democrats released their draft legislation in June, it was apparent they had no intention of enacting an “option” program as large as the one Hacker originally proposed. The Democrats’ bills eliminated all but one of the features of Hacker’s original version of the “option” that would have guaranteed enormous size. The features the Democrats struck from Hacker’s original model included the requirements that the “option” be open to all non-elderly Americans, that the “option” automatically enroll all uninsured people and all Medicaid recipients prior to the commencement of operations, and that only enrollees in the “option” get subsidies to offset the cost of the “option’s” premiums.

The initial reports by the Congressional Budget Office released in July made it even more obvious how badly the Democrats had shrunk the “option.” CBO estimated the Senate HELP Committee’s version of the “option” would enroll approximately zero people while the HR 3200 version would enroll roughly 10 million people. CBO is now saying
the new House version of HR 3200 (HR 3962) released by Speaker Nancy Pelosi on October 29 will enroll just 6 million people.

By no later than July, then, representatives of the “option” campaign had no excuses for comparing the “option” to the traditional Medicare program. That didn’t stop them from doing so, however. Hence the great confusion among members of the public, the media, pollsters, and even members of Congress about what the Democrats’ proposed “option” is and, therefore, the role corporations will play in its creation and administration.

When we knew for sure the “option” was going to be tiny, commonsense and a rudimentary knowledge of the health insurance industry should have told us the “option” would not be a uniform program like the traditional Medicare program but would instead be broken up into dozens or hundreds of individual programs or insurance companies, each serving a particular health insurance market, for example, California’s Bay Area or upstate New York. Commonsense would not necessarily have told us that these multiple insurance programs or companies would be run by private corporations. They could just as easily (and for less money) be run by the federal government.

For information on who would run these local programs, we had to consult the “option” language in the Democrats’ legislation. It is there we find evidence that these programs will be run by private firms. I have reviewed the murky “option” sections of the Senate bill and House bill in previous papers. 

In the remainder of this paper I will focus on why our commonsense tells us that a very small “option” has to be a balkanized program consisting of multiple local programs. I believe it is the failure of many people to comprehend this fact that leads some of them to misinterpret the language in the Democrats’ bills authorizing the federal government to outsource “administrative functions” necessary to run the “option.”

What commonsense and a little knowledge of the industry tells us

In this section I want to discuss the Democrats’ proposed “option” as if we know only three things about it: (1) it must compete with private health insurance companies to sell health insurance to the non-elderly; (2) unlike the Medicare program, which was given 100 percent of the elderly to insure and thus began with a huge pre-enrolled pool of people, the “option” will instead be guaranteed zero enrollees on its first day of operations and will have to compete with the insurance industry for every customer it eventually enrolls; and (3) the “option” is expected to perform on a “level playing field,” that is, it is given no advantages over Aetna and its other private-sector competitors (such as subsidies to its enrollees to purchase the “option’s” product that people who buy insurance company policies don’t get).

Commonsense tells us that this version of the “option” will not resemble Medicare, either in the manner in which it must be implemented or in its final structure. If the “option” really were like Medicare and was given 100 percent of all Americans in a large age bracket, say all kids up to age 19 or all adults age 50 to 64, we would have every reason to predict the “option” would spring up as quickly as Medicare did and flourish as Medicare has. We would also have every reason to think the establishment of such an “option” would be relatively easy. The primary task that would need to be carried out by such an “option” would be to announce its existence with press conferences and an advertising campaign like the one that preceded the establishment of Medicare Part D (the drug program). These activities, easily executed out of one office in Washington DC, would, largely by themselves, achieve nearly universal enrollment of the eligible population and educate doctors and hospitals about how to participate in the new program.

Because this hypothetical version of the “option” would quickly enroll virtually all of the eligible population (Medicare accomplished that task within 11 months), it would have little or no problem inducing clinics and hospitals everywhere to accept “option”-insured patients even if it paid providers at rates below those paid by the insurance industry. It would have little or no trouble because very few providers would want to turn away so many patients and so much revenue. Commonsense tells us this would be true across the country (not just in some parts of the country) because the distribution of any given age bracket is roughly the same across the country.

Medicare’s history confirms this commonsense analysis. No law requires doctors and hospitals to accept Medicare patients, and yet virtually all doctors and hospitals have accepted Medicare patients routinely since Medicare began operations on July 1, 1966 even though Medicare has paid providers 20 percent less, on average, than the insurance industry has (the actual difference between Medicare and insurance industry reimbursement rates has varied over time and by region).

On the other hand, commonsense suggests a very different outcome if the “option” starts out as a program separate from Medicare and is guaranteed none or few of the advantages that Hacker specified for his original version of the “option,” including a large enrollment prior to the first day of operations. Commonsense tells us that if the “option” is instead forced to begin operations without a single enrollee, and must compete on a level playing field with existing insurance companies to recruit whatever enrollees it eventually does get, the “option’s” growth pattern will be quite different from Medicare’s.

And here we come to my main point: The major difference between an “option” that really does resemble Medicare and the little one proposed by Democrats is that the little Democratic “option” can’t be rolled out all at once at the national level. Rather, it must be implemented at the local level market by market – in the Bay Area market, in the upstate New York market, in the Chicago market, in the Iron Range-Duluth market, in the Fort Worth-Dallas market, and so on.

Small size dictates market-by-market implementation of the “option” program

A small “option” must be implemented market by market because wholesale activities at the national level – like press conferences and a public education campaign – no longer accomplish, by themselves, the two fundamental tasks that any successful insurance program must accomplish – the enrollment of a sufficient number of people, and achieving some assurance (formal or informal) that a sufficient number of providers are ready and willing to treat those people. For the tiny “option” promoted by the Democrats, those tasks can be accomplished, if at all, by a work plan that (1) goes beyond mere press conferences and advertising that is (2) conducted at the local level.

In short, those who must implement the Democrats’ tiny “option” will have to behave as if they were executives of an insurance company seeking to break into markets in which the company has no presence. However, unlike insurance company executives, “option” administrators won’t have the luxury of merely buying an existing insurance company in the target market. (Insurance companies never or rarely create insurance companies from scratch any more but instead buy their way into new markets. That fact indicates how difficult it is going to be for the “option” to establish itself in any market in the US.)

Once we accept the fact that the Democrats’ “option” will have to be built market by market, an obvious question arises: Won’t the “option” program or insurance company we build in one market differ in important ways from the ones we build in other markets? The answer to this question is, Yes, the “options” could vary by premium levels, benefits covered, level of out-of-pocket payments (this will be true even if the final “option” legislation sets minimum benefit and out-of-pocket levels), degree to which patient choice of provider is limited, or all of the above.

For those who aren’t familiar with the insurance industry, let me elaborate briefly. Health care markets, and therefore health insurance markets, are local. With the exception of prescription drugs and medical equipment, the great majority of medical expenditures are for services provided by health care professionals to people who live near them, that is, within their market area. The fact that most health insurance companies are multi-state or national doesn’t change the fact that the success of any given insurance company depends primarily on how it performs in the local markets in which it attempts to compete. Since at least the advent of managed care, the performance of insurance companies in a particular market has depended first and foremost on its size.

The reason insurance companies do not attempt to penetrate all markets is that there are barriers to market entry that are expensive to overcome and, in some markets, impossible to overcome. One of the most important market-entry barriers, possibly the most important, is the level of concentration within the insurance market. A market in which, for example, two insurance companies insure 80 percent of the population will, other things being equal, be harder to break into than a market in which the largest two insurance companies insure only 20 percent of the population. The level of concentration within the clinic and hospital sectors will also have some bearing on how difficult market entry will be.

A third important factor affecting the ease of market entry is the extent to which managed care has taken over the market. In markets where managed care practices are widely used, insurers typically limit patient choice of provider. Insurance companies do this because it allows them to funnel a large number of patients to relatively few providers, and this in turn augments their power to extract discounts from providers and to induce providers to cooperate with the insurance company’s efforts to deny services to patients. Both of these advantages – paying providers less and paying for fewer services – obviously help the insurer keep its premiums down.

Markets differ in the strength of market-entry barriers. In markets where

• one or two insurers insure the majority of the people who live in that market and
• where those insurers impose restrictions on patient choice of provider and, therefore,
• have succeeded in pushing their provider rates way below those of other insurers and
• have induced their providers to deny care at higher rates than smaller insurers have –

in those markets, establishing a new insurance company that can quickly get its premiums down near or below those of the dominant insurers is very, very difficult. On the other hand, in markets where, say, 20 insurance companies each enroll 5 percent of the population and those insurers make limited use of managed-care tactics, entry and long-term survival by new competitors is less difficult.

To sum up: If we know only that the proposed “option” (1) is expected to compete with insurance companies, (2) will be small, and (3) won’t be given advantages that insurers don’t get, we can predict the “option” will have to be built market by market. We can predict, conversely, that such an “option” cannot be implemented with the simpler and less expensive national-level activities that would suffice to implement a large “option” that truly did resemble Medicare. Exactly how small the “option” has to be before we can predict it must be implemented market by market is not clear. But it seems safe to say that the little zero-to-six-million-enrollee “option” proposed by the Democrats falls far below the critical mass required for a publicly financed health insurance program to be implemented with the relatively simple tools with which Medicare was implemented.

Finally, if we reach the conclusion that the Democrats’ “option” must be implemented market by market, then we must also reach the conclusion that the locally implemented “options” will look different from one another. Why? Because the market-entry barriers they will have to overcome will differ from market to market. Such an “option” will be “national” only in the sense that the federal government will be financing the attempt by the “option” program to break into every market in the US, and in the sense that the federal government will set some minimum criteria (such as minimum benefit levels) that “option” programs must meet in each market.

Option advocates offer no information on who will create and run the “options”

Reaching the conclusion that the “option” program will have to be implemented market by market does not necessarily mean individual local “option” programs will be created by or run by private firms. One could imagine Congress passing a law that requires “option” programs to be created and run by public employees.

To shed some light on this issue, it would be helpful if we could find discussions about the implementation of the “option” in documents prepared by “option” advocates, by the staff of the Democrats who wrote the “reform” bills, or by independent consultants who reviewed the “option” proposal. But, amazingly, the available documents contain not a word about how the “option” will be created. The following documents about the “option” say nothing at all about how “option” plans will be established:

* Jacob Hacker’s 2001, 2007, and 2009 papers describing the “option”;
* All three reports on Hacker’s version of the “option” by the Lewin Group (the first two of which Hacker and his allies endorsed);
* Press releases and other documents about the “option” prepared by representatives of Health Care for America Now and of the Congressional Progressive Caucus;
* All five reports by the Congressional Budget Office to members of Congress about the impact of the “option” on the uninsured rate and on federal spending issued between July and September as well as CBO’s latest (October 29) report on the “option” in the House bill.

On October 27, I attempted to induce Jason Rosenbaum, a blogger for HCAN, to explain how the Democrats’ “option” would be implemented. I posted a question to Rosenbaum on an article he wrote for the Firedoglake Website in which he called Sen. Reid’s announcement the previous day (that the Senate version of the “reform” bill would contain an “option”) “a huge victory.” My question, which is presented in an appendix to this post, laid out my best guess as to how an “option” plan could come into existence plus several questions about aspects of my scenario. Rosenbaum declined to discuss my question. “Sorry Kip, not interested,” was the extent of his reply.

Divining the intention of the authors of the Democrats’ legislation

Thus, the only documents available to the public at this date that shed light on the extent to which private corporations will create and run the “option” program are the Democrats’ “reform” bills – the Senate HELP Committee bill and HR 3200, now HR 3962. As I have noted in previously posted papers, both bills clearly authorize the Secretary of the Department of Health and Human Services (the official in charge of implementing the “option” in both bills) to hire private-sector insurance companies and other types of corporations “for the purpose of performing administrative functions … with respect to the public health insurance option” (as HR 3962 puts it at page 212; the HELP Committee bill uses identical language but substitutes “with respect to the community health insurance option”). Both bills state that these “administrative functions” include at minimum the claims-processing functions now carried out by insurance companies for Medicare. Both bills, especially the Senate bill, clearly imply that the administrative functions that will need to be carried out to create the “option” will go way beyond mere claims processing. However, neither bill explains what these non-claims-processing tasks will be.

In my view it is reasonable to infer that the non-claims-processing functions will be all those tasks necessary to create and run “option” programs in every market in the US. I said above that the Senate HELP Committee bill is especially clear about this. That’s because it not only explicitly acknowledges that the “option” will consist of numerous “community option” programs, but because it limits the use of the start-up funds to loans to the “contracting administrators” (the Senate HELP Committee’s name for the corporations the Secretary may contract with). There is, in other words, no language in the “option” section of the Senate HELP bill that gives the Secretary money to hire more public employees to carry out the task of creating “option” insurance programs. The Secretary’s only choice is to outsource all the tasks necessary to create “option” programs market by market to private sector corporations, most of which will probably be insurance companies.


Using our commonsense and a few basic bits of information about the Democrats’ “option,” we can deduce that the “option” will not be uniform like Medicare, but will be a smorgasbord of local plans. When we consult the Democrats’ legislation, it becomes apparent – in the case of the Senate bill, obvious – that the “option” will be created and possibly run by insurance companies and other corporations.

Once we establish that the “option” will consist of multiple local plans, then it becomes obvious the contracting administrators will have to set those up. What’s not obvious, but what seems inevitable, is that (a) the contracting administrators will hire non-public-employees to staff the local plans and (b) the contracting administrators will either eventually retire from the scene and leave those plans in private hands (in which case we can say the local “options” are privately owned and run) or the contracting administrators will continue to play some ownership or supervisory role indefinitely (in which case it would be accurate to say the contracting administrators not only created the local “options” but ran them thereafter).

Thanks in large part to the bait-and-switch tactic employed by the leaders of the “public option” movement, the high probability that the “option” will be a balkanized program created and run by insurance companies is not obvious to the public. The constant description of the “option” as “like Medicare” and “available to all Americans” has created widespread confusion about every aspect of the “option,” including how big it will be, whether it will be uniform like Medicare or balkanized into dozens or hundreds of local programs, and who will create it. Given this confusion, I definitely understand why some people thought Byrne’s article overstated the role insurance companies will play in the “option.” But that doesn’t excuse them. The movement for universal health insurance does not need ditto-heads. We need well informed people capable of playing a role in improving, not diminishing, public understanding of the Democrats’ “reform” legislation.

I want to stress that the issue of whether the Democrats’ tiny “option” is run by public employees or private corporations is secondary to the question of whether the “option” will work as advertised, in particular, whether it will be big enough, efficient enough, and sufficiently immune to adverse selection to seize substantial market share from the insurance industry and force its premiums down. The important issue is the impact the small size of the Democrats’ option will have on its ability to keep its administrative costs and provider reimbursement rates down. The use of private firms to create the numerous “community insurance option” programs will probably add to the total administrative cost of setting up the “option” program, but those additional costs pale in comparison to the higher administrative costs created by the need to build the “option” program on a retail basis, that is, market by market, rather than on a wholesale basis.

Most importantly, if the Democrats’ feeble “option” is used as a fig leaf by liberal members of Congress to throw hundreds of billions of dollars per decade at the insurance industry, and if the “option” fails to have any effect on the insurance industry, serious damage will be inflicted on Americans, both as patients and as premium- and tax-payers. Those who wish to alleviate human suffering in all its forms will care little whether the “option” failed under the guidance of public employees or insurance companies.

Nevertheless, this issue of whether corporations will play a significant role in the “option” is an important one because truthful reporting about it helps educate Americans, including those Americans who hold seats in Congress, about what the “option” is and isn’t. Right now the Democrats’ “option” looks like a tiny little program that will hire insurance companies to create little privately run insurance companies from scratch on a market by market basis. It is extremely unlikely that if pollsters asked Americans what they thought of this version of the “option” that a majority would say they like it. It’s hard to believe a majority of the membership of Congress would vote for it.


My question for HCAN blogger Jason Rosenbaum, posted October 27, 2009 on Firedoglake’s blog:

Could you walk us through the process by which the Department of Health and Human Services will set up an “option” plan in any given market, say Boston, under the Senate health bill, HR 3200, or HCAN’s blueprint? Here’s the scenario I believe will occur under both the Senate HELP bill and HR 3200 assuming the “option” actually survives.

* Beginning in 2013, the Secretary of HHS contracts with a “contracting administrator,” that is, a corporation such as Blue Cross Blue Shield, to set up an “option” plan in Boston. The Secretary also loans Blue Cross several hundred million dollars to carry out all the tasks necessary to set up an “option” plan.

* Blue Cross then hires 80-100 people to create an insurance company to serve Boston. These people do the things you’d expect people to do to create a new insurance company, including making cold calls on clinics and hospitals to see if they’d be interested in accepting “option”-insured patients at Medicare rates plus 5% (or about 15% below the insurance industry average).

Question: Do you anticipate that Blue Cross will at some point ask clinics and hospitals to sign contracts with Blue Cross indicating their commitment to be part of the Boston “option” network? Or will contracts be unnecessary?

* After six months of making numerous cold calls, Blue Cross succeeds somehow in inducing a sufficient number of clinics and hospitals to agree to accept “option” enrollees. Now Blue Cross incorporates the Boston Public Option Plan (BPOP) and hires 80 people to staff BPOP.

Question: Does Blue Cross exit the scene now, or do you anticipate Blue Cross will continue to serve as an advisor to BPOP? Obviously, Blue Cross, if it does retire from the project, has to leave in place a contract with BPOP that at minimum ensures BPOP will repay the loan that Blue Cross got from the Secretary of HHS.

* BPOP/Blue Cross now begins advertising heavily and making cold calls on employers seeking to induce tens of thousands of Boston residents to pay their premiums to BPOP in the event that these people are eligible to shop in the MA exchange.

Question: How many people will have to enroll in BPOP in order for BPOP to have sufficient leverage over local providers to get them to accept reimbursement rates even with or below the rates paid by Aetna et al. in the Boston area? I’m not looking for precision, just some evidence that you or someone you know in the “option” movement has thought about this.

* Let’s assume BPOP solves the chicken-and-egg problem of trying to assemble a critical mass of providers and enrollees roughly simultaneously. BPOP formally opens for business. BPOP makes enough money within the next 8 to 9 years that it can repay to Blue Cross the loan it got from the Sec or HHS. Blue Cross in turn repays HHS.
Is this the process you envision?

Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program. He is the author of The Health Care Mess (AuthorHouse, 2006).

CBO report on the public option

Posted by on Friday, Oct 30, 2009

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

Preliminary Analysis of the Affordable Health Care for America Act

Congressional Budget Office
October 29, 2009

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have completed a preliminary analysis of H.R. 3962, the Affordable Health Care for America Act, as introduced on October 29, 2009.

The options available in the insurance exchange would include private health insurance plans as well as a public plan that would be administered by the Secretary of Health and Human Services (HHS). The public plan would negotiate payment rates with all providers and suppliers of health care goods and services; providers would not be required to participate in the public plan in order to participate in Medicare. The public plan would have to charge premiums that covered its costs, including the costs of paying back start-up funding that the government would provide.

Roughly 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 about 6 million.

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 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.)


Affordable Health Care for America Act

H.R. 3962 (replaces H.R. 3200)
Introduced October 29, 2009


Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost-sharing.

H.R. 3962 (1990 pages)

What happened to that public option that the liberals promised us when they decided not to try to enact the golden standard of a single payer national health program? You know, that government program, like Medicare, designed to be less expensive, more efficient and more equitable, and that each of us could choose in place of private health plans. Really, what happened to it?

Well, Congress plowed it under. Their first priority never was about patients. It was always about taking care of the private insurance industry. Instead of enacting policies that would provide everyone with affordable health care, they have crafted reform that provides a robust insurance market, and then patients are crammed into whatever niches that market creates.

A prime example of their approach is that they have insisted that the public option be prohibited from using policies that provide the greater efficiency and effectiveness of government health care financing programs such as Medicare. To protect the private insurers from “unfair” competition from the government, they have included in the legislation policies to “ensure a level playing field.”

What does the CBO predict will be the outcome of these policies? The public option would have “premiums that are somewhat higher than the average premiums for the private plans in the exchanges,” and fewer than 2 percent of our nation will be enrolled in our own Medicare-like plan that was promised as a choice for all of us.

The golden standard? This public option is not even made of brass. It’s merely the slag cast off while the private insurers walk away with the ingots.

(NB: Do not assume that this message is a plea for a “robust” public option. Adding a robust option to our dysfunctional, fragmented system of health care financing would have very little impact in reducing the waste, inequities, and inefficiencies in our system. This message is a plea to dump the private insurers into the slag pit and use our taxpayer ingots to purchase our own improved Medicare-for-all system.)

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