Data Note: Americans’ Satisfaction with Insurance Coverage

Kaiser Family Foundation
September 2009

Some Dissatisfaction Despite Positive Ratings

How would you rate your overall insurance coverage?

90% – Excellent/Good

9% – Not so good/Poor

Of those who rate their coverage not so good/poor:

Percent dissatisfied with:

74% – The amount you spend out of pocket on health care costs your insurance doesn’t cover

56% – The amount you pay for your health insurance coverage

46% – The amount of paperwork and number of calls required to manage your health insurance

53% – The number and kind of treatments your health insurance will cover

32% – Your choice of doctors and hospitals

22% – The quality of health care you receive

Of those who rate their coverage excellent/good:

33% – Had problems paying medical bills in the past 12 months

66% – Report dissatisfaction with at least one element of care (listed above)

86% – Had problems paying OR report dissatisfaction with at least once element of care (listed above)

Conclusion

Though a large majority of the public reports satisfaction with their health insurance coverage, a closer look identifies significant variations among demographic groups and those with differing health care needs. The non-elderly, lower income Americans and those in fair or poor health – the very people who are most likely to need to use health care services – are less likely to say they are satisfied with their health coverage than their counterparts. And though most Americans say their insurance is excellent or good — significant portions of these groups still report problems paying their medical bills or dissatisfaction with certain aspects of their coverage. Higher levels of dissatisfaction with coverage are also clustered among those who are more vulnerable and likely to use the health care system – those with low incomes or in poor health.

As policy makers, interest groups and the news media continue to discuss the potential effects of health reform on individual families, it is important to remember that, though most Americans express a level of contentedness with their health insurance coverage, dissatisfaction, anxiety and problems with cost remain. Significant minorities report problems paying medical bills or delaying care and a majority of Americans say they are at least somewhat worried about being able to afford the health care services they need, their quality of health care services getting worse, and, among those who are insured, losing their coverage.

http://www.kff.org/kaiserpolls/upload/7979.pdf

According to this study conducted last month, 90% of insured Americans rated their insurance coverage either excellent or good. Yet when asked about specifics, only 14% of those rating their coverage excellent or good reported that they did not have any problems with paying their medical bills in the last 12 months and that they were satisfied with the elements of coverage listed above.

So good or excellent equates with premiums that are too high, with excessive out-of-pocket costs for uncovered services, with inadequate plan benefits, with excessive administrative hassles, with reduced choice of health care professionals and institutions, or with problems paying medical bills in the past 12 months.

What a disconnect! We need to start having a forthright conversation with all of these duped Americans who believe that their insurers are giving them a good deal.

Employer Health Benefits

2009 Annual Survey
Kaiser Family Foundation
September 15, 2009

Premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year.

http://www.kff.org/insurance/ehbs091509nr.cfm

Report (238 pages):
http://ehbs.kff.org/pdf/2009/7936.pdf

Employer-sponsored health plans insure not only the largest sector of our society, but also the healthiest: the healthy workforce and their young healthy families. Because of the greater purchasing leverage of employers, economies of group plans, better regulatory oversight, and the lower average health care needs of the beneficiaries, premiums being paid for employer-sponsored plans represent the greatest value that we can expect in health care financing. Today a working family pays $13,375 for its coverage (which includes the employer contribution paid indirectly by the employee in forgone wage or salary increases).

Keep in mind that, in addition to the $13,375 premium, the family also pays the deductible, co-payments, coinsurance, costs of out-of-network care, and costs of products and services that are not benefits of the plan.

Many perceptive observers of the reform process are beginning to realize that the proposals may have a significant negative impact on the finances of middle-income Americans. What would a $13,375 premium mean to a middle-income family?

The House bill, HR 3200, cuts off premium subsidies at 400% of the federal poverty level, which is $88,200 for a family of four. That family, under the House bill, would have to pay over 15% of its income just for a $13,375 premium. Under the Senate Finance proposal released by Sen. Baucus today, the cutoff is at 300% ($66,150), so that family would pay over 20% of income just for the premium.

But wait, there’s more. The legislative proposals also provide for an annual maximum for out-of-pocket expenses, and they remove the life-time maximum on health care coverage. Since some of the care over those limits represents the 80% of health care that is used by the sickest 20% of the population, those costs can be very significant. The insurers will have no choice but to add those costs to the premiums. But the family also will have to add to its health care bill the costs below the out-of-pocket maximum, plus the costs that are not covered by the plan, even though they exceed the maximum.

One method of controlling premium prices is to strip benefits out of the plans. As an example, the Senate Finance proposal released today would make available a “young invincible” catastrophic plan for young adults. Measures that reduce benefits might make premiums more affordable, but they do so by shifting more costs as out-of-pocket expenses to those who need care, costs which would be unaffordable for many middle-income Americans. For those who say that the out-of-pocket maximums would take care of that problem, keep in mind that the balance would have to be collected in higher premiums.

Anyway you slice or dice it, a $13,375 health care benefit package plus out-of-pocket expenses are no longer affordable for tens of millions of middle-income Americans, even with subsidies. Depending on the final details, that could be over half of our population!

Congress must quit low-balling us. Let’s demand a legitimate analysis using the most credible numbers available and then see what this program will cost each of us.

Once we have those numbers and compare them with what a single payer system would cost each of us, there would be no contest. Of course, similar studies have already been done, and everyone except the wealthiest would pay less. And the wealthy would never know the difference unless their accountants singled out those numbers for their perusal.

Obama’s Mistakes in Health Care Reform

By Vicente Navarro
CounterPunch
September 7, 2009

Error Number Three

Obama plans to cover the uninsured by increasing taxes on the rich (a very popular measure, as shown in all polls) and by transferring funds saved through increased efficiencies in existing programs, including Medicare (an unpopular measure, for the reasons I’ve mentioned). We see here the same problems we’ve seen with other programs targeted to specific, small sectors of the population, such as the poor. Programs that are not universal (i.e., do not benefit everyone) are intrinsically unpopular. This is why antipoverty programs are unpopular. People feel that they are paying, through taxation, for programs that do not benefit them. Compassion is not, and never has been, a successful motivation for public policy. Solidarity is. You support others with the understanding that they will support you when you need it most. The long history of social policy, in the U.S. and elsewhere, shows that universality is a better way to get popular support for a program than means-testing for programs targeted to specific vulnerable groups. The limited popularity of the welfare state in the U.S. is precisely due to the fact that most programs are not universal but means-tested. The history of social policy shows that the best way to resolve poverty is not by developing antipoverty programs, but by developing universal programs to which all people are entitled — for example, job and incomes programs. In the same way, the problem of noncoverage by health insurance will not be resolved without resolving the problem of undercoverage, because both result from the same failing: the absence of government power to ensure universal rights. There is no health care system in the world (including the fashionable Swiss model) that provides universal health benefits coverage without the government intervening, using its muscle to control prices and practices. The various proposals being put forward by the Obama administration are simply tinkering with, not resolving, the problem. You can call this government role “single-payer” or whatever, but our experience in the U.S. has already shown (what other countries have known and practiced for decades) that without government intervention, all the measures now being proposed by this administration will be handsome bailouts for the medical-insurance-pharmaceutical complex.

(Vicente Navarro, M.D., Ph.D. is Professor of Health Policy at The Johns Hopkins University and editor-in-chief of the International Journal of Health Services.)

http://www.counterpunch.org/navarro09072009.html

The subtitle of this article is “Why Obama Needed Single Payer on the Table.” The full article is well worth reading.

Medicare has long been a flashpoint generating intense disagreement across party lines over the role of private markets versus that of government.

Republicans have fought against Medicare from the very beginning. They bitterly opposed it in various committees in both houses of Congress in 1964 -1965. But they relented, at least for a while, in the face of strong public support for the program, and it passed with bipartisan support.

Almost overnight, tens of millions of American seniors gained access to affordable health care. Medicare was also a boon to the medical profession, hospitals, and the insurance industry, since Blue Cross became the main fiscal intermediary between government, physicians and hospitals.

But that honeymoon was not to last. Republicans have been trying to rein in “entitlement programs” and chip away at Medicare since the start of the Reagan years in 1980. As Speaker of the House in 1994, with a new Republican majority in Congress, Newt Gingrich introduced a bill to privatize and convert Medicare to a smaller program with defined contributions instead of one for all seniors with benefits defined by law. His statement at the time clarified the conservative agenda: (This kind of ‘reform’ might result in “solving the Medicare problem” and lead it to “wither on the vine.” Later pronouncements have followed along the same line, as illustrated by Grover Norquist’s desire to “shrink the government down to the size that it could be drowned in a bathtub.”

With the Balanced Budget Act of 1997, the conservatives’ goal to privatize Medicare was advanced with the new Medicare + Choice (M + C) program. These private plans, mostly HMOs and PPOs, were promoted as offering more choice and value than traditional Medicare. But their subsequent track record belied those claims. Instead, these programs proved themselves unstable in the marketplace, seeking out favorable markets, leaving others when profits were not sufficient, cherry picking the market by avoiding sicker enrollees, and costing the government an average of 13 percent more per enrollee than in traditional Medicare. About one-third of Medicare beneficiaries enrolled in M + C plans between 1999 and 2002 were dropped when their plans abandoned the market, often forcing patients to change physicians and return to regular Medicare.

As M + C programs became discredited, Republicans renewed their attack on Medicare with the passage in 2003 of the Medicare Prescription Drug, Improvement and Modernization Act (MMA), another bonanza for the insurance and drug industries. The MMA established private Medicare Advantage plans (MA) as successors to M + C plans and turned over the drug benefit to the private sector, even prohibiting the government from negotiating drug prices as the Veterans Administration does so effectively. As expected, MA plans have many of the same problems as M + C plans. They are still subsidized by government overpayments averaging 14 percent more than Medicare, while providing less efficiency, choice, value and reliability than traditional Medicare.

Today, as health care reform proposals take shape amid a highly polarized debate in Congress and across the country, conservatives (including Republicans, Blue Dog Democrats and some Independents) have mobilized once again to expand private markets for the insurance industry and other corporate stakeholders in the medical industrial complex. While overlooking their role in fueling health care inflation in both private and public programs, conservatives are intent on handing the party in power a defeat over health care reform, but at the same time maneuvering to expand future health care markets.

In their strategy to kill ObamaCare (whatever that may turn out to be), they are all of a sudden sounding like defenders of Medicare beneficiaries against the presumed evils of big government. Consider these examples of their new-found protector role of seniors:

• Senator Mike Enzi (R-WY) and member of the Gang of Six charting policy in the Senate Finance Committee, warns that “Democrats are cutting hundreds of billions from the elderly and planning to limit or deny care based on age or disability of patients.”
• House Minority Leader John Boehner (R-OH) claims that projected reductions in the growth of Medicare spending means “fewer choices and lower health care quality for our nation’s seniors.”
• In order to “assure that our greatest generation will receive access to quality health care”, Michael Steele, chairman of the Republican National Committee, recently proposed a ‘Seniors’ Health Care Bill of Rights’ with these provisions:

“(1) We need to protect Medicare and not cut it in the name of ‘health insurance reform’;
(2) We need to prohibit the government from getting between seniors and their doctors;
(3) We need to outlaw any effort to ration health care based on age;
(4) We need to prevent government from dictating the terms of end-of-life care; and (5) We need to protect our veterans by preserving Tricare and other benefit programs for military families.”

The cynicism of these statements almost defies belief, given the long Republican track record of trying to undermine Medicare at every turn. These would-be defenders of Medicare pretend to be protecting seniors from an uncaring government, while raising such scare words as rationing and loss of choice, coverage and benefits. Their real goal is to advance their narrow agenda of undermining public programs by privatizing them to their best advantage.

The Republican machine, based on long experience, is expert at scare tactics. One of many examples is the threat of “death panels”, raised by former vice-presidential candidate Sarah Palin and others in reaction to a provision (Section 1233) in the House bill (H.R. 3200) which would provide funding for voluntary end-of-life counseling by physicians on such matters as living wills. Ironically, this provision was suggested by Johnny Isakson, Republican pro-life senator from Georgia, who has been advocating such counseling for years. But as the Medicare Rights Center, AARP and many experts have confirmed, none of these scare claims have any substance in fact.

So what we are seeing is blatant distortion, disinformation and deception by conservative forces bent on defeating any health care reform advanced by the party in power. Fanning concerns and worries among seniors is intended to weaken seniors’ support for reform and perpetuate the hold of private markets on the system. Meanwhile, of course, Republicans keep trying to exploit private Medicare markets to their own advantage as long as the program is alive.

Adapted in part from Shredding the Social Contract: The Privatization of Medicare, 2006, with permission of the publisher Common Courage Press.

Buy John Geyman’s Books at: http://www.commoncouragepress.com

Will U.S. learn its healthcare reform lesson from California?

By Michael Hiltzik
Los Angeles Times
September 14, 2009

The difference between a government program that works and one that fails spectacularly can be razor thin. A few words here, a loophole there, and you can turn a boon for the consumer into a windfall for big business.

That lesson should be fixed in the frontal lobes of everyone in Congress working on the healthcare reform bill, and especially on a piece of the reform puzzle known as the insurance exchange — a key element of the reform plan backed by congressional Democrats and President Obama.

Here in California we know all about the pitfalls of an exchange that doesn’t work, because we established a statewide version in 1992 and attended its funeral in 2006. The state exchange, known originally as the Health Insurance Plan of California and later as PacAdvantage, was designed to give California’s small businesses the collective clout to negotiate with health insurers for lower premiums and consumer-friendly standards.

As written into the benchmark bill in the House of Representatives (H.R. 3200), the federally supervised exchange would be the sole marketplace where individuals and employees of small businesses could buy health insurance. By mandating insurer participation, the exchange would provide customers the choice they don’t get in the market today. By requiring all plans to offer identical base policies it would enable buyers to compare them by price and quality.

But we’re still at the starting line. A lot of mischief can be committed on a bill’s path to enactment. The threat to a functioning exchange will come from vested interests trying to water down the mandates. Insurance companies will want the right to offer catastrophe-only coverage, which is a big moneymaker, or to specialize in the yacht-owning executive market. Lobbyists for health savings accounts, who are carrying water for financial services companies lusting after the fees these accounts generate, will insist on an HSA loophole. And politicians in some states will want to export their bare-bones coverage standards nationwide so they can lure health insurers into headquartering there, the way one-horse states without usury limits, such as South Dakota, made themselves the credit card-issuing capitals of America.

Any loophole will set the stage for others, until the exchange becomes a useless, tattered dream. “If there’s a gap or a loophole, the market will exploit it,” (former president of PacAdvantage John) Grgurina says.

http://www.latimes.com/business/la-fi-hiltzik14-2009sep14,0,7041044.column

A previous qotd also discussed insurance exchange lessons from California:
http://www.pnhp.org/news/2009/august/health_insurance_exc.php

In health care, we spend more and receive less, and everyone agrees that has to change. The decision has been made that we will do that by regulating our dysfunctional health insurance market, and then mandate that everyone who is not covered by other qualifying programs be required to purchase private health plans. To be certain that everyone has access to a plan, an insurance exchange will be established.

Regulations will require guaranteed issue, guaranteed renewability, the end of rescissions, rules to reduce adverse selection, and other measures to improve the functioning of the markets. In his speech to Congress and to the nation, President Obama provoked laughter when he said, “… there remain some significant details to be ironed out…” The particular details that will need to be ironed out should probably provoke grief, anger, disgust or other negative emotions, but they certainly are not funny.

No matter what rules are established for the exchanges, there will always be loopholes. Michael Hiltzik has suggested some possibilities. Our experience with the larger private insurers has proven that they can find loopholes that the best policy analysts could never see coming. Unlike the European insurers that have a mission of service, our private insurers that dominate most markets have an obligatory mission of enhancing investor value. Their business ethic mandates that they investigate every opportunity to increase revenues and reduce expenses. The invisible loopholes will always be there, and the entrepreneurial mind will always find them.

The insurance exchanges won’t even be established for four years, and then it will be many more years before the policy community passes judgement on their impact. During that time our public stewards will be busy trying to patch the innumerable loopholes penetrated by the entrepreneurs, only to find more opening up.

In future books recording the history of U.S. health care reform, President Obama will have his own chapter on yet another failed effort. He’ll deserve it because he hardly picked up his baton to orchestrate reform. When Obama should have been conducting Beethoven’s Ninth, Congress was busy writing Rap. Rap might work for a few of us, but the nation deserved much more.

By Kip Sullivan, JD

Advocates of a “public option” claim that the “option” will look like Medicare. They say this about the “option” in both bills that have been introduced to date – the House “reform” bill, HR 3200, and the bill written by the Senate Health, Education, Labor and Pensions (HELP) committee. But this statement is not true.

Medicare is larger than any private insurance company; the “option” in both bills will be small. The traditional Medicare program is a single program with uniform benefits; the “option” in both bills will be a balkanized program that may not be available in all parts of the country. Medicare is administered by public employees; the “options” in both bills will be administered by private-sector corporations, some or all of which will be insurance companies. The “option” in neither bill resembles Medicare.

Review of two previous papers

The “option” provisions of the Senate HELP Committee bill appear in Section 3106. HR 3200’s “option” provisions appear in Title II, Subtitle B, entitled “Public health insurance option.” I have already discussed in some detail Section 3106 in a paper posted on August 14. Readers who want more details on Section 3106 should read that paper.

In another paper I have discussed the claim by “option” advocates that the “option” in HR 3200 is superior to the “option” in the Senate HELP bill. Those who make this claim rest their argument on a mere two sentences in HR 3200. One sentence says doctors and hospitals that participate in Medicare will be deemed to be participants in the “option” unless they “opt out” of the “option.” The other says the “option” is authorized to pay providers at rates linked to Medicare’s rates. Neither argument makes sense. Both sentences are useless and do nothing to augment the power of HR 3200’s moribund “option.”

The purpose of this paper is to examine the rest of the “option” provisions in Title II, Subtitle B of HR 3200 to see if there is any reason to describe HR 3200’s “option” as “like Medicare.” I begin with a summary of the ways in which the “options” in HR 3200 and the Senate HELP bill resemble each other.

Comparison of the “options” in HR 3200 and the HELP bill

The “option” sections of HR 3200 and the HELP bill have these features in common:

~ Both bills authorize the Secretary of DHHS to sell health insurance to the non-elderly. HR 3200 calls the program that will do this the “public health insurance option” while the HELP bill calls it “community health insurance options.” In both bills, “option” insurance can be purchased only within an “exchange” (a one-stop shopping center for health insurance). The exchange will clearly be multiple exchanges at the state level under the HELP bill. The exchange will probably be a single national program under HR 3200.

~ Both bills authorize a start-up fund for the Secretary to use in some unspecified manner to get the “option” program up and running, and require the Secretary to “provide for the repayment” (HR 3200’s phrasing) of the start-up fund within ten years.

~ Both bills authorize subsidies for the relatively small number of Americans who will be eligible to shop within the exchange. These subsidies will be given to eligible individuals regardless of whether they use the subsidy to buy insurance from the “option” or from an insurance company.

~ Both bills authorize the Secretary to contract with corporations to conduct unspecified activities that will somehow lead to the creation of an “option” program throughout the country.

I want to dwell at some length on this last shared feature for two reasons. First, the language in both bills setting forth the role of corporations in creating the “option” is rather convoluted. Second, it’s an extremely important feature.

The bills do not describe the criteria that corporations have to meet to get contracts from the Secretary; instead they refer the reader to criteria laid out in Section 1874A of the Social Security Act. That section spells out criteria corporations have to meet to win contracts to administer the current Medicare program. Under Section 1874A, corporations that win contracts to administer the Medicare program are called “Medicare Administrative Contractors” (MACs). (The task MACs carry out for Medicare is limited in its scope: It is to process claims filed by providers who treat Medicare patients.) Even though the authors of the HELP bill and HR 3200 want the Secretary to use MAC-like criteria in deciding which corporations to contract with to create the “option” program, they chose not to use the “MAC” label for the corporations that will create the “option.” The HELP bill calls them “contracting administrators.” HR 3200 gives these entities no name at all. For lack of a more convenient term, I will refer to the MAC-like corporations in the HR 3200 as “contracting administrators.”

As the preceding rather convoluted description of MACs and contracting administrators suggests, neither the HELP bill nor HR 3200 makes it easy for readers to grasp that corporations, not public employees, will create, and probably run, the “option” program. Neither bill comes right out and says, “The Secretary shall hire private-sector corporations to create and run as many health insurance companies as is necessary to make health insurance available for sale to the non-elderly in each health insurance market in America.” Nor is that fact being ballyhooed by the bills’ authors and proponents. But it’s an important feature for “option” supporters to understand because it undermines the claim “option” advocates make over and over that the “option” will look like Medicare.

In the next two sections, I discuss in more detail the evidence that supports the conclusion that HR 3200’s “option” will be created by corporate America and, in all other important respects, will look like the HELP “option.” I begin with curious statements by Sen. Harry Reid and a spokesman for Health Care for America Now supporting this thesis, and then turn again to the text of HR 3200.

Reid and Kirsch agree the “option” could be run by a private corporation

The fact that the “option” programs in both bills will be run by privately owned corporations was hinted at by Sen. Majority Leader Harry Reid and Richard Kirsch, the campaign director of Health Care for America Now, on September 1. As the following excerpt from a post on Talking Points Memo suggests, the Democratic leadership and HCAN have known since these bills were first drafted that the “option” programs will not be Medicare-like, but rather will be administered by one or more private-sector corporations:

During a Friday tele-town hall event, Sen. Majority Leader Harry Reid told constituents that he doesn’t think the public option ought to be a government run program like Medicare, but instead favors a “private entity that has direction from the federal government so people that don’t fall within the parameters of being able to get insurance from their employers, they would have a place to go.”
Today, a Reid spokesperson tells me, “[t]he idea is that [Department of Health and Human Services] could contract with a third-party administrator to do the administrative stuff. It would still be policies set by HHS.”
Though this isn’t the reform community’s first preference, it is something they could get behind.
According to Richard Kirsch … such an arrangement might work out OK.
The public option “doesn’t have to be a government agency, though we’d prefer it,” Kirsch said. “The entity would have to be accountable to the public, its risks borne by the public, and its policies set by a public entity.”

Note that both Reid and Kirsch used the singular form of “entity.” They did not use the plural form. That suggests that they were thinking of turning the “option” over to a single corporation, say, United Healthcare, rather than to multiple corporations. In view of the actual language of HR 3200 (which I will discuss further below), and given the rabid resistance such a proposal would provoke – not just from “option” supporters and the public but probably from the insurance industry as well (the industry would no doubt prefer to see multiple contracts scattered among its members) – it is extremely difficult to believe that Reid and Kirsch really meant to imply that the entire “option” program will be turned over to a single corporation.

But regardless of whether Reid and Kirsch really meant to refer to one corporate administrator or dozens of them, why would they wait until September to drop the hint that the “option” will be run by one or more corporations? They have known, or should have known, since at least June (when draft versions of both bills were published) that corporations will play a dominant role in the creation and administration of the “option.” My guess is that Reid and Kirsch avoided revealing the role of corporations till now in order to maintain the illusion among “option” supporters that the “option” will be run by public employees. It’s pretty difficult to convince people the “option” will “look just like Medicare” when you admit it will be run by corporations, many of which will probably be insurance companies. I think Reid and Kirsch decided they might gain more than they lost if they revealed the fact that the “option” will not only create millions of new customers for the insurance industry, but will let corporations actually create the “option” program. They were hoping, in other words, to win over a few Blue Dogs and maybe a Republican or two without losing the votes of any member of Congress who already supports the “option.”

Reading the entrails of HR 3200

Several provisions of Title II, Subtitle B in HR 3200 indicate the authors of HR 3200 understand that the “option” will be run by multiple corporations. These provisions, coupled with an understanding of the obstacles that these corporations will have to overcome to create “option” insurance in every region of the country, support the conclusion that HR 3200’s “option” program will not look like Medicare, but rather will look very much like the hodge-podge of privately-run programs proposed by the Senate HELP Committee.

Three provisions in HR 3200 support the conclusion that the “option” will be run by corporations. One, which I have already discussed briefly, authorizes the Secretary to contract with what the HELP bill calls “contracting administrators.” A second requires the Secretary to make these contracting administrators repay their loans within ten years. A third authorizes the Secretary to engage in “direct contracting with providers” and direct negotiations with drug companies.

HR 3200 authorizes contracts with multiple corporations

Like the HELP bill, HR 3200 indicates public employees will not be setting up the “option” or “options.” This fact stands in sharp contrast to expectations created among the public by “option” advocates. HR 3200 communicates this fact by not authorizing the hiring of public employees and, instead, authorizing the Secretary to “enter into contracts” with corporations described in subsection (a)(4) of section 1874A of the Social Security Act. When you track this statute down and read it, you discover that HR 3200 is talking about corporations called “Medicare Administrative Contractors.”

Notice that the clause from HR 3200 I quoted above – “enter into contracts” – refers to “contracts,” plural. HR 3200’s bill writers obviously anticipate the Secretary will be signing multiple contracts with multiple MAC-like corporations. As I noted in my August 14 article about the HELP bill, the corporations that now qualify for MAC contracts with Medicare are nearly all insurance companies. This shouldn’t be surprising; the skills a corporation is supposed to have to get a MAC contract are virtually identical to those possessed by the typical insurance company. (At the end of this article I present the list of the current MACs I presented in my August 14 paper.)

There are several minor differences between HR 3200 and the HELP bill on this issue of MAC-like contractors. One is that HR 3200 does not require that the MAC-like corporations that get contracts with the Secretary be non-profit, whereas the HELP bill makes the non-profit requirement very clear.

Loan repayment provision

In addition to the remarks by Reid and Kirsch quoted above and the provision in HR 3200 authorizing the Secretary to hire private corporations, two other provisions in HR 3200 strongly suggest that HR 3200’s authors expect the “option” to be run by private corporations. One of them is the provision creating a start-up fund for the “option.”

HR 3200 uses peculiar language to describe who can use this start-up money and who has to repay it. In a paragraph entitled “Start-up funding,” HR 3200 says, “there is hereby appropriated to the Secretary … $2,000,000,000” (emphasis added) plus additional funds “necessary to cover 90 days worth of claims reserves based on projected enrollment.” But in the section requiring these start-up funds to be repaid within ten years, HR 3200 doesn’t say the Secretary shall repay the loans. Rather, it says, “The Secretary shall provide for the repayment of the start-up funding” within ten years (emphasis added).

Is this not peculiar phrasing? If the Secretary is the borrower, why not simply say the Secretary “shall repay the loan”? The only plausible explanation is that the Secretary isn’t going to be the ultimate borrower. The only plausible explanation is that the Secretary will turn around and lend the money to another entity, or more likely, multiple other entities, namely, contracting administrators. For reasons known only to the authors of HR 3200, the bill does not contain language analogous to that in the HELP bill which clearly indicates entities outside of DHHS will be the recipients of the start-up funds. Despite this peculiar omission, it is reasonable to infer that multiple MAC-like entities will be receiving loans from the Secretary under HR 3200.

Why did HR 3200’s authors insist on using the unnecessarily opaque phrase, “shall provide for repayment”? My hypothesis here is identical to my hypothesis about why Sen. Reid and Richard Kirsch delayed revealing the role of corporations in the administration of the “option.” My hypothesis is that the authors of HR 3200 didn’t want to reveal to the public the dominant role private corporations will play in creating and administering the “option.” What the authors of HR 3200 really wanted to say was, “The Secretary shall include in all contracts with contracting administrators a clause requiring that they pay back all loans from the Secretary within ten years.” They didn’t do that because it would have revealed the secret – that the “option” won’t be run by public employees, at least not directly, and it will not look anything like Medicare.

Direct contracting

The third provision in HR 3200’s Title II, Subtitle B which suggests the “option” will be run by multiple corporations is one which authorizes the Secretary to engage in “innovative payment mechanisms,” including “direct contracting with providers.” For those who know what “direct contracting” means, this is a telling clause.

In health policy, “direct contracting” is used to describe the practice of self-insured corporations contracting directly with clinics and hospitals on behalf of their own employers. Direct contracting spread rapidly among large corporations in the early 1990s as employers struggled to find ways to cut their health insurance costs. The contracts between employers and providers are called “direct” in order to distinguish them from the more traditional contracts between employers and insurance companies in which an insurance company agrees to serve as the middleman between the employer and the provider.

The explicit authority in HR 3200 for the Secretary to resort to “direct contracting with providers” makes sense only if the authors of HR 3200 understood that the “option” that the Secretary will oversee will consist of dozens or hundreds of insurance companies. If the “option” really were going to look like the traditional Medicare program – a single program in which Medicare reimburses providers directly – there would be no need for HR 3200 to explicitly authorize the Secretary to deal directly with providers.

Another provision in HR 3200 authorizing the Secretary to negotiate on behalf of all “option” enrollees with the drug industry raises a similar question. If direct negotiations with drug companies has to be specifically authorized by HR 3200, doesn’t that imply that the authors of HR 3200 understand that medical goods and services will be delivered by the “option” through a hodge-podge of insurance companies, just as prescription drugs are now delivered through hundreds of insurance companies under the privatized Medicare Part D program?

The logistics of creating the “option”

Even if HR 3200 stated clearly that the “option” will be run by public employees and not corporations, it would still be reasonable to conclude that the “option” program won’t be a single, uniform program like Medicare, but will instead consist of many programs that vary by state and region. The obstacles that will have to be overcome to create “option” insurance will be the same regardless of whether public or private employees are in charge. Those obstacles will vary from one insurance market to another. The primary obstacle will be the power of the insurance industry in any given market, and this power will be determined primarily by how concentrated the industry is. It will be more difficult to establish the “option” in those markets where one or two insurers insure a majority of the local population than in those markets where no single insurer dominates.

Depending on how successful the corporations in charge of creating “option” insurance are, some parts of the country may have no “option” coverage available at all, some might have “option” insurance that meets only the minimum criteria for coverage spelled out in HR 3200 and the HELP bill, and some might have “option” insurance that exceeds the minimum coverage. Other significant features of the “option” could vary as well, including the premiums and how tightly managed the coverage is (including how much freedom enrollees will have to choose their own doctor).

We need truth in advertising about the “option”

When Jacob Hacker began promoting what is now called the “public option” in 2001, he referred to it as “Medicare Plus.” Given the enormous size of this version of the “option” (Hacker predicted it would enroll at least half of the non-elderly population), Hacker’s comparison of his proposed program with Medicare was not misleading. But after the Democrats introduced draft versions of the Senate HELP bill and HR 3200 last June, “option” advocates should have immediately ceased comparing the “option” to Medicare.

They did not do that. They continued to barrage the public with statements linking the “option” with Medicare. For example, in an interview posted on AlterNet on July 8, Howard Dean responded to a question about what the “option” looks like by saying, “In a nutshell, it looks like Medicare.”

One would think “option” supporters would have an especially strong motive to stop misleading the public about what the “option” will look like. They risk serious embarrassment if the “option” they keep comparing to Medicare turns out to be a hodge-podge of small, ineffective insurance companies created by private corporations. But I am aware of only two instances in which “option” advocates have so much as hinted at the possibility of this outcome. In a paper posted on August 20, Jacob Hacker conceded in a parenthetical remark that “the HELP bill appears to leave open the possibility … that the public plan could be contracted out to private insurers or at least established on a state-by-state basis, two undesirable approaches that should be clearly ruled out in subsequent legislation.” (page 2) The other instance was the September 1 comment by HCAN’s Richard Kirsch, which I quoted above, in which Kirsch agreed with Sen. Reid that the “option” might be administered by a private-sector firm.

“Option” advocates need to do better. They need to tell congressional Democrats the “options” in the HELP bill and HR 3200 will be no match for the insurance industry and that unless the Democrats rewrite the “option” sections to create “options” like Hacker’s original Medicare Plus, they will urge members of Congress and the public to oppose the “reform” legislation.
__________________________________________________________________
Appendix: List of corporations that currently serve as “Medicare Administrative Contractors” for Medicare
• Cahaba Government Benefit Administrators, a subsidiary of Blue Cross and Blue Shield of Alabama;_• First Coast Service Options, a subsidiary of Blue Cross and Blue Shield of Florida;_• Highmark Medical Services, a division of Highmark Blue Cross Blue Shield of Pennsylvania;_• National Government Services, a subsidiary of WellPoint, the nation’s largest health insurance company measured by enrollment (as opposed to revenues);_• National Heritage Insurance Corporation, which is a subsidiary of Electronic Data Systems (the firm Ross Perot founded) which is now a subsidiary of Hewlett Packard;_• Noridian Administrative Services;_• Palmetto GBA, a subsidiary of Blue Cross Blue Shield of South Carolina;_• Pinnacle Business Solutions, a subsidiary of Blue Cross Blue Shield of Arkansas;_• Trailblazer Health Enterprises, a subsidiary of Blue Cross Blue Shield of South Carolina;_• Wisconsin Physicians Services Health Insurance Corporation.
__________________________________________________________________
Kip Sullivan is a member of the steering committee of the Minnesota chapter of Physicians for a National Health Program.

Letter to the editor re: “Strained by Katrina, A Hospital Faces Deadly Choices ” by Sheri Fink, M.D., Ph.D. in the New York Times August 30, 2009

To the Editor:

Fink parses the ethics of hospital staff rather than those who abandoned them during Katrina.  What if Tenet and LifeCare, the owners of the two health facilities at Memorial Hospital, decided to take immediate responsibility for evacuating their patients?

LifeCare wanted first FEMA and then Tenet to take care of it. Tenet got on the horn to friends in Washington.

Tenet’s CEO was compensated 9.7M in 2008. Tenet’s history is littered with scandals including unnecessary surgeries and repeated fraud.  LifeCare, which has found funds to make illegal campaign contributions, has 20 locations and assets of $484M. Surely, in absolute terms, either could have paid for timely helicopter evacuation.  This was a business decision.

Dr. Pou and others stepped up to the plate and most patients were saved.  Tenet came up with helicopters 3 days into the crisis, LifeCare never did.  Fink digs up already dismissed charges of “euthanasia” against Samaritan heroes who stayed put to work under unspeakable conditions while asserting, “LifeCare deployed the full array of modern technology to keep alive its often elderly and debilitated patients.”

Fink’s sensational article is an unfitting commemoration of Katrina and a missed opportunity for investigating a case scenario of how for-profit healthcare works.

Laura S. Boylan, MD

New York City

Link to original article: http://www.nytimes.com/2009/08/30/magazine/30doctors.html

Obama and the Bureaucratization of Health Care

By Sarah Palin
The Wall Street Journal
September 9, 2009

Some 45 years ago Ronald Reagan said that “no one in this country should be denied medical care because of a lack of funds.” Each of us knows that we have an obligation to care for the old, the young and the sick. We stand strongest when we stand with the weakest among us.

Common sense tells us that the government’s attempts to solve large problems more often create new ones. Common sense also tells us that a top-down, one-size-fits-all plan will not improve the workings of a nationwide health-care system that accounts for one-sixth of our economy.

… many of the sick and elderly are concerned that the Democrats’ proposals will ultimately lead to rationing of their health care by — dare I say it — death panels?

http://online.wsj.com/article/SB20001424052970203440104574400581157986024.html

And…

A Time for Choosing

By Ronald Reagan
October 27, 1964

A young man, 21 years of age, working at an average salary — his Social Security contribution would, in the open market, buy him an insurance policy that would guarantee 220 dollars a month at age 65. The government promises 127. He could live it up until he’s 31 and then take out a policy that would pay more than Social Security. Now are we so lacking in business sense that we can’t put this program on a sound basis, so that people who do require those payments will find they can get them when they’re due — that the cupboard isn’t bare?

Barry Goldwater thinks we can.

At the same time, can’t we introduce voluntary features that would permit a citizen who can do better on his own to be excused upon presentation of evidence that he had made provision for the non-earning years? Should we not allow a widow with children to work, and not lose the benefits supposedly paid for by her deceased husband? Shouldn’t you and I be allowed to declare who our beneficiaries will be under this program, which we cannot do? I think we’re for telling our senior citizens that no one in this country should be denied medical care because of a lack of funds. But I think we’re against forcing all citizens, regardless of need, into a compulsory government program, especially when we have such examples, as was announced last week, when France admitted that their Medicare program is now bankrupt. They’ve come to the end of the road.

http://www.reagan.utexas.edu/archives/reference/timechoosing.html

The heated debate over health care reform was certainly not unexpected. What has been a surprise to many of us is the intensity of the nastiness of the opponents of reform.

In the past, politicians often supported their ideological positions through distortions created by carefully selecting favorable facts and discarding the unfavorable. In the current debate it seems like the ideologues opposed to reform are creating rhetoric that does not carry the burden of factual support. That flexibility allows an introduction of nastiness like we’ve never seen. That has extended all the way to Congress where we heard during President Obama’s address the shout from a Congressman, “You lie!”

The rhetoric is so bad that we have now introduced fact checkers – a problem in itself since since some dispute the facts that the fact checkers are using. Risking the possibility that my comments might be challenged based on my ideology (supporting health care for all), I’ll do my best to provide a little bit of honest fact checking here.

* Sarah Palin selected a quote from Ronald Reagan suggesting that we as a nation will stand together to see that no one in this country “be denied medical care because of a lack of funds.” It would be difficult to interpret this as representing anything other than unambiguous support for the concept of social insurance. Of course then she dispels that notion with her own anti-government rhetoric.

* Placing that same quote of Ronald Reagan in context, it was actually buried in his attack on Social Security, rejecting social insurance as a “compulsory government program.” Although he did say that no one should be denied medical care because of lack of funds, he did not tell us what the source of those funds would be.

* Ronald Reagan said, “… France admitted that their Medicare program is now bankrupt. They’ve come to the end of the road.” That was in 1964. This year, 2009, the conservative leaders in France have again stated that their health care program is bankrupt. Regardless, their health care system has been ranked number one by the World Health Organization, and it is funded at a fraction of what we spend per capita in the United States. The “bankrupt” rhetoric will always be with us, but what really counts is whether or not the system is providing everyone with the health care that they need.

* To prove what a bad deal Social Security is, Ronald Reagan used the example of a 21 year old with average wages. He said that a privately purchased insurance policy would provide a guarantee of 220 dollars a month at age 65, whereas Social Security would guarantee him only 127 dollars per month. As it happens, that 21 year old would be 66 now, and the average Social Security benefit for a retired worker is 1,153 dollars per month (SSA.gov). (I can hear the conservative actuaries saying, “But… but… you lie!”)

* Sarah Palin dared to repeat once again: “death panels.” Although we’ve been saturated with the fact checkers’ “pants on fire” ratings of this comment, that is no problem for the conservatives – the fact checkers lie.

The nastiness of this dialogue has seemed to lock us into a nonsensical “True! Lie!” debate over relatively peripheral issues. This is a debate that the conservatives will always win because it diverts us from the fundamentals of reform. In the meantime, behind the scenes the insurance industry has manipulated its own jackpot win while the noisy public debate has been taking place.

The tragedy is that the Democrats allowed themselves to be maneuvered into a position of a pseudo-bipartisan compromise that is based on a mandate to purchase private health plans that many middle-income Americans cannot afford.

Here is where the debate should have been:

* A Medicare for all program that automatically enrolls everyone is a truly universal program. TRUE!

* A mandate to purchase private health plans is a truly universal program. FALSE!

* The single payer model of reform includes policies that are effective in slowing the increase in health care costs to a sustainable level. TRUE!

* The current Democratic model of reform contains measures that are effective in slowing the increase in health care costs to a sustainable level. FALSE!

* A single universal risk pool that is funded through equitable tax policies will make health care affordable for each and every individual. TRUE!

* A multi-payer system of public and private programs funded from multiple sources, including a mandate to pay partially subsidized premiums for some, will make health care affordable for each and every individual. FALSE!

Come on! Let’s start debating the TRUTH, based on actual FACTS. Let’s advocate for affordable health care for everyone. A fact checker can’t challenge simple human decency.

Health Insurance Coverage: 2008

U.S. Census Bureau
September 10, 2009

* The percentage of people without health insurance in 2008 was not statistically different from 2007 at 15.4 percent. The number of uninsured increased to 46.3 million in 2008, from 45.7 million in 2007.

* The number of people with health insurance increased to 255.1 million in 2008 — up from 253.4 million in 2007. The number of people covered by private health insurance decreased to 201.0 million in 2008 — down from 202.0 million in 2007. The number of people covered by government health insurance increased to 87.4 million — up from 83.0 million in 2007.

* The percentage of people covered by private health insurance was 66.7 percent in 2008 — down from 67.5 percent in 2007. The percentage of people covered by employment-based health insurance decreased to 58.5 percent in 2008, from 59.3 percent in 2007. The number of people covered by employment-based health insurance decreased to 176.3 million in 2008, from 177.4 million in 2007.

* The percentage of people covered by government health insurance programs increased to 29.0 percent in 2008, from 27.8 percent in 2007. The percentage and the number of people covered by Medicaid increased to 14.1 percent and 42.6 million in 2008, from 13.2 percent and 39.6 million in 2007. The percentage and number of people covered by Medicare increased to 14.3 percent and 43.0 million in 2008, from 13.8 percent and 41.4 million in 2007.

* In 2008, the percentage and number of children under 18 without health insurance were 9.9 percent and 7.3 million, lower than they were in 2007 at 11.0 percent and 8.1 million. The uninsured rate and the number of uninsured for children are the lowest since 1987, the first year that comparable health insurance data were collected. Although the uninsured rate for children in poverty decreased to 15.7 percent in 2008, from 17.6 percent in 2007, children in poverty were more likely to be uninsured than all children.

* The uninsured rate and number of uninsured for non-Hispanic Whites increased in 2008 to 10.8 percent and 21.3 million, from 10.4 percent and 20.5 million in 2007. The uninsured rate and number of uninsured for Blacks in 2008 were not statistically different from 2007, at 19.1 percent and 7.3 million.

* The percentage of uninsured Hispanics decreased to 30.7 percent in 2008, from 32.1 percent in 2007. The number of uninsured Hispanics was not statistically different in 2008, at 14.6 million.

http://www.census.gov/hhes/www/hlthins/hlthin08.html

President Obama, in his speech before the joint session of Congress last evening, did not break new ground on the current proposal for reform being developed by Congress and the administration. So, based on the framework that has been advanced, what impact will the current proposal have on the numbers of uninsured?

* The primary reason for the excessive numbers of uninsured is that health care costs are now so high that premiums for adequate health plans are no longer affordable for low and middle income individuals. The policies in the current proposal designed to reduce health care spending are inadequate and will not have an impact on reducing the numbers of uninsured since it will be impossible to create less expensive plans that have adequate benefits.

* Although lower-income individuals will have greater access to Medicaid/CHIP and to larger subsidies to purchase private plans, the subsidies for average-income Americans will be inadequate to make the premiums and cost sharing affordable.

* Most small businesses will be exempt from the employer mandate and thus will not be a factor in increasing the rate of insurance coverage amongst their employees.

* Initially only uninsured individuals and small businesses will have access to the insurance exchange. Thus most Americans will not be able to select from an FEHBP-like menu of plans similar to the program that members of Congress now have.

* Because of a reluctance to increase revenues through the tax system and an insistence that the program not add to our budget deficits, Congress has restricted the amount of funds that will be available to expand Medicaid and to finance the premium subsidies for the private plans.

* Middle-income individuals will be mandated to purchase private health plans. Affordability of these plans for individuals and families will be determined by income levels, by the amount of the government subsidies used to purchase the plans, by adequacy of plan benefits, and by the amount of cost sharing required of those accessing care. Based on the preliminary numbers provided, serious affordability issues will be faced by a far greater number of middle-income individuals than are being projected by the architects of the proposal.

* Because of affordability issues, consideration is being given to allowing the purchase of underinsurance plans like those designed for the young invincibles. Because of the adverse health and financial impacts of relying on these deficient plans, these individuals should be counted amongst the uninsured from a policy design perspective.

* It has been agreed that the inadequacy of the government subsidies will require the issuance of hardship waivers for those who cannot afford their portion of the insurance premium, based on their incomes. Hardship waivers will become commonplace for those caught between low-income, where government support is generous, and high-income, where affordability is not a consideration. Those in the middle are the majority of Americans. Hardship waivers which relieve individuals of paying fines for the crime of being uninsured could become the standard for middle-income Americans.

An improved Medicare for all single payer program would automatically include everyone, and would be affordable for all of us. President Obama’s program will leave far too many out, and will fail to adequately address the high costs of health care.

Many believe that President Obama effectively used his address to set the stage for the final phases of the reform process, with no turning back. We desperately do need to push on with reform, but it needs to be reform that works.

When President Obama mentioned single payer last evening, there was an embarrassing smattering of applause. Democrats were there to support the president who supports a mandate to purchase private plans that you can’t afford. How embarrassing. Supporting a plan that serves the private insurance industry so well, at great cost to the American people.

So you disagree? You think that this will serve middle-income Americans well? Prove it! Demand a full study that calculates premiums for private plans with adequate benefits and adequate financial protection in the face of medical need and includes all risks in the pools, that determines the premiums as a percent of income at various income levels, that determines the size of the subsidy that would be required to make the balance of the premiums affordable at each income level, that determines the level of cost sharing that would be required of those with needs, that determines the true amount of public funding that would be necessary to support those premiums and cost sharing, and then describes precisely the sources of that public funding.

Those crafting reform can’t make the numbers work. If you can’t either, then join us in a march on Washington to demand that they enact reform with numbers that do work in providing all of us with the health care that we need. Sacrificing the insurers should not be an embarrassment to any of us. It should be a matter of pride.

By Kip Sullivan, JD

Leaders of the campaign for a “public option” have circled their wagons around two sentences in HR 3200 (the House health “reform” bill). These sentences, which are not in the bill passed by the Senate health committee, appear in Section 223 of HR 3200:

Health care providers participating under Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary.

[T]he Secretary shall base the payment rates [for providers] on the payment rates for similar services and providers under parts A [the hospital services part] and B [the physician services part] of Medicare.

“Option” advocates are claiming these two sentences are “crucial” and “critical” to the success of the “option” and absolutely must be in any final “reform” bill. The Congressional Progressive Caucus has even warned President Obama that if these two sentences are not in the final bill, they will vote against it.

In this paper, I demonstrate why these two sentences accomplish nothing. In a paper I will post soon, I will go on to show that the “option” in HR 3200 is no better than the “option” in the Senate health committee bill.

Review of recent history

Five committees in Congress have jurisdiction over health care reform, two in the Senate, and three in the House – Health, Education, Labor and Pensions (HELP) and Finance in the Senate, and Energy and Commerce, Education and Labor, and Ways and Means in the House. The Senate HELP Committee has produced a bill, and the three House committees have produced a bill. The Senate Finance Committee has yet to report a draft bill.

The Senate HELP bill is called the Affordable Health Choices Act. A draft version of the HELP Committee bill was published last June. It passed out of committee on July 15, but at this date still has no number and is not available as a single bill. In this paper “the HELP bill” will refer to the portion of the HELP Committee’s draft bill known as “the additional Chairman’s mark on coverage,” available at the Website of the HELP Committee.

The House bill is called America’s Affordable Health Choices Act (my emphasis). A draft version of this bill, written by the chairmen of the three House committees, was published last June. It was formally introduced in July, which means it was given a number (HR 3200). HR 3200 passed out of all three House committees in late July and early August. To placate the Blue Dogs, the version of HR 3200 that passed out of the Energy and Commerce Committee was stripped of the language authorizing the “option” to use Medicare’s rates plus 5 percent. In this paper, “HR 3200” will refer to the original version of that bill which, at this date, is the only version available via the search engine at the Library of Congress.

Both bills, the HELP Committee bill and HR 3200, contain “public option” provisions. It has been obvious since the draft versions of these bills were published last June that the “options” in them are so weak they will have no effect on the premiums insurance companies will charge, and they might not even survive. “Option” advocates refuse to acknowledge these facts.

Instead of taking steps to strengthen the “option” provisions in the HELP bill and HR 3200, “option” advocates have taken the position that the “options” in both bills are “strong” and “robust,” and the “option” in HR 3200 is particularly “strong” and “robust” because it contains the two sentences I quoted above. In fact, the leadership of the “option” movement has decided to make those two pipsqueak sentences their bottom line, their Alamo, their litmus test for whether they will support the final “reform” legislation.

The two sentences “option” supporters say they must have

Here again are the two sentences from HR 3200 that representatives of the “option” movement now claim they must have:

Health care providers participating under Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary. (Section 223(b)(3))

[T]he Secretary shall base the payment rates [for providers] on the payment rates for similar services and providers under parts A [the hospital services part] and B [the physician services part] of Medicare. (Section 223(a)(2)(A))

(Language elsewhere in the bill says the Secretary shall pay providers who participate in both Medicare and the “option” an extra 5 percent during the first three years of the program.)

By contrast, the HELP bill says providers do not have to participate in the “option” program. It authorizes the Secretary only to negotiate with providers about rates (with the proviso that the negotiated rates cannot exceed the average paid by the insurance industry).

Yet “option” advocates treat these two sentences in HR 3200 – the providers-are-assumed-in and the Medicare-rate provisions – as if they were crucial weapons in the “option’s” upcoming battle with the insurance industry.

For example, in a July 15 post entitled, “Why the House’s public option is better than Kennedy’s public option,” Wonk Room blogger Igor Volsky wrote:

Though the House bill is not perfect—it encourages providers to participate rather than compels them to—it goes much further than the Kennedy bill [i.e., the HELP bill] to take full advantage of a public plan’s market power. Under the House legislation, Medicare providers are auto-enrolled as providers in the public option (the legislation presumes they will offer coverage unless they opt out) and their reimbursement rates, which are tied to Medicare rates for the first three years, include a 5 percent bonus for physicians that participate in both Medicare and the public plan (emphasis added).

In a paper posted on August 20, Jacob Hacker, the man credited with inventing the modern version of the “option,” makes the same argument. Hacker lumps the magic Two Sentences into a single concept he dubs, misleadingly, “a Medicare tie-in.” According to Hacker:

Under a Medicare tie-in, providers participating in Medicare would automatically be considered participating providers in the new public plan (although in the House bill, they would have the right to opt out) and payments to providers would be based on Medicare rates – for example, Medicare rates plus 5 percent. If the public plan is required instead to adopt the “not-so-good” approach of signing up providers and bargaining over payments directly with them, the public plan may have a very hard time building a network and obtaining reasonable rates to act as a true competitor to private plans, given the barriers it will face in consolidated insurer and provider markets. The versions of the House bill approved by the House Ways and Means Committee and House Education and Labor Committee contain a Medicare tie-in…. By contrast, the House Energy and Commerce Committee approved the House bill with amendments that preserve only the first of [the] two elements [of the Medicare tie-in – the assumption that providers will participate]. The HELP Committee bill has an even weaker guarantee that the public plan will be able to establish itself. … [I]t states that the Secretary has to negotiate rates directly with providers. But the legislation also lacks the presumption in the House bill that Medicare providers will participate (with an opt-out option), putting the public plan at a disadvantage against the private insurers with established networks. This is also a not-so-good provision that should be changed to the House approach of presuming participation. (pages 4 and 5)

By September, “option” advocates within the Congressional Progressive Caucus had decided to make the Two Sentences their Alamo. In a September 3 letter to President Obama, the CPC abandoned its previous promise to compare HR 3200’s “option” with the CPC’s criteria for a strong “option” and explicitly endorsed the HR 3200 “option” (the version that retained the Medicare-rate requirement):

We continue to support the robust public option that was reported out of the Committees on Ways and Means and Education and Labor and will not vote for a weakened bill on the House Floor or returning from a Conference with the Senate. Any bill that does not provide, at a minimum, a public option built on the Medicare provider system and with reimbursement based on Medicare rates – not negotiated rates – is unacceptable. A plan with negotiated rates would ensure higher costs for the public plan….

Note how easily each of these three statements – Volsky’s, Hacker’s, and the CPC’s – glides right past reality into another world where whatever we wish comes true. All three statements make the utterly unrealistic assumption that the task of “opting out” of the “option” program is going to be so onerous that providers who really don’t want to participate in the “option” will do so just to avoid the opt-out process. All three statements assume that all or most providers won’t want to work for below-industry rates (otherwise why give the “option” the authority to pay such rates), and yet all three statements assume the flimsy little “opt out” requirement will cause providers to change their minds.

Although the language of HR 3200 does say the Secretary will be responsible for developing an “opt out” process, there is nothing in that language to suggest that Congress expects the Secretary to make the process burdensome. What if a future Secretary of DHHS did create an onerous process to keep providers in the public plan? The inevitable a lawsuit to force the Secretary to rescind the onerous process and replace it with a simple one would succeed precisely because HR 3200 contains not even a hint that the process is supposed to cause headaches.

A far more realistic assumption is that the “opt out” process will amount to filling out a form on a computer and mailing it in to the Secretary or to the local “option.” Obviously, an “opt out” process that simple is, in the real world, no different from the voluntary process called for in the Senate HELP bill.

Similarly, the assumption that the Secretary is going to be able to induce clinics and hospitals all over the country to accept Medicare’s rates simply because HR 3200 authorizes the Secretary to use those rates is speculation at best and a daydream at worst. Providers will accept Medicare’s rates for “option” patients only if they think it’s in their financial interest to do so. As I have argued elsewhere, a provider’s judgment about whether to participate in the “option” will be based upon the total revenue that participation in the “option” will generate for the provider, not merely the fees the “option” pays. Total revenue is a function of the fees the “option” will pay and the number of patients it will deliver to the provider. But nothing in HR 3200 guarantees large enrollment in the “option.”

The CPC’s reference to a “Medicare provider system” is particularly egregious. There is no such thing. There is only the reality that the vast, vast majority of American providers accept Medicare patients at Medicare rates without legally being required to do so. Referring to the “Medicare provider system” is like referring to the “Wal-Mart customer system.” Yes, millions of people shop voluntarily at Wal-Mart. That doesn’t make them part of a “system.”

So if the magic Two Sentences can’t create the equivalent of “the Medicare provider system … with reimbursement based on Medicare rates,” to quote the CPC, what will? If the “option” isn’t going to have a ready-made supply of providers to work with, how will it be able to determine what premiums it will charge and which providers its enrollees can see so that it can begin the process of recruiting a customer base? I have discussed this complex “chicken and egg” problem in two previous papers (here and here). Essentially, the problem is that the “option’s” managers won’t be able to negotiate advantageous rates with providers unless they can give providers some idea of how many patients they will deliver to them, but they can’t make that estimate until they have some idea of what premiums the “option” will charge, but they can’t do that till they know what they have to pay providers, etc.

The chicken-egg problem could be solved if HR 3200 contained a provision that created a huge customer base for the “option” in every state prior to the day the “option” opened for business. Alternatively, HR 3200 could require all providers in America to participate in the “option” program (although it is not clear that even this requirement could solve the “chicken and egg” problem by itself). But HR 3200 contains neither provision. All it offers are the magic Two Sentences – providers are assumed to participate unless they say otherwise, and the Secretary is authorized to use Medicare’s rates. Offering the Secretary the Two Sentences is like offering someone scissors with one blade. The CPC’s vow to oppose legislation that does not contain the equivalent of scissors with one blade is silly.

It’s time for truth in advertising about the “option”

The decision by the leadership of the “option” movement to cash in all their marbles for the Two Sentences was dumb. It raises the obvious question, Why did they do it? Were they really unable to determine that the simple “opt out” provision in HR 3200 isn’t worth the paper it’s written on? Are they really incapable of understanding that merely authorizing the “option” to pay Medicare rates plus 5 percent is, by itself, no solution to the chicken-and-egg problem?

Or is there something else going on here?

Perhaps the CPC and other leaders of the “option” movement comprehend that the Two Sentences really are worthless and that the “option” in HR 3200 really is extremely weak, but they can’t bring themselves to say this publicly because they believe any “option,” not matter how pathetic, is better than no “option.” They think a “foot in the door” is better than nothing at all. As I have argued in a previous paper, the “option” will not be a typical government program. It will be a business. One does not open a business on the “foot in the door” theory. You either open a business with a solid business plan and a good chance of succeeding or you don’t.

I suspect the latter explanation (that “option” advocates know the Two Sentences are worthless) is the correct one, with one wrinkle. I suspect the leadership of the “option” movement didn’t start out thinking they would settle for any legislation so long as the naked phrase “public option” appeared somewhere in it. I suspect they decided (wrongly) that the reason Bill Clinton’s 1993 Health Security Act failed was that Clinton revealed way too much detail in his bill and this gave his enemies lots of ammunition with which to sink his ship. If I’m correct about this, the “option” movement’s leaders decided early on that they simply wouldn’t say much about how the “option” would work; they would simply ask their followers to chant “public option, public option” over and over, much the way advertising for consumer products often repeats a brand name or a concept over and over (as in, “great taste, less filling”).

If we measure this repeat-the-mantra strategy by whether it catapulted the phrase “public option” into the news media and resulted in the phrase being incorporated into legislation supported by the leadership of congressional Democrats, we would have to say it worked. But if we measure it by whether it resulted in legislation that (a) describes in sufficient detail a workable program and (b) has a chance of passing, we would have to say it failed.

If I were a foot-soldier in the “option” movement I would ask my leaders to abandon the know-nothing strategy – the strategy of saying nothing about the details of the “option” and concentrating only on the “brand” name. If I believed that a “public option” could truly reform health care I would now conclude that it was a mistake to sell the “option” as if we were selling detergent or lip gloss. I would conclude that “public option” leaders have created great “brand recognition” but they have not created legislation that will implement real health care reform.

All of us desperately need real reform of our sick health care system. The present system ruins human lives daily through preventable deaths, devastating bankruptcies, hideous disparities and gross injustice and indignity. We cannot afford to experiment with “reforms” like the “options” in HR 3200 and the HELP bill which, coupled with the enormous insurance industry bailouts called for by those bills, will merely perpetuate the current system.

It’s time for the “option” movement to insist that its representatives start speaking truthfully about the “option” provisions in HR 3200 and the HELP bill. They might start by admitting that the Two Sentences in HR 3200 are, by themselves, incapable of giving the “option” the tools it needs to survive, much less thrive.

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: How We Got Into It and How We’ll Get Out of It (AuthorHouse, 2006).