Expanding Health Insurance Coverage and Controlling Costs for Health Care

Testimony of Douglas W. Elmendorf, Director, Congressional Budget Office
United States Senate
Committee on the Budget
February 10, 2009

The government could also design an insurance option based on Medicare that would be made more broadly available, on a voluntary basis, to the nonelderly population. The federal costs per enrollee would depend primarily on the benefits that system provided; the rates used to pay doctors, hospitals, and other providers of health care; and the extent of any premium subsidies that were offered to enrollees — all of which could differ from Medicare’s current design. As for whether such a plan would be more or less costly than a private health insurance plan that provided the same benefits to a representative group of enrollees, the answer would vary geographically. Assuming that Medicare’s current rules applied, those costs would be comparable in many urban areas, but in other areas, the cost of the government-run plan would be lower (as is evident in the current program through which Medicare beneficiaries may enroll in a private health plan). At the same time, because Medicare currently provides broad access to doctors and hospitals and employs little benefit management, a Medicare-based option might attract relatively unhealthy enrollees, which could drive up its premiums, federal costs, or both.

Many of the same considerations would arise in designing a single-payer, Medicare-for-all system, but that approach might raise some unique issues as well — and the scale of its impact on federal costs could obviously be much larger if nearly all of the population was covered. Enrollees could be offered a choice of plans under a single-payer system (as happens in Medicare). If, instead, only one design option was offered and all residents were required to enroll in it, then concerns about adverse selection would not arise. That approach could also reduce the administrative costs that doctors and hospitals currently incur when dealing with multiple insurers. The lack of alternatives with which to compare that program, however, could make it more difficult to assess the system’s performance. More generally, that approach would raise important questions about the role of the government in managing the delivery of health care.

Douglas Elmendorf’s written testimony (34 pages):
http://budget.senate.gov/democratic/testimony/2009/02-10-HealthElmendorf_Testimony.pdf

In his testimony before the Senate Budget Committee, CBO Director Douglas Elmendorf discussed considerations for expanding coverage, and considerations and options for controlling costs and improving efficiency, including a discussion of options under consideration that might not be effective in controlling spending. Most of his comments were confined to various policies that currently are hot topics in the Washington dialogue on reform.

It is no surprise that his discussion of single payer was no more than a tangential paragraph buried in the middle of his written testimony. This seems to reflect their view that single payer has been dismissed as a serious proposal that might have any chance of being enacted.

What might surprise the progressive community is that the proposal to offer the option of purchasing a Medicare-like plan within a market of private health insurance plans has also been relegated to a tangential paragraph, adjacent to the single payer paragraph. It appears that the Congressional Budget Office and the Senate Budget Committee do not consider the controversial Medicare-like option to be a proposal worth serious consideration (likely because of strong Republican opposition, not to mention AHIP’s opposition).

What Elmendorf does say about a Medicare-like option is that design is very important in determining the impact that it would have. He also states, as we have stated before, that a Medicare-like option would be subject to adverse selection, creating much greater challenges in the financing of such an option.

But look at what he says about single payer with “only one design option” (an improved Medicare program). It would cover everyone, eliminate adverse selection, shift funding to the federal government (through equitable tax policies), and reduce administrative costs. Sounds pretty good.

Though he states that single payer would “raise important questions about the role of the government,” aren’t those the questions that are already being raised today. When the financial systems don’t work, the government needs to step in.

Fire fighters rescue the highest bidder

YouTube

video (40 seconds):
http://www.youtube.com/watch?v=bnjQ3cV4×1I

Though not quite so graphic, free market private health insurance is not unlike the rescue purchased by this unfortunate lady. Just as she purchased a contract to avoid hitting the ground when she jumped from this burning building, private health insurance is purchased to prevent financial hardship or bankruptcy in the face of medical need. It doesn’t always work.

Private enterprises, whether for fire protection or for the financing of health care, work by the rules of the market wherein money sets priorities. Access is subject to the vagaries the market. Public services, whether fire protection or a public national health program, work by the rules of social solidarity wherein human decency sets priorities. Public services are always there when you need them.

There is a difference.

In all fairness, this fictional bit of sick humor could be used by the opponents of a public national health program to point out that queues are a problem in public systems. Even there, many public health systems do not have excessive queues since they monitor and adjust capacity as needed, and apply queue management techniques when appropriate, all in the interests of better public service. Private health systems attempt to reduce queues for well funded patients, but they also oppose adequate funding of the public systems in order to create a greater market demand from those who can buy their way to the front of the inevitably longer queues.

We are seeing a renewal of legal challenges by Brian Day and his colleagues in Canada to create an artificial private market for health care. Just as limiting capacity in the public fire department theoretically would open up the opportunity for private entrepreneurial protection, Day is attempting to convince the courts that wealthier Canadians should have the right to pay extra to the private sector in order to bypass public queues. He contends that relieving the pressure in the public system reduces public queues, but all evidence is that two-tiered systems result in greater impairment of access in the public welfare system (think of Medicaid and the lack of willing providers, especially in the lucrative procedure-oriented specialties, who who seek the security of the better-funded private sector).

There really is a difference.

More than 4.1 million people lost their jobs in the last year. One year ago the unemployment rate was 4.8%. The other day we learned that job loss accelerated. As the unemployment rate hit 7.6%, no hope could be extended that the trend might reverse.

The relationship between losing a job and, with it, our health care, was examined in a report published in April 2008 by the Kaiser Commission on Medicaid and the Unemployed. The authors, Stan Dorn, Bowen Garrett, John Holahan, and Aimee Williams, all of the Urban Institute, estimated that when the unemployment rate rises by 1%, 1 million new people enroll in SCHIP and Medicaid and another 1.1 million people lose their health insurance.

Using these projections, a 2.8% rise in unemployment would correspond to 5.8 million people losing their health insurance, resulting in an increase in SCHIP and Medicaid enrollment by about 2.8 million people (about 1.68 million of them children) and increasing those lacking any form of health coverage by over 3 million people, all in the last twelve months.

In a year of disappearing jobs, where will people turn for their health needs, when they live in a society where, as the New York Times reported, “When a Job Disappears, So Does the Health Care”?

Spending to Survive: Cancer Patients Confront Holes in the Health Insurance System

By Karyn Schwartz, Gary Claxton, Kristi Martin, and Christy Schmidt
Kaiser Family Foundation
American Cancer Society
February 2009

1) High cost-sharing, caps on benefits and lifetime maximums leave cancer patients vulnerable to high out-of-pocket health care costs.

2) People who depend on their employer for health insurance may not be protected from catastrophically high health care costs if they become too sick to work.

3) Cancer patients and survivors are often unable to find adequate and affordable coverage in the individual market.

4) While high-risk pools are designed to help cancer patients and others who are uninsurable, they are not available to all cancer patients and some find the premiums difficult to afford.

5) Waiting periods, strict restrictions on eligibility, or delayed application for public programs can leave cancer patients who are too ill to work without an affordable insurance option.

It is impossible to determine exactly how many privately insured individuals in the United States are at risk for high out-of-pocket health costs. However, research indicates that a growing percentage of the population is already facing high out-of-pocket costs. Gaps in the current private health insurance system leave cancer patients and others with serious illnesses vulnerable even when they have coverage.

Addressing the holes in the current health insurance system will be key to providing the privately insured with economic security and access to health care in the face of illness.

Spending to Survive (55 pages):
http://www.kff.org/insurance/upload/7851.pdf

An excellent test of how well our insurance system is working is to determine how well it serves those individuals who have the tragic misfortune of developing cancer. This report shows that all too often the insurance system fails to protect cancer patients from the additional burden of financial hardship, defeating one of the most important reasons for having health insurance in the first place.

KFF and ACS are to be commended for producing this important report exposing these injustices in our health insurance system, but, at the same time, they can be condemned for their timidity in their suggested solution for this tragic problem. “Addressing the holes in the current insurance system” might be the politically safe recommendation, but we’ve been doing that for half of a century. Patching holes doesn’t fix a rotten system.

People need the support of a financing system that provides them access to the health care that they need, when they need it. They do not need a financing system that exposes them to financial hardship merely because fate has handed them the misfortune of illness or injury.

We could add hundreds of billions of dollars to our current health care financing system and still leave people vulnerable, or we could dump our dysfunctional system and replace it with one that works – a single payer national health program. It seems like the decision should be ours, but we have turned it over to the Washington clique that supports our rotten system. How smart is that?

The Public Plan Option: Bipartisanship, Or Fear And Loathing?

by Rob Cunningham
Health Affairs Blog
February 5, 2009

The tea leaves say President Barack Obama will do more than pay lip service to bipartisanship, but they don’t say whether others will follow his example.

“I sense a genuine interest in working together on the part of key Republicans in the Congress,” Senate Finance Committee chairman Max Baucus (D-MT) said this week. “They all want to be in on this. There’s a lot of excitement.” To be sure, differences over how to promote effectiveness research or IT will test the commitment of the pragmatic center. But, arguably, where there’s a will there’s a way.

That may not be the case, however, with another critical feature of the Democrats’ reform vision. Jeanne Lambrew, of the White House office of Health Reform, said this week that the administration eventually wants… to create a structured market, or “exchange,” as it is called in the Massachusetts version of universal coverage… and also a “public option.”

The subject of the public option came up frequently in the course of the Feb. 2-3 National Health Policy Conference, sponsored by Health Affairs and AcademyHealth. Whenever it did, old wounds seemed ready to reopen. A Business Roundtable representative asked if administrative costs of the public plan would be subsidized with taxpayer funds, giving it an unfair advantage over private plans. If the market power of the public plan enabled it to force lean reimbursement on providers, as the Medicare and Medicaid programs do, would providers shift costs onto private payers? The public plan idea makes the private sector nervous, said a participant in a workshop on employers’ perspectives on reform. “There’s a lot of concern.”

Republican Hill staffers at the AcademyHealth conference also expressed deep reservations about the public plan option and the related idea of creating a National Health Board to oversee the national exchange and other health-system functions. Ryan Long, minority staffer on the House Energy and Commerce Committee, asked if the public option would mean that everyone in the exchange would end up on Medicaid. Dan Elling, from the House Ways and Means Committee, wondered if the Health Board would constitute “one big HMO.” But Democratic staffers insisted that the public plan option is a must for them.

Lambrew said that details of the administration’s plans aren’t likely to be available for weeks, because work on the stimulus package takes precedence. So the exact shape of this new animal is still somewhat obscure. But fear and loathing of public-sector solutions in health care remains powerful, as it has been for most of the past century. It may be the ultimate test of the new president’s dream of post-partisanship.

http://healthaffairs.org/blog/2009/02/05/the-public-plan-option-bipartisanship-or-fear-and-loathing/

Well, we are there now. The progressive community had decided that the political barriers that have prevented reform over the past century must be brought down. A solution that would appease the conservative community must leave in place a private market of financing options. The progressives have agreed, and have asked only for one more option – a plan administered by the government.

In this Health Affairs Blog, Rob Cunningham reports on the pulse of the cross section of attendees at the National Health Policy Conference this week. What is clear is that every single detail of The Great Compromise – the public Medicare-like option – will be challenged during the legislative process. It is a fantasy to think that a bipartisan or post-partisan process will ever lead to the enactment of public option that would have any resemblance to the progressive concept of a comprehensive, better-than-Medicare plan with a financing system that would make it affordable for anyone.

Rob Cunningham reports that the mere discussion of such an option created an atmosphere in which “old wounds seemed ready to reopen.” But those wounds have never healed! And they never will.

Removing politics from policy is an impossibility. So are we going to establish battle lines over an emasculated public option that will send us back to our corners to sulk because we failed again? Or are we going to establish those same battle lines over a bona fide single payer national health program? The alignment would be the same, but with the first option, we surrender before the battle has even begun.

Sen. Baucus Discusses Prospects for Health Care Overhaul This Year

Kaiser Daily Health Policy Report
February 4, 2009

(Sen. Max) Baucus also said that he does not believe a single-payer health care system is the right model for the U.S. at this time because the shift would be too big of a change and would place too much of the private sector under control of the government. He said, “We’re constituted differently than European countries” with single-payer systems, adding, “There’s more of an entrepreneurial sense” in the U.S. “So we’ve got to come up with a uniquely American result. And a uniquely American result will be a combination of public and private insurance,” Baucus said (CQ HealthBeat, 2/3).

http://www.kaisernetwork.org/Daily_reports/print_report.cfm?DR_ID=56795&dr_cat=3

And…

The Biggest Idea in Health Care

By Andy Louis-Charles
The Motley Fool
February 3, 2009

Andy Louis-Charles: Your thoughts on a single-payer system? Should health care be treated any different than police, fire, or postal services?

Uwe E. Reinhardt: Many countries with single-payer systems (Canada, Taiwan, etc.) ask that question. Those countries do view health care like fire protection and elementary and secondary education, and they structure their health system accordingly. We are rather an exception, viewing health care as basically a private-consumption good, but we don’t quite believe that either — hence the coexistence of unbridled kindness and unbridled callousness in our health system. We do not have our head straight on this issue. Other countries have.

http://www.fool.com/investing/general/2009/02/03/the-biggest-idea-in-health-care.aspx

So with Tom Daschle stepping out of the picture, Sen. Max Baucus is maneuvering to take the lead on reform by advocating for a “uniquely American result” with “more of an entrepreneurial sense” since “we’re constituted differently than European countries.”

Uwe Reinhardt quite correctly characterizes the U.S. exceptionalism as “the coexistence of unbridled kindness and unbridled callousness in our health system.” It really is time that we learn from other countries so that we can get “our head straight on this issue.”

Today, Dr. Quentin Young, national coordinator of Physicians for a National Health Program, called on President Barack Obama to nominate Dr. Marcia Angell or Dr. David Satcher to head the Department of Health and Human Services.

Angell is a senior lecturer at Harvard Medical School and former editor of the New England Journal of Medicine. Satcher is a former U.S. surgeon general and is director of Morehouse School of Medicine’s Center of Excellence on Health Disparities.

Young said, “In the wake of former Sen. Tom Daschle’s downfall, it has become perfectly clear that the new HHS secretary must be free of compromising financial links to corporate medicine. In this regard, Dr. Marcia Angell or Dr. David Satcher would be superb candidates who pass this test.

“Either one of these distinguished physicians would make an excellent nominee for the position of HHS secretary,” Young continued, noting their many outstanding achievements in medicine and health policy. “Perhaps most important is their belief that health care is a human right, not a commodity for sale. We need precisely that kind of vision at the helm of HHS to help bring about the fundamental health reform our nation so desperately needs.”

“Both Dr. Angell and Dr. Satcher are thoroughly committed to protecting the public interest,” Young said. “Further, they are untainted by the blandishments of the private insurance and pharmaceutical industries. Our nation would be well served by having either of these remarkable physicians in this critical role.”

Young said messages of support for Angell or Satcher could be sent to President Obama by calling the White House comment line (202-456-1111) or the general switchboard there (202-456-1414). Messages can also be faxed to the White House (202-456-2461), e-mailed (visit whitehouse.gov/contact), or sent via U.S. mail (The White House, 1600 Pennsylvania Ave. NW, Washington, DC 20500).

Marcia Angell, M.D.

(Courtesy the National Library of Medicine/National Institutes of Health, http://tinyurl.com/bxn8wq)

In 1999, Dr. Marcia Angell became the first woman to serve as editor-in-chief of the New England Journal of Medicine, the premier journal of medical science in the United States. She is also committed to broadening the public’s understanding of science, and has written for a general audience on the relationships between medicine, ethics, and the law.

After completing her undergraduate studies in chemistry and mathematics at James Madison University in Harrisonburg, Va., Marcia Angell spent the next year as a Fulbright Scholar studying microbiology in Frankfurt, Germany. She received her M.D. degree from Boston University School of Medicine in 1967 and completed residencies in both internal medicine and anatomic pathology.

Currently serving as a senior lecturer in the department of social medicine at Harvard Medical School, Dr. Angell has devoted her life to researching, writing and speaking on topics incorporating medical ethics, health policy, the nature of medical evidence, the interface of medicine and the law, and end-of-life care. “My most fundamental belief,” wrote Dr. Angell in the preface to her 1996 book on the breast implant controversy in the United States, “is that one should follow the evidence wherever it leads.”

A board-certified pathologist, Angell joined the editorial staff of the New England Journal of Medicine in 1979. A decade later she was named executive editor and, in 1999, she became the first woman to serve as editor-in-chief of the prestigious journal. “I was fortunate enough to have a ready-made outlet for my thoughts,” Dr. Angell said of her tenure there. In addition to her academic writing, Dr. Angell has written for The New York Times, Newsweek, USA Today, The Washington Post, and other national publications.

Dr. Angell is a member of the Institute of Medicine of the National Academy of Sciences and a fellow of the American College of Physicians. In 1997 Time Magazine named her one of the twenty-five most influential Americans.

David Satcher, M.D.

(Excerpt courtesy the Satcher Health Leadership Institute, http://tinyurl.com/cr95xf)

Dr. David Satcher established The Satcher Health Leadership Institute (SHLI) at Morehouse School of Medicine in 2006 as a natural extension of his experience in improving public health policy for all Americans and his commitment to eliminating health disparities for minorities, poor people and other disadvantaged groups.

As a champion of improved health care quality and expanded health care access for minorities, Dr. Satcher found himself drawn to the Atlanta University Center (AUC), the largest association of Historically Black Colleges and Universities in the world, for his next challenge. In an environment with a rich history of nurturing minority leaders who engineered the Civil Rights Movement, Dr. Satcher finds both the inspiration and resources to carry out his ambitious mission.

Appointed by President Bill Clinton in 1998 as the 16th surgeon general of the United States, Dr. Satcher served simultaneously in the positions of surgeon general and assistant secretary of health at the U.S. Department of Health and Human Services. As such, he held the rare rank of full admiral in the U.S. Public Health Corps, to reflect his dual offices.

During his service as surgeon general, Dr. Satcher tackled issues that had not previously been addressed at the national level, including mental health, sexual health, and obesity, as well as the disparities that exist in health and health care access and quality for minorities.

His initial report on mental health, the first Surgeon General’s Report on this important health topic, asserts that mental illness is a critical public health problem that must be addressed by the nation. The reports he issued as surgeon general have triggered nationwide efforts of prevention, heightened awareness of important public health issues, and generated major public health initiatives.

He also served as director of the Centers for Disease Control and Prevention and administrator of the Agency for Toxic Substances and Disease Registry (1993-1998).

In addition to his governmental and academic credentials, Dr. Satcher served as a fellow at the Kaiser Family Foundation and as a Robert Wood Johnson Clinical Scholar and Macy Faculty Fellow. He is a fellow of the American Academy of Family Physicians, the American College of Preventive Medicine, the American College of Physicians, and the American Psychiatric Association.

This afternoon Dr. Quentin Young, national coordinator of Physicians for a National Health Program, made the following statement:

It’s entirely heartening to fight for a just cause and, with remarkable speed, win.

Yesterday, I and others called for Tom Daschle’s nomination to the position of Health and Human Services secretary to be withdrawn, given his tax problems and his compromising financial links to the health care profiteers. In view of these links, we now understand why nominee Daschle claimed that single-payer reform was, in effect, “off the table.”

Today, Mr. Daschle has withdrawn his nomination, and now the possibility of a progressive replacement looms.

To those who helped win this victory: congratulations all around.

Those concerned about the prospects for fundamental health reform should inform President Obama of the importance of appointing an unblemished civil servant to the HHS post.

Cordially,

Quentin Young, MD, MACP

Chicago

Getting Health Reform Right: A Q&A With Jacob Hacker

RJ Eskow
The Huffington Post
February 2, 2009

Professor Hacker’s proposal, Health Care for America, is based on two simple principles: First, that both the employer-based private system and publicly-funded Medicare are essentially working for their members. Second, that every uninsured American (or legal resident) should be able to buy into a Medicare-like public program at affordable rates, with need-based subsidies.

The plan has been well-received across the center/left spectrum, even receiving a friendly review from Don McCanne, MD, a Senior Fellow with single-payer advocacy group Physicians for a National Health Program (PHNP).

http://www.huffingtonpost.com/rj-eskow/getting-health-reform-rig_b_163270.html

And…

Getting Health Reform Right: According to Jacob Hacker

By DrSteveB
Daily Kos
February 3, 2009

There is a must read interview with Jacob Hacker, the re-inventor of the individual mandate bulding blocks plan for liberals (it originally came from center-right think tanks) which is the same core as Obama/Baucus/Daschle et al, summarized on HuffPo and in full at Richard Eskow’s the Sentinel Effect blog.

As Don McCanne and other Single Payers advocates have been pointing out:

Leaving the private insurers in place perpetuates the administrative waste of those insurers and the administrative burden on the providers. Intense regulatory oversight of the private insurers would be even more imperative since they would increase their efforts to game the system through surreptitious favorable selection and other clandestine market expediencies. The public program would likely concentrate lower-income individuals initially, risking a political transformation into a welfare program. Also his plan includes features of both an employer mandate and an individual mandate, each with its own policy problems, though he does ameliorate the impact to a certain extent with some of the other features of his plan. From a single payer perspective, it would be far better to totally cut the link between financing and coverage. A system of equitable tax funding of the entire risk pool is more efficient than a system of premiums linked to the individual.

nativist posts:

I read that post, and like this author, I think Mr. Hacker is incorrect as to the effectiveness of private healthcare.

I’m surprised Don Mcanne is supposed to be onboard with the features of Hacker’s proposals. Speaking broadly, yes it’s good to have Medicare or a close clone compete against trad insurers. Perhaps half a loaf is better than none in his view.

DrSteveB posts:

Don was being polite in Jan 2007… Don is always polite with our erstwhile incrementalist reformist friends

http://www.dailykos.com/story/2009/2/3/72018/39311/226/692345

My response, as follows, was posted on both blogs (edited to under 250 words for Huffington Post):

Jacob Hacker deserves our respect, even if wrong

DrSteveB is right. I was being polite. Jacob Hacker is a highly respected political scientist who supports social justice. I have greatly admired his work.

In his proposal he was looking for a political solution to satisfy those with good employer-sponsored plans who are uncomfortable with trading them in for a public plan that has not yet been precisely defined (since any proposed public plan must clear the hurdles in Congress). In so doing he compromised on policy, trading away many of the advantages of the single payer model.

Since I wrote the comments above, the public option described by Hacker has come under intensive attack by Enzi and his fellow Republicans, by AHIP, and by the U.S. Chamber of Commerce. It has been singled out as the most important feature that the Democrats will have to trade away if they expect the Republican support and industry support that they will need.

At best, “universal” coverage will be FEHBP plans with unaffordable premiums. Obama understood that an individual mandate cannot work, though efforts are being made to require that. According to the Milliman Medical Index, an average working family is already paying $15,600 for health care. That’s average, so many are paying more. Using private plans with premiums indexed to the average costs of individuals and their families is an obsolete model of financing health care.

Health care costs are now so high that only an administratively efficient, equitably funded universal risk pool will work. It would automatically include everyone, with financing based on ability to pay. As a single payer, the program would be a single purchaser (monopsony), finally providing us with a mechanism that would ensure value in our health care purchasing.

(I’ll add here that a social insurance model using private plans would also “work,” but is a far more expensive model of reform that trades away administrative efficiency, equity and true universality. Perpetuating unfairness, waste, and leaving some out is not the definition of what works, in my book.)

Don McCanne

Today, Dr. Quentin Young, national coordinator of Physicians for a National Health Program, sent the following open letter to the president:

Dear President Obama,

The recent revelations of former Sen. Tom Daschle’s direct financial ties to the powerful insurance and pharmaceutical industries fighting health reform are alarming. His nomination to head the Health and Human Services Department must be withdrawn.

Mr. Daschle’s numerous conflicts of interest and tax problems end his ability to lead this vital agency. Mr. President, I earnestly call upon you to name an HHS secretary who can achieve the urgent health reform our nation needs, a program that will necessarily replace the vested interests that have generously employed Mr. Daschle in the recent past.

Respectfully,

Quentin D. Young, MD, MACP

Chicago