By Theodore Marmor, PhD; Jonathan Oberlander, PhD; and Joseph White, PhD
Annals of Internal Medicine
April 7, 2009

In short, if medical costs are to be controlled, no substitute exists for constraining prices and capping expenditures. Frank talk about these cost-control realities, however, is politically difficult. It immediately elicits alarms from the medical care and insurance industries about “rationing” (ignoring the fact that the United States could realize significant savings from lower prices and administrative costs). Others, particularly the pharmaceutical industry, raise alarms about the effect that cost control would have on the pace of medical innovation. In addition, spending targets constrain medical providers’ income and thereby prompt intense political struggles. The Obama team’s limited treatment of cost-control realities — including the absence of global budgets and spending targets or caps — seems to reflect a desire to avoid such political controversies.

We write this essay, then, as a cautionary tale. Claims of savings from health information technology, prevention, P4P, and comparative effectiveness research are politically attractive. Their political appeal lies largely in the embrace of widely supported goals, including better health and improved quality of medical care. In theory, these reforms — more research, more preventive screenings, and better organized patient data — sound like benign devices to moderate medical spending. For many purposes, such reforms are substantively very desirable. But these reforms are ineffective as cost-control measures. If the United States is to control health care costs, it will have to follow the lead of other industrialized nations and embrace price restraint, spending targets, and insurance regulation. Such credible cost controls are, in the language of politics, a tough sell because they threaten the medical industry’s income. The illusion of painless savings, however, confuses our national debate on health reform and makes the acceptance of cost control’s realities all the more difficult.

http://www.annals.org/cgi/content/full/150/7/485

Comment:

By Don McCanne, MD

High health care costs are the primary driving force behind the renewed effort for reform. Everyone agrees that high costs are straining personal, business and government budgets, and something must be done to make health care affordable for all of us.

Some of us are also concerned about health care justice. We want to see that everyone has affordable access to high quality care. It is more than fortuitous that the most effective methods of reducing excess health system spending also achieve the social justice goal of health care for everyone.

Much has been written on what does work and what doesn’t work in controlling spending. This paper provides an excellent, brief summary of the concepts being floated, and is well worth downloading. We should be very concerned that the leading mechanisms proposed, as summarized in this article, would not have a significant impact on slowing spending, and would likely actually increase our costs. Nor would they be effective in achieving health care justice for all.

If we are going to address costs seriously, there is no other option than to fundamentally restructure our health care financing system. As the authors state, “no substitute exists for constraining prices and capping expenditures.” We can never achieve that by relying on our wasteful, fragmented multi-payer system of financing health care. As all other nations have shown us, there is no other option than central, public control.

It is true that some nations do use private insurers. But private insurers in their countries organized into social insurance programs serving the public good have almost nothing in common with private insurers in the United States that shun organization in order to serve their own business interests. Adding a few regulations to our current fragmented system will increase costs but cannot transform a self-serving business model into a public-serving social insurance model.

We really have only two effective choices that would achieve both of our goals. We can dismiss our current private insurers and bring in new private insurers with a mission of serving the public good, but that is the most expensive model of reform, and it compromises equity and efficiency. Our other choice would be to eliminate our fragmented financing system and replace it with a single payer national health program. That would allow us to constrain prices and cap expenditures while achieving our other goal of providing all necessary care for everyone.

We can do it, but the people, through our elected representatives, are going to have to tell the special interests that we’ve had enough.

Does the nation need a clear policy on a right to basic health care?

By Josh Freeman
Medicine and Social Justice
April 10, 2009
At a recent conference, I was asked to be a “thought provocateur” (!!) on the topic “The nation needs a clear policy on the basic right to health care”.
This is an interesting question, since my first reaction is: “Of course, we need a clear policy on the basic right to health care! I mean, I have a pretty clear idea of what that policy should be, but certainly even those who would disagree with me would agree that we need a policy!”
But, on reflection, I don’t know that they do. I think that a great deal of the perseverance of our “non-system” of health care has been a result of a consensus among our leaders to NOT talk about this issue, to NOT grapple with it, to not have to take a position one way or another on whether health care is a basic right.
This is because, if one does take a position, there are implications, and things that we would then have to do.
If health care is a basic right, then we need to provide it to everyone. We can no longer diddle around with partial fixes, tinkering around the edges, covering (maybe) children but not their parents, covering people who are poor — as long as they are children and their mothers and are really poor and not working — but not those who are poor, or nearly-poor, depending on which state you are in. Or, for that matter, working-class, or, in increasing numbers, middle class.
But the problem is most people in power, including most politicians including the President, don’t want to have to take a position against health care being a basic right. It sounds, well, mean. There aren’t many people, except, well, mean people (and maybe some reactionary ideologues), who are willing to defend this position.
So we have shows such as “Sick Around America”, the Frontline “sequel” to T.R. Reid’s “Sick Around the World” (which Reid disassociated himself from). It interviewed insurance company executives who said “sure we can insure everyone”. If we make it mandatory and can make a profit, everyone. Hmm. The cost would be ridiculous. And the option of single payer was never mentioned. There is a lot more that has to be decided if we agree that health care is a basic right, like how to provide it, how to pay for it, and what will be and will not be covered. I mean, sure, other countries seem to have solved that problem, and we could model a system on one or more of theirs, but where’s the fun in that?
And if we agree that health care is not a basic right, we solve that problem, but we have other ones — like all these uninsured, and underinsured people.

• And folks not getting preventive care but rather incredibly expensive curative care.
• And companies like our automobile companies going bankrupt in some part because of the cost of health insurance.
• And, oh yeah, people dying in the streets.

For the record, I do believe that we need a policy on health care as a basic right, and my belief is that it should be. Perhaps the most important reason is social justice; we all share in the public good. This is what virtually every other nation of the first world has long realized. When T.R. Reid asked the leaders of the countries he visited for “Sick Around the World” how many of their citizens went bankrupt as a result of health care debts, they all said none. The most dramatic response was from the President of the Swiss Confederation, a conservative who had originally opposed the Swiss program in the early 90s. “No one,” he boomed in his French-accented English, “why, it would be a national scandal!”
The health of our society depends upon the health of all of us.

• When people crowd our emergency rooms, not with minor illnesses, but with serious illnesses that could have been prevented with earlier treatment, that is a scandal.
• When parents cannot afford their own health care and their illnesses threaten their ability to keep providing for their children, that is a scandal.
• When people stay in jobs they hate, or forego the opportunity to start a new business, because they rightfully fear being uninsured, that is a scandal.
• When our friends and neighbors, parents and children, only take partial doses of their medicine because it is a choice between that and not eating, that is a scandal.
• When a hard-working man with chest pain can see the billboards advertising the superb heart care available at our local hospitals and know they are not meant for him because he is uninsured, that is a scandal.

When we are all in it together, we all have an interest in making the system be as good as it can be. The efforts of those of us who are more educated, more financially able, more vocal, more empowered will ensure that the needs of those who are less able to lobby for themselves are also met.
Just as our nation cannot survive half-slave and half-free, or with only half of adults having the vote, we cannot survive with only some of us having access to health care.
We need to do this for all of us, for, after all, ultimately, we are our brother’s and sister’s keepers.
http://medicinesocialjustice.blogspot.com/2009/04/does-nation-need-clear-policy-on-right.html
The Coastal Research Group
http://coastalresearch.org/about/

Joshua Freeman, MD is Professor and Chair of the Department of Family Medicine at the University of Kansas School of Medicine. I was fortunate to have been in the audience when Josh delivered his comments above at the Twentieth National Conference on Primary Health Care Access, sponsored by The Coastal Research Group.
Words on paper (or on a computer monitor screen) can express concepts, but they fall short in expressing the passion and inspiration communicated to the audience during the presentation of the speaker. This was one of those moments I’ll remember forever.
Josh had to leave before the discussion of a reactor panel assembled to respond to his comments. One physician from Nebraska expressed his views of health care as a matter of justice – comments which also moved me deeply. Another physician from Texas was not inclined to support health care as a right, and then he read us a passage from the Bible.
I’ll ask you, does the nation need a clear policy on a right to basic health care?

Institute for America’s Future and Berkeley Center on Health, Economic & Family Security
Policy Brief
April 2009

Healthy Competition: How to Structure Public Health Insurance Plan Choice to Ensure Risk-Sharing, Cost Control, and Quality Improvement

By Jacob S. Hacker, Ph.D.
Executive Summary
The debate over health care reform has increasingly centered on the issue of “public plan choice”–whether Americans younger than 65 who lack employment-based coverage should have the choice of enrolling in a new public health insurance plan modeled after Medicare. The central argument for public plan choice is that such a plan, offered as a choice within a new national insurance “exchange,” provides an essential set of security guarantees, ensuring that Americans without insurance from their place of work can find a plan that offers them quality, affordable health care through a broad choice of providers in all parts of the country.
For public plan choice to provide such guarantees, however, the public plan must be properly structured, compete on a truly “level playing field” with private plans, and have the authority to use its bargaining power as one of many tools to encourage greater value in health care delivery. The most effective and easily implemented model for the new public plan is a “Medicare-like” plan that builds on Medicare’s administrative infrastructure and basic framework of coverage but is separate from Medicare’s risk pool and departs from Medicare in a number of key respects regarding payment and benefits.
To create a level playing field requires attention to the “three R’s” of workable public-private competition: rules that are the same for both the public plan and private plans, risk adjustment that protects plans from being competitively disadvantaged if they enroll a less healthy group of people, and regional pricing that allows private plans and the public plan to compete within regions on the same terms, rather than having the public plan compete on a national basis with regionally based private plans (whose premiums may be lower or higher in any given region).
Finally, giving the public plan the authority to bargain for reasonable rates is an essential item on the menu of cost control — and one that the Congressional Budget Office (CBO) and other budget watchdogs are likely to “score” as producing savings (in contrast with many other currently favored cost-control strategies). Nonetheless, there are reasonable concerns about how the new public plan will use its bargaining power — concerns reflected in current proposals for a price-taking (rather than price-making) public plan that would have limited ability to secure fair rates. However, a watered-down public plan would be a grave mistake. Instead, the public plan should include safeguards designed to ensure that providers are fairly represented and that bargaining for lower prices does not negatively affect patients’ access to care or shift costs onto private insurers. Indeed, a better alternative to a public plan without price-setting authority would be allowing private fee-for-service-style plans to piggyback on the public plan in setting their own prices.
Public plan choice is rooted in existing precedents that have shown themselves to work, rather than speculative convictions about how a delicately balanced new system will operate. It must be part of any successful reform package. Without public plan choice, Americans without workplace insurance will be put in jeopardy, private insurers will lack an effective check on their actions, and the opportunity to place our crumbling framework of health financing on a secure foundation will be lost.
http://www.ourfuture.org/files/Hacker_Healthy_Competition_FINAL.pdf

This is a very important paper because addresses one of the most controversial issues in the current health care reform debate: Should a Medicare-like plan be offered in competition with a market of private health plans? UC Berkeley Professor Jacob Hacker adds to his previous contributions on the private plan/public option model of reform by describing in detail what a properly-designed Medicare -like option would look like.
To understand this fairly complex model, you really need to read this 31 page report. But looking at just a few of the problems that he addresses can give you an idea of where this approach is headed.
How would the public option control costs?
From the report: “The great virtue of public plan choice as a means of cost control is that it proposes relatively minimal disruption to existing arrangements compared with other comprehensive reform proposals. It only says that a public health insurance plan will be offered alongside private plans as a coverage option for those without insurance through their employer. It is the competition between private plans and public health insurance, with its distinctive cost-control advantages, that presses both public and private plans to provide more for less and ensures that the goal of affordable quality coverage can be maintained over time at a price the nation can bear.”
DM: In the Medicare Advantage program we have already tested this concept, and the private plans required more money, not less, than the “competing” traditional Medicare program. With a single, universal public program, cost efficiencies would apply to our entire health care system.
How would this proposal spur improved quality?
From the report: “… a new public health insurance plan for the nonelderly (and Medicare, through its association with the new plan) can and should be centrally involved in obtaining better information to improve physician and patient decisions, as well as insurer decisions about coverage, pricing, and benefit structure. Because of its broad and national reach, the stability of its enrollment, and the unparalleled opportunity for data collection and use, the new public health insurance plan is the player in the system that will have the largest incentives to make these investments.”
DM: So the public program would bear the costs on research and data collection. Would those costs be allocated exclusively to the patients in the public program? Would the private insurers have a free ride? Since the mission and income needs of the private insurers are different from the public plan, would they even use the results of the research, especially if greater spending would ensue? Would the government even have access to the proprietary information of these plans competing in the private marketplace? Obviously a single, universal public program would have a more complete and accurate information database that could be applied to improve the quality of our entire health care delivery system, rather than allowing private plans to pick and choose based on bottom line issues rather than optimal quality.
What should the public plan look like?
From the report: “More specifically, the new public plan should be national (with the same basic terms nationwide for patients and providers), governmental (a true public health insurance plan, not, say, a nonprofit insurer operating under federal charter), comprehensive (providing defined benefits on the same basic administrative platform), and built on Medicare’s infrastructure.”
DM: So a bona fide public program is proposed, but…
How could the public and private plans compete “on a level playing field”?
From the report: “… a level playing field requires a set of safeguards that are easily remembered as the “three R’s”: rules, risk adjustment, and regional pricing.”
Rules: “Both the public and private plans should also have to abide by the same fundamental rules, the main purpose of which is to prevent plans from profiting by selecting healthy people rather than delivering value. These rules include: community rating, guaranteed issue, limits on marketing, standardized and defined benefits, reserve requirements, transparency…”
Risk adjustment: “…there is also a need for risk adjustment. That is, plans should be paid different amounts by the exchange based on the expected and realized risk of their enrollees. Enrollees and plans should not be penalized when a plan attracts less healthy enrollees. While prospective risk adjustment technologies have come a long way, they are still imperfect. Thus any risk-adjustment system should mix prospective risk adjustment with a retrospective risk-adjustment process at the end of the year that redistributes funds among the plans to ensure that those with very unfavorable mixes of risk are protected. Of course, the public health insurance plan must be part of this arrangement.”
Regional pricing: “… the bids made by both the public plan and private plans should be made on a regional basis. In other words, although the exchange should be nationally administered, the bids should be regionally specific. Many private plans will only wish to provide benefits in certain regions where they operate. The public health insurance plan will of course be truly national. Without regional bidding, the public plan will be disadvantaged in areas where private premiums are low and advantaged where they are high. Neither is conducive to a truly level playing field.”
DM: Merely to counter the attack that the government doesn’t play on a level field, we would have to establish a set of administratively complex rules of competition with which the government must comply, include the difficult task of determining and adjusting for the relative risks in the public and private pools in spite of the private insurers proclivity to game these risks, and then require our national public program to bid in each region to provide fairness for the government program? This adds considerable administrative inefficiency to a government program that should be offering greater efficiency. A single, universal national health program would not require these extra rules, risk adjustments and health plan competitive bidding processes.
How would the premium for the public plan be established?
From the report: “A strong argument can be made for the federal government setting subsidies on the basis of the average weighted premium of plans, as opposed to the cost of the least expensive plan. First, this would reduce the chance that lower-income enrollees would feel pressured by costs to enroll in the least expensive plan. Second, it would at least crudely adjust subsidies to reflect the variance of plan premiums as well as the level. In areas where the range of plan premiums is larger, subsidies based on the average will much better protect enrollees against premium costs than subsidies based on the lowest-cost plan. For these two reasons, the weighted-average-premium approach is preferable to the lowest-cost-plan approach for setting subsidies, and the graphics that follow focus on showing how this approach would work. However, either approach would create the necessary incentive for enrollees to prefer less expensive plans.”
DM: Instead of a complex process to determine a premium for a public program based on the actuarial value of the benefits provided, a single payer program would do away with premiums. The system would be financed with a simpler and much more equitable tax. Also, everyone who believes in health care justice should be deeply troubled by the statement that this approach “would create the necessary incentive for enrollees to prefer less expensive plans.”
Since premiums would be unaffordable for the majority, how would subsidies be administered?
From the report: “… the subsidy could vary with the income of the enrollee. Low-income enrollees would certainly receive even greater assistance, as well as help with cost-sharing. Because most enrollees through the exchange will be workers whose employers have contributed on their behalf, and because coverage should be kept affordable, the subsidies should cover a good portion of the premium for all enrollees. Since the average employer/employee split of health premiums is roughly 80/20 in the private market today, 80 percent seems a reasonable baseline contribution.”
DM: The purpose of government subsidies is to transfer payment for health care from the wealthy to those who cannot afford to pay for their full, evenly-divided allocation of our national health care bill. That now includes middle-income Americans. A subsidy system requires a separate administrative task for everyone included within the system of health care coverage, with further adjustments depending on out-of-pocket expenses, and periodic reevaluation of eligibility requirements. These administrative excesses are made necessary only because we couple the payment of health care to the specific benefit package – the insurance plan. A single payer system eliminates this administrative nonsense by replacing premiums and cost-sharing with tax financing – again, a much simpler and more equitable approach.
What about the all-payer alternative?
From the report: “…allow private plans that pay providers on a more or less fee-for-service basis to piggyback on the public plan in setting their own prices… In practice, all-payer rate setting of this sort would mean that private fee-for-service plans within the exchange would use the same fee schedule that the public plan did. Allowing private plans that use fee-for-service payment to piggyback on the public plan’s rate thus would have broader benefits than simply reducing the opposition of private insurers to the idea of a public plan. It would make cost control more effective, encourage administrative simplification and care improvement, and increase the degree of coordination in American health financing.”
DM: Okay. So we combine the public and private payers into an all-payer program. Then why would any individual in his/her right mind, other than an insurance executive or shareholder, want to keep this worthless, wasteful, expensive industry in play?
PNHP has been under attack by our friends in the progressive community for being opposed to the public Medicare-like option. That is a misstatement of our position. We are opposed to a fragmented, dysfunctional health care financing system that is causing financial hardship, physical suffering, and, all too often, death. Adding a public option will have only a negligible impact on the fundamental flaws that are causing so much personal grief.
Our friends and our enemies know what would fix our system: a single payer national health program. We think we understand the position of our enemies – largely based on greed. Why else would they support such a cruel system?
But our friends? Why do they attack us as they retreat to a secure position within the ranks of the private insurance industry? Besides, just wait and see what the insurers and their purchased representatives in Congress will do with Jacob Hacker’s “Healthy Competition” proposal. You’ll have to look quick because the window of opportunity for reform will have slammed shut.

Institute for America’s Future and Berkeley Center on Health, Economic & Family Security
Policy Brief
April 2009

Healthy Competition: How to Structure Public Health Insurance Plan Choice to Ensure Risk-Sharing, Cost Control, and Quality Improvement

By Jacob S. Hacker, Ph.D.

Executive Summary

The debate over health care reform has increasingly centered on the issue of “public plan choice”–whether Americans younger than 65 who lack employment-based coverage should have the choice of enrolling in a new public health insurance plan modeled after Medicare. The central argument for public plan choice is that such a plan, offered as a choice within a new national insurance “exchange,” provides an essential set of security guarantees, ensuring that Americans without insurance from their place of work can find a plan that offers them quality, affordable health care through a broad choice of providers in all parts of the country.

For public plan choice to provide such guarantees, however, the public plan must be properly structured, compete on a truly “level playing field” with private plans, and have the authority to use its bargaining power as one of many tools to encourage greater value in health care delivery. The most effective and easily implemented model for the new public plan is a “Medicare-like” plan that builds on Medicare’s administrative infrastructure and basic framework of coverage but is separate from Medicare’s risk pool and departs from Medicare in a number of key respects regarding payment and benefits.

To create a level playing field requires attention to the “three R’s” of workable public-private competition: rules that are the same for both the public plan and private plans, risk adjustment that protects plans from being competitively disadvantaged if they enroll a less healthy group of people, and regional pricing that allows private plans and the public plan to compete within regions on the same terms, rather than having the public plan compete on a national basis with regionally based private plans (whose premiums may be lower or higher in any given region).

Finally, giving the public plan the authority to bargain for reasonable rates is an essential item on the menu of cost control — and one that the Congressional Budget Office (CBO) and other budget watchdogs are likely to “score” as producing savings (in contrast with many other currently favored cost-control strategies). Nonetheless, there are reasonable concerns about how the new public plan will use its bargaining power — concerns reflected in current proposals for a price-taking (rather than price-making) public plan that would have limited ability to secure fair rates. However, a watered-down public plan would be a grave mistake. Instead, the public plan should include safeguards designed to ensure that providers are fairly represented and that bargaining for lower prices does not negatively affect patients’ access to care or shift costs onto private insurers. Indeed, a better alternative to a public plan without price-setting authority would be allowing private fee-for-service-style plans to piggyback on the public plan in setting their own prices.

Public plan choice is rooted in existing precedents that have shown themselves to work, rather than speculative convictions about how a delicately balanced new system will operate. It must be part of any successful reform package. Without public plan choice, Americans without workplace insurance will be put in jeopardy, private insurers will lack an effective check on their actions, and the opportunity to place our crumbling framework of health financing on a secure foundation will be lost.

http://www.ourfuture.org/files/Hacker_Healthy_Competition_FINAL.pdf

Comment:

By Don McCanne, MD

This is a very important paper because addresses one of the most controversial issues in the current health care reform debate: Should a Medicare-like plan be offered in competition with a market of private health plans? UC Berkeley Professor Jacob Hacker adds to his previous contributions on the private plan/public option model of reform by describing in detail what a properly-designed Medicare -like option would look like.

To understand this fairly complex model, you really need to read this 31 page report. But looking at just a few of the problems that he addresses can give you an idea of where this approach is headed.

How would the public option control costs?

From the report: “The great virtue of public plan choice as a means of cost control is that it proposes relatively minimal disruption to existing arrangements compared with other comprehensive reform proposals. It only says that a public health insurance plan will be offered alongside private plans as a coverage option for those without insurance through their employer. It is the competition between private plans and public health insurance, with its distinctive cost-control advantages, that presses both public and private plans to provide more for less and ensures that the goal of affordable quality coverage can be maintained over time at a price the nation can bear.”

DM: In the Medicare Advantage program we have already tested this concept, and the private plans required more money, not less, than the “competing” traditional Medicare program. With a single, universal public program, cost efficiencies would apply to our entire health care system.

How would this proposal spur improved quality?

From the report: “… a new public health insurance plan for the nonelderly (and Medicare, through its association with the new plan) can and should be centrally involved in obtaining better information to improve physician and patient decisions, as well as insurer decisions about coverage, pricing, and benefit structure. Because of its broad and national reach, the stability of its enrollment, and the unparalleled opportunity for data collection and use, the new public health insurance plan is the player in the system that will have the largest incentives to make these investments.”

DM: So the public program would bear the costs on research and data collection. Would those costs be allocated exclusively to the patients in the public program? Would the private insurers have a free ride? Since the mission and income needs of the private insurers are different from the public plan, would they even use the results of the research, especially if greater spending would ensue? Would the government even have access to the proprietary information of these plans competing in the private marketplace? Obviously a single, universal public program would have a more complete and accurate information database that could be applied to improve the quality of our entire health care delivery system, rather than allowing private plans to pick and choose based on bottom line issues rather than optimal quality.

What should the public plan look like?

From the report: “More specifically, the new public plan should be national (with the same basic terms nationwide for patients and providers), governmental (a true public health insurance plan, not, say, a nonprofit insurer operating under federal charter), comprehensive (providing defined benefits on the same basic administrative platform), and built on Medicare’s infrastructure.”

DM: So a bona fide public program is proposed, but…

How could the public and private plans compete “on a level playing field”?

From the report: “… a level playing field requires a set of safeguards that are easily remembered as the “three R’s”: rules, risk adjustment, and regional pricing.”

Rules: “Both the public and private plans should also have to abide by the same fundamental rules, the main purpose of which is to prevent plans from profiting by selecting healthy people rather than delivering value. These rules include: community rating, guaranteed issue, limits on marketing, standardized and defined benefits, reserve requirements, transparency…”

Risk adjustment: “…there is also a need for risk adjustment. That is, plans should be paid different amounts by the exchange based on the expected and realized risk of their enrollees. Enrollees and plans should not be penalized when a plan attracts less healthy enrollees. While prospective risk adjustment technologies have come a long way, they are still imperfect. Thus any risk-adjustment system should mix prospective risk adjustment with a retrospective risk-adjustment process at the end of the year that redistributes funds among the plans to ensure that those with very unfavorable mixes of risk are protected. Of course, the public health insurance plan must be part of this arrangement.”

Regional pricing: “… the bids made by both the public plan and private plans should be made on a regional basis. In other words, although the exchange should be nationally administered, the bids should be regionally specific. Many private plans will only wish to provide benefits in certain regions where they operate. The public health insurance plan will of course be truly national. Without regional bidding, the public plan will be disadvantaged in areas where private premiums are low and advantaged where they are high. Neither is conducive to a truly level playing field.”

DM: Merely to counter the attack that the government doesn’t play on a level field, we would have to establish a set of administratively complex rules of competition with which the government must comply, include the difficult task of determining and adjusting for the relative risks in the public and private pools in spite of the private insurers proclivity to game these risks, and then require our national public program to bid in each region to provide fairness for the government program? This adds considerable administrative inefficiency to a government program that should be offering greater efficiency. A single, universal national health program would not require these extra rules, risk adjustments and health plan competitive bidding processes.

How would the premium for the public plan be established?

From the report: “A strong argument can be made for the federal government setting subsidies on the basis of the average weighted premium of plans, as opposed to the cost of the least expensive plan. First, this would reduce the chance that lower-income enrollees would feel pressured by costs to enroll in the least expensive plan. Second, it would at least crudely adjust subsidies to reflect the variance of plan premiums as well as the level. In areas where the range of plan premiums is larger, subsidies based on the average will much better protect enrollees against premium costs than subsidies based on the lowest-cost plan. For these two reasons, the weighted-average-premium approach is preferable to the lowest-cost-plan approach for setting subsidies, and the graphics that follow focus on showing how this approach would work. However, either approach would create the necessary incentive for enrollees to prefer less expensive plans.”

DM: Instead of a complex process to determine a premium for a public program based on the actuarial value of the benefits provided, a single payer program would do away with premiums. The system would be financed with a simpler and much more equitable tax. Also, everyone who believes in health care justice should be deeply troubled by the statement that this approach “would create the necessary incentive for enrollees to prefer less expensive plans.”

Since premiums would be unaffordable for the majority, how would subsidies be administered?

From the report: “… the subsidy could vary with the income of the enrollee. Low-income enrollees would certainly receive even greater assistance, as well as help with cost-sharing. Because most enrollees through the exchange will be workers whose employers have contributed on their behalf, and because coverage should be kept affordable, the subsidies should cover a good portion of the premium for all enrollees. Since the average employer/employee split of health premiums is roughly 80/20 in the private market today, 80 percent seems a reasonable baseline contribution.”

DM: The purpose of government subsidies is to transfer payment for health care from the wealthy to those who cannot afford to pay for their full, evenly-divided allocation of our national health care bill. That now includes middle-income Americans. A subsidy system requires a separate administrative task for everyone included within the system of health care coverage, with further adjustments depending on out-of-pocket expenses, and periodic reevaluation of eligibility requirements. These administrative excesses are made necessary only because we couple the payment of health care to the specific benefit package – the insurance plan. A single payer system eliminates this administrative nonsense by replacing premiums and cost-sharing with tax financing – again, a much simpler and more equitable approach.

What about the all-payer alternative?

From the report: “…allow private plans that pay providers on a more or less fee-for-service basis to piggyback on the public plan in setting their own prices… In practice, all-payer rate setting of this sort would mean that private fee-for-service plans within the exchange would use the same fee schedule that the public plan did. Allowing private plans that use fee-for-service payment to piggyback on the public plan’s rate thus would have broader benefits than simply reducing the opposition of private insurers to the idea of a public plan. It would make cost control more effective, encourage administrative simplification and care improvement, and increase the degree of coordination in American health financing.”

DM: Okay. So we combine the public and private payers into an all-payer program. Then why would any individual in his/her right mind, other than an insurance executive or shareholder, want to keep this worthless, wasteful, expensive industry in play?

PNHP has been under attack by our friends in the progressive community for being opposed to the public Medicare-like option. That is a misstatement of our position. We are opposed to a fragmented, dysfunctional health care financing system that is causing financial hardship, physical suffering, and, all too often, death. Adding a public option will have only a negligible impact on the fundamental flaws that are causing so much personal grief.

Our friends and our enemies know what would fix our system: a single payer national health program. We think we understand the position of our enemies – largely based on greed. Why else would they support such a cruel system?

But our friends? Why do they attack us as they retreat to a secure position within the ranks of the private insurance industry? Besides, just wait and see what the insurers and their purchased representatives in Congress will do with Jacob Hacker’s “Healthy Competition” proposal. You’ll have to look quick because the window of opportunity for reform will have slammed shut.