PNHP

David Cutler on ten ideas to bend the cost curve

David Cutler on ten ideas to bend the cost curve

Health Reform Passes the Cost Test

By David M. Cutler
The Wall Street Journal
March 9, 2010

Many people are worried that the health-care reform proposed by President Obama and congressional Democrats will fail to bend the “cost curve.” A number of commentators are urging no votes because of this, and Republicans have asked the president to start health reform over, focusing squarely on the issue of cost reduction.

These calls overlook the actual legislation. Over the past year of debate, 10 broad ideas have been offered for bending the health-care cost curve. The Democrats’ proposed legislation incorporates virtually every one of them. Here they are:

• Form insurance exchanges. These would help curb underwriting and inefficient marketing practices that raise costs in the small-group and individual insurance markets. This is addressed in all the House and Senate bills, and the president’s proposal. Grade: Full credit.

• Reduce excessive prices, including those of supplemental plans enrolling Medicare beneficiaries. The president’s proposal reduces these Medicare Advantage overpayments and others to different providers, even in the face of Republican claims that reducing such overpayments is tantamount to rationing care for seniors. Grade: Full credit.

• Moving to value-based payment in Medicare. Both Democrats and Republicans have called for moving from a system where volume drives reimbursement to one where value drives reimbursement. The president’s proposal includes virtually every idea offered for doing this. Grade: Full credit.

• Tax generous insurance plans. Health-insurance benefits are excluded from income taxation, providing incentives for excessively generous insurance. Many economists have proposed capping the tax exclusion to reduce these incentives. The president’s proposal taxes some of the most generous policies, though it has deferred the date by which these taxes take effect. Grade: Partial credit.

• Empower an independent Medicare advisory board. Interest-group politics intrudes too deeply within the mechanics of Medicare policy, raising program costs and hindering efforts to improve care. Despite powerful opposition, the president proposes this independent board and a process for fast-tracking such recommendations through Congress. Grade: Full credit.

• Combat Medicare fraud and abuse. The administration has started an active task force to combat these problems. Other ideas to reduce fraud and abuse were presented at the recent health-care summit, and were incorporated in the president’s proposal. Grade: Full credit.

• Malpractice reform. Defensive medicine is a small but important driver of medical spending. The reform proposal makes some headway, encouraging states to experiment with alternative mechanisms to reduce malpractice burdens. More could be done—for example, specialized malpractice courts and a safe harbor for physicians practicing evidence-based medicine—but the president’s proposal makes a start. Grade: Partial credit.

• Invest in information technology. Many studies suggest savings in the tens of billions of dollars from IT investment. The stimulus bill passed a year ago contains funds to wire the medical system over the next few years, and the administration is supplementing this with significant funds to analyze the comparative effectiveness of different treatments—even in the face of “death panel” claims. Grade: Full credit.

• Prevention. The president’s proposal includes significant public-health investments, provides new incentives for physicians to focus on preventive and chronic care, and opens Medicare to finding new ways of supporting prevention. The only area of weakness is the lack of a junk food tax or tax on sugar sweetened beverages. Grade: Partial credit.

• Create a public option. A public insurance option would provide competition for insurers in areas that are nearly a monopoly and provide a path for reforms in Medicare to expand readily in the under-65 population. The public option was eliminated because of Republican opposition, however. Grade: No credit.

So reform gets full credit on six of the 10 ideas, partial credit on three others, and no credit on one. The area of no credit (a public option) is because Republicans opposed the idea. One area receives only partial credit because of Democratic opposition (malpractice reform) and two other areas reflect general hesitancy to increase taxes (taxing Cadillac plans and taxing drivers of obesity).

Why is reform viewed so negatively? In part, it may reflect the perfect being the enemy of the good. If the only passing grade is 10 out of 10, then reform clearly fails. But given where the Republican Party is on a public option, no reform will get a passing grade. If both parties were willing to raise taxes and Republicans negotiated malpractice reform for their overall support, we could probably get a nine out of 10.

Reform is also viewed negatively because official scorekeepers do not believe anything on this list other than reducing prices will save much money. The Congressional Budget Office has consistently estimated that policies built around changing incentives and thus encouraging more efficient care will not have any effect on cost trends. My own calculations, mirrored by other observers and a host of business and provider groups, suggest that the reforms will save nearly $600 billion over the next decade and even more in the subsequent one.

Of course, no one knows precisely how much medical spending increases will moderate. But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States. Should we really walk away from that?

Mr. Cutler is a professor of economics at Harvard University. He was senior health-care adviser to the Obama presidential campaign.

http://online.wsj.com/article/SB10001424052748703936804575108080266520738.html

Comment: 

By Don McCanne, MD

There is an important debate taking place as to whether or not the Obama proposal, based on the Senate bill, will control health care costs. President Obama and his supporters contend that every idea on controlling costs is in this bill. The private insurance industry contends that premiums will continue to increase at unsustainable levels because this measure does very little to control rising costs. Who is right?

Harvard economics professor David Cutler served as a health care adviser to the Obama presidential campaign and is well situated to present the arguments in support of the position that the Obama proposal will “bend the cost curve,” slowing the rise in health care costs. Let’s look at the arguments that he presents in this WSJ article.

*  Form insurance exchanges.

Private insurance plans to be offered through the exchanges will have higher premiums than plans currently in the individual market because the increased costs of the required benefits will more than offset any administrative efficiencies of these plans. Since the actuarial value of the exchange plans will be lower than the average of today’s employer-sponsored group plans, patients will have to bear a significant portion of the costs. The exchanges themselves create additional administrative costs which will reduce the savings from administrative efficiencies.

Although the administrative waste in our current fragmented financing system is profound, reform that would recover much of this waste was rejected before the process began. If there is any net savings at all from the exchanges, it will not qualify as even a footnote in the annual report on our national health expenditures (NHE).

*  Reduce excessive prices, including th
ose of supplemental plans enrolling Medicare beneficiaries.

Studies have shown that one of the largest and most important contributors to our health care spending is the very high health care prices in the United States, when compared to other nations. In other nations, the government plays a significant role in pricing, but our legislators rejected any type of administered pricing that was not already in force in our public programs, instead leaving it to market competition of private plans. The fact that we have the highest prices is proof that the private plans have not been capable of controlling prices.

The proposal reduces the overpayments to private plans, but leaves in place their administrative excesses. Spending in Medicare actually could be reduced by eliminating both the Medicare Advantage plans and the Medigap plans. Medigap provides the very worst value of private health plans. It would be far less expensive to roll the extra benefits that are of value in these plans into the traditional Medicare program. That would enable modest savings while providing Medicare beneficiaries with a better program.

*  Moving to value-based payment in Medicare.

Cutler says that the president’s proposal “includes virtually every idea offered” for “moving from a system where volume drives reimbursement to one where value drives reimbursement.” Nice rhetoric, but the plethora of health policy literature provides almost nothing on how to do this. Current measurements of value in health care are very primitive and would have very little impact on our total health care delivery system.

Much of health care is not particularly productive even if provided in large volumes, but it is exceedingly difficult to slash the volume without slashing the truly beneficial services blended into that volume. We should certainly make greater strides in trying to sort out beneficial and non-beneficial services, but that is not dependent on the passage of this bill.

Many of the financing experiments in the proposal are limited to Medicare and wouldn’t even apply to the remaining 85 percent of our population. When we do find out how to obtain greater value in health care, we need to apply those principles to our entire population and not simply to Medicare beneficiaries. To do that would require an improved Medicare-like financing structure that includes everyone, because the fragmented market of private insurance plans could never pull their act together.

*  Tax generous insurance plans.

Employer-sponsored plans formerly provided an actuarial value of about 89 percent, leaving 11 percent of the costs as the responsibility of the employee. In an attempt to control premium increases – not cost increases – more of the costs have been shifted to employees, reducing the average actuarial value to about 80 percent. The exchanges will be offering plans at a 70 percent actuarial value.

In one of the great deceptions of the reform process, plans that actually protect patients from financial hardship are now called “generous insurance plans” which allegedly need to be taxed. The intent of the tax is to ratchet down the actuarial value of employer-sponsored plans to control the premiums, while reducing spending by increasing financial barriers through greater patient cost sharing. We need policies to help get patients the care that they need, not hinder access.

*  Empower an independent Medicare advisory board.

As discussed in a recent Quote of the Day, we do need a greater government role in improving our health care financing, which can help to transform health care delivery into a high performance system, whether that is through an Independent Medicare Advisory Board – an empowered MedPAC – or some other appropriate institution. Again, this should not be a role limited to 15 percent of our population. To be effective it should be applied to an improved Medicare that covers everyone. The Obama plan, since it perpetuates our fragmented system, would not enable such an institution to provide the impact that it should have.

*  Combat Medicare fraud and abuse.

Since the beginning of Medicare everyone knows that fraud and abuse are problems because of all of the reports of the government cracking down on these criminal activities. This legislation is not essential to perpetuate the government oversight that we need to reduce these losses. What we need instead is an expansion of this oversight to our entire health system and not limited to the government programs. The federal government formerly partnered with the private insurers in fraud prosecution, but it doesn’t anymore since the private insurers contributed very little but merely wanted a cut of the recovery. Can you imagine the insurers ever risking offending their network panels by conducting fraud investigations against them?

*  Malpractice reform.

Our malpractice tort system fails to provide most individuals who experience medical injury with any compensation. It isn’t working and needs to be reformed. If we do provide compensation for all victims of medical injury, costs will increase. Although that is appropriate, we can’t pretend that costs will decrease merely because of the enactment of this legislation.

*  Invest in information technology.

Electronic medical records and integrated information technology systems are expensive. Most studies indicate that they increase costs. One study demonstrated that they have enabled upcoding, resulting in higher prices for the same services. Well designed systems may provide some benefit, but don’t look for cost savings, and certainly don’t think that this legislation provides the key to unlock the IT world.

*  Prevention.

Prevention is very important, but overall it does not save money, and it is certainly not dependent on the enactment of this legislation.

*  Create a public option.

There is no public option in the Obama plan. Even if there were, it would not reduce the waste in our dysfunctional health care system, just as Medicare has been largely unable to do. In our fragmented system Medicare is merely an additional player, adding to the complexities and costs of health care financing and health care delivery. As a single entity covering everyone, an improved Medicare would provide the efficiencies that would recover hundreds of billions of dollars that could be used to fully cover the uninsured and underinsured.

Conclusion

The confusion in costs and “bending the curve” has resulted from the fact that the discussion primarily has been limited to consultations with the Congressional Budget Office on the federal budget and not on our national health expenditures. The very modest bending of the curve has related to federal budget projections. Much of that was accomplished by placing a greater financial burden on the people, especially moderate and upper-moderate income individuals and families. We need to fix the problem of our escalating total costs, and then adjust the federal budget to match the solution.

Now do like David Cutler and go back and score these “ten broad ideas that have been offered for bending the health-care cost curve.” Negative scores are not only permitted but should be used when appropriate.

Your final score?  (Ouch!)

David Cutler on ten ideas to bend the cost curve

Health Reform Passes the Cost Test

By David M. Cutler
The Wall Street Journal
March 9, 2010
Many people are worried that the health-care reform proposed by President Obama and congressional Democrats will fail to bend the “cost curve.” A number of commentators are urging no votes because of this, and Republicans have asked the president to start health reform over, focusing squarely on the issue of cost reduction.
These calls overlook the actual legislation. Over the past year of debate, 10 broad ideas have been offered for bending the health-care cost curve. The Democrats’ proposed legislation incorporates virtually every one of them. Here they are:
• Form insurance exchanges. These would help curb underwriting and inefficient marketing practices that raise costs in the small-group and individual insurance markets. This is addressed in all the House and Senate bills, and the president’s proposal. Grade: Full credit.
• Reduce excessive prices, including those of supplemental plans enrolling Medicare beneficiaries. The president’s proposal reduces these Medicare Advantage overpayments and others to different providers, even in the face of Republican claims that reducing such overpayments is tantamount to rationing care for seniors. Grade: Full credit.
• Moving to value-based payment in Medicare. Both Democrats and Republicans have called for moving from a system where volume drives reimbursement to one where value drives reimbursement. The president’s proposal includes virtually every idea offered for doing this. Grade: Full credit.
• Tax generous insurance plans. Health-insurance benefits are excluded from income taxation, providing incentives for excessively generous insurance. Many economists have proposed capping the tax exclusion to reduce these incentives. The president’s proposal taxes some of the most generous policies, though it has deferred the date by which these taxes take effect. Grade: Partial credit.
• Empower an independent Medicare advisory board. Interest-group politics intrudes too deeply within the mechanics of Medicare policy, raising program costs and hindering efforts to improve care. Despite powerful opposition, the president proposes this independent board and a process for fast-tracking such recommendations through Congress. Grade: Full credit.
• Combat Medicare fraud and abuse. The administration has started an active task force to combat these problems. Other ideas to reduce fraud and abuse were presented at the recent health-care summit, and were incorporated in the president’s proposal. Grade: Full credit.
• Malpractice reform. Defensive medicine is a small but important driver of medical spending. The reform proposal makes some headway, encouraging states to experiment with alternative mechanisms to reduce malpractice burdens. More could be done—for example, specialized malpractice courts and a safe harbor for physicians practicing evidence-based medicine—but the president’s proposal makes a start. Grade: Partial credit.
• Invest in information technology. Many studies suggest savings in the tens of billions of dollars from IT investment. The stimulus bill passed a year ago contains funds to wire the medical system over the next few years, and the administration is supplementing this with significant funds to analyze the comparative effectiveness of different treatments—even in the face of “death panel” claims. Grade: Full credit.
• Prevention. The president’s proposal includes significant public-health investments, provides new incentives for physicians to focus on preventive and chronic care, and opens Medicare to finding new ways of supporting prevention. The only area of weakness is the lack of a junk food tax or tax on sugar sweetened beverages. Grade: Partial credit.
• Create a public option. A public insurance option would provide competition for insurers in areas that are nearly a monopoly and provide a path for reforms in Medicare to expand readily in the under-65 population. The public option was eliminated because of Republican opposition, however. Grade: No credit.
So reform gets full credit on six of the 10 ideas, partial credit on three others, and no credit on one. The area of no credit (a public option) is because Republicans opposed the idea. One area receives only partial credit because of Democratic opposition (malpractice reform) and two other areas reflect general hesitancy to increase taxes (taxing Cadillac plans and taxing drivers of obesity).
Why is reform viewed so negatively? In part, it may reflect the perfect being the enemy of the good. If the only passing grade is 10 out of 10, then reform clearly fails. But given where the Republican Party is on a public option, no reform will get a passing grade. If both parties were willing to raise taxes and Republicans negotiated malpractice reform for their overall support, we could probably get a nine out of 10.
Reform is also viewed negatively because official scorekeepers do not believe anything on this list other than reducing prices will save much money. The Congressional Budget Office has consistently estimated that policies built around changing incentives and thus encouraging more efficient care will not have any effect on cost trends. My own calculations, mirrored by other observers and a host of business and provider groups, suggest that the reforms will save nearly $600 billion over the next decade and even more in the subsequent one.
Of course, no one knows precisely how much medical spending increases will moderate. But one cannot doubt the commitment to try. What is on the table is the most significant action on medical spending ever proposed in the United States. Should we really walk away from that?
Mr. Cutler is a professor of economics at Harvard University. He was senior health-care adviser to the Obama presidential campaign.
http://online.wsj.com/article/SB10001424052748703936804575108080266520738.html

There is an important debate taking place as to whether or not the Obama proposal, based on the Senate bill, will control health care costs. President Obama and his supporters contend that every idea on controlling costs is in this bill. The private insurance industry contends that premiums will continue to increase at unsustainable levels because this measure does very little to control rising costs. Who is right?
Harvard economics professor David Cutler served as a health care adviser to the Obama presidential campaign and is well situated to present the arguments in support of the position that the Obama proposal will “bend the cost curve,” slowing the rise in health care costs. Let’s look at the arguments that he presents in this WSJ article.
*  Form insurance exchanges.
Private insurance plans to be offered through the exchanges will have higher premiums than plans currently in the individual market because the increased costs of the required benefits will more than offset any administrative efficiencies of these plans. Since the actuarial value of the exchange plans will be lower than the average of today’s employer-sponsored group plans, patients will have to bear a significant portion of the costs. The exchanges themselves create additional administrative costs which will reduce the savings from administrative efficiencies.
Although the administrative waste in our current fragmented financing system is profound, reform that would recover much of this waste was rejected before the process began. If there is any net savings at all from the exchanges, it will not qualify as even a footnote in the annual report on our national health expenditures (NHE).
*  Reduce excessive prices, including those of supplemental plans enrolling Medicare beneficiaries.
Studies have shown that one of the largest and most important contributors to our health care spending is the very high health care prices in the United States, when compared to other nations. In other nations, the government plays a significant role in pricing, but our legislators rejected any type of administered pricing that was not already in force in our public programs, instead leaving it to market competition of private plans. The fact that we have the highest prices is proof that the private plans have not been capable of controlling prices.
The proposal reduces the overpayments to private plans, but leaves in place their administrative excesses. Spending in Medicare actually could be reduced by eliminating both the Medicare Advantage plans and the Medigap plans. Medigap provides the very worst value of private health plans. It would be far less expensive to roll the extra benefits that are of value in these plans into the traditional Medicare program. That would enable modest savings while providing Medicare beneficiaries with a better program.
*  Moving to value-based payment in Medicare.
Cutler says that the president’s proposal “includes virtually every idea offered” for “moving from a system where volume drives reimbursement to one where value drives reimbursement.” Nice rhetoric, but the plethora of health policy literature provides almost nothing on how to do this. Current measurements of value in health care are very primitive and would have very little impact on our total health care delivery system.
Much of health care is not particularly productive even if provided in large volumes, but it is exceedingly difficult to slash the volume without slashing the truly beneficial services blended into that volume. We should certainly make greater strides in trying to sort out beneficial and non-beneficial services, but that is not dependent on the passage of this bill.
Many of the financing experiments in the proposal are limited to Medicare and wouldn’t even apply to the remaining 85 percent of our population. When we do find out how to obtain greater value in health care, we need to apply those principles to our entire population and not simply to Medicare beneficiaries. To do that would require an improved Medicare-like financing structure that includes everyone, because the fragmented market of private insurance plans could never pull their act together.
*  Tax generous insurance plans.
Employer-sponsored plans formerly provided an actuarial value of about 89 percent, leaving 11 percent of the costs as the responsibility of the employee. In an attempt to control premium increases – not cost increases – more of the costs have been shifted to employees, reducing the average actuarial value to about 80 percent. The exchanges will be offering plans at a 70 percent actuarial value.
In one of the great deceptions of the reform process, plans that actually protect patients from financial hardship are now called “generous insurance plans” which allegedly need to be taxed. The intent of the tax is to ratchet down the actuarial value of employer-sponsored plans to control the premiums, while reducing spending by increasing financial barriers through greater patient cost sharing. We need policies to help get patients the care that they need, not hinder access.
*  Empower an independent Medicare advisory board.
As discussed in a recent Quote of the Day, we do need a greater government role in improving our health care financing, which can help to transform health care delivery into a high performance system, whether that is through an Independent Medicare Advisory Board – an empowered MedPAC – or some other appropriate institution. Again, this should not be a role limited to 15 percent of our population. To be effective it should be applied to an improved Medicare that covers everyone. The Obama plan, since it perpetuates our fragmented system, would not enable such an institution to provide the impact that it should have.
*  Combat Medicare fraud and abuse.
Since the beginning of Medicare everyone knows that fraud and abuse are problems because of all of the reports of the government cracking down on these criminal activities. This legislation is not essential to perpetuate the government oversight that we need to reduce these losses. What we need instead is an expansion of this oversight to our entire health system and not limited to the government programs. The federal government formerly partnered with the private insurers in fraud prosecution, but it doesn’t anymore since the private insurers contributed very little but merely wanted a cut of the recovery. Can you imagine the insurers ever risking offending their network panels by conducting fraud investigations against them?
*  Malpractice reform.
Our malpractice tort system fails to provide most individuals who experience medical injury with any compensation. It isn’t working and needs to be reformed. If we do provide compensation for all victims of medical injury, costs will increase. Although that is appropriate, we can’t pretend that costs will decrease merely because of the enactment of this legislation.
*  Invest in information technology.
Electronic medical records and integrated information technology systems are expensive. Most studies indicate that they increase costs. One study demonstrated that they have enabled upcoding, resulting in higher prices for the same services. Well designed systems may provide some benefit, but don’t look for cost savings, and certainly don’t think that this legislation provides the key to unlock the IT world.
*  Prevention.
Prevention is very important, but overall it does not save money, and it is certainly not dependent on the enactment of this legislation.
*  Create a public option.
There is no public option in the Obama plan. Even if there were, it would not reduce the waste in our dysfunctional health care system, just as Medicare has been largely unable to do. In our fragmented system Medicare is merely an additional player, adding to the complexities and costs of health care financing and health care delivery. As a single entity covering everyone, an improved Medicare would provide the efficiencies that would recover hundreds of billions of dollars that could be used to fully cover the uninsured and underinsured.
Conclusion
The confusion in costs and “bending the curve” has resulted from the fact that the discussion primarily has been limited to consultations with the Congressional Budget Office on the federal budget and not on our national health expenditures. The very modest bending of the curve has related to federal budget projections. Much of that was accomplished by placing a greater financial burden on the people, especially moderate and upper-moderate income individuals and families. We need to fix the problem of our escalating total costs, and then adjust the federal budget to match the solution.
Now do like David Cutler and go back and score these “ten broad ideas that have been offered for bending the health-care cost curve.” Negative scores are not only permitted but should be used when appropriate.
Your final score?  (Ouch!)

Individual health-care premiums to soar up to 60%

Minimum hike to be 3% -- Durbin slams move as boost to profits

BY SANDRA GUY
Chicago Sun-Times
March 8, 2010

Individual health-insurance rates in Illinois will rise this year up to 60 percent, according to Michael McRaith, director of insurance for Illinois.

McRaith said insurance companies have filed reports showing that the individual plans’ base rates will increase from 3 percent to more than 60 percent. The report, which lists each insurance company’s rate increase from Jan. 1, 2008, to the present, can be seen online at insurance.illinois.gov under “Insurance Latest News.”

Sunday, Sen. Dick Durbin responded to the report: “Emergency rooms are overflowing. Health centers are struggling to meet the increasing demand. Yet insurance companies continue to raise premiums for hardworking families and, consequently, their profit margins.”

The report shows that 500,000 to 600,000 Illinoisans have bought private health-care policies from legitimate, licensed insurance companies.

Insurance companies are not required to report what they charge for group plans, such as those offered by employers.

McRaith said his office deals with 15,000 formal complaints a year about individual health-insurance policies.

He said, “We need some kind of ability to understand why their premiums are increasing so dramatically.”

Last week, Health and Human Services Secretary Kathleen Sebelius told top U.S. health insurers to publicly justify a spate of double-digit premium hikes, mostly affecting individual policies.

http://www.suntimes.com/business/2089458,CST-NWS-insure08.article

Universal health care would cost U.S. less

Letter to the Editor
Portsmouth (N.H.) Herald
March 04, 2010

Like Sen. Judd Gregg, I also believe Congress needs to start over with its health care efforts — but for very different reasons.

The current Senate bill has many good features, including the elimination of pre-existing conditions as an excuse for denying insurance and the prohibition of denial of existing coverage when a patient becomes ill. But, as a member of the Physicians for a National Health Program, I feel the current reform efforts falls far short of the goals of PNHP — namely, providing universal health coverage for all Americans and eliminating the excessive waste of health insurance premiums. At present, more than 30 percent of health insurance premiums goes toward administrative expenses and profits. In contrast, administrative expenses under Medicare amount to 3 to 4 percent of expenses.

H.R. 676, which has been suppressed in the House of Representatives for several years, and was not even included in the discussions on health care reform, would provide universal coverage for all Americans under a single-payer health care system for less than what is currently being spent for health care in the United States.

It is a disgrace that the United States is the only developed country in the world that does not provide universal health care coverage, even though we currently spend 17 percent of our gross national product for health care. That is up to twice what other developed countries spend on health care, and they cover all of their citizens.

I would urge everyone to read T.R. Reid’s book, “The Healing of America.” In his book he describes how numerous developed countries provide high quality universal health care coverage. Mr. Reid describes a variety of systems, including single payer and private insurance-based systems.

All of these systems share these basic characteristics: Everyone is included in the health care system; they are all nonprofit; and they all have low administrative expenses.

After reviewing the facts (and ignoring the hyperbole), I urge everyone to contact their senators and representatives to push for true health care reform that provides universal coverage.

P.S. For more information, please visit www.pnhp.org.

H. Dixon Turner, M.D.
Portsmouth, N.H.

http://www.seacoastonline.com/articles/20100304-OPINION-3040392

The single-payer failure

By Rick Alterbaum
The Brandeis Hoot (Brandeis University’s Community Newspaper)
March 5, 2010

Last Thursday, President Obama and leaders from both parties deliberated for seven hours to espouse their talking points and delve into the intricacies of health care policy.  They discussed a multitude of topics, ranging from health savings accounts to medical malpractice reform to the “Cornhusker Kickback.”  What they did not mention, however, was the possibility of establishing a single-payer health care system.  This failure of Congress to consider the plausibility of this policy has been the underlying tragedy of the health care debate.

Several months into the Obama presidency, the Democrats took on the challenge of fixing the broken and convoluted structure in which the American people acquire health insurance.  Believing they possessed a mandate for change after their gigantic 2008 victory, the Democrats yearned for a major legislative victory.  And, more importantly, they ultimately wished to make history where presidents from Theodore Roosevelt to Bill Clinton could not.

But right from the start of this initiative, the Democrats did not even entertain the thought of a single-payer option.  They dismissed it as too radical and politically infeasible, viewing it as a fringe issue and a pet project of the far left.

This is foolhardy. The creation of a single-payer health care system would only extend Medicare coverage to every hard-working, tax-paying American citizen.  Medicare is not a perfect institution.  Indeed, the program contains its fair share of fraud, abuse and waste.  However, its administrative costs are generally far lower than those associated with private health insurance companies, and seniors who are recipients of Medicare’s federally-mandated benefits overwhelmingly approve of the quality and treatment associated with the care they receive.  This program is familiar, a household name from the political lexicon and popular.

So why can’t people younger than 65 be so fortunate?  According to conservatives, single-payer is socialism, government takeover and communism, to name a few.

Despite the conservative histrionics, advocates of these views are at least partially right.  Under a single-payer system, every person would receive coverage that is funded by the federal government.  Consequently, the market for private health insurance would, if not dissipate, erode significantly.

But that shouldn’t be counted against the single-payer system.  People like their doctors and the care they receive and don’t like   the intermediaries they need to deal with as the beneficiaries of this care.  This is especially the case when said-intermediaries escalate premiums by up to 39 percent, as Anthem Blue Cross in California did recently, when said-intermediaries deny people coverage based on previous medical conditions and preexisting conditions; when said-intermediaries haggle and squabble over nearly every single medical claim they get.

As long as for-profit insurers are dominant, the American people will suffer.  Even if the current health care reform bill passes, this will still be the case.  These companies will presumably find loopholes that they can exploit in order to elude the prospect of truly abiding by new regulations.  At the same time, due to an individual mandate, millions of more Americans will be forced into the greedy clutches of these insurers via a virtual marketplace, or exchange.  There will not even be an alternative for these individuals—no public option, no Medicare buy-in, no health care cooperatives, nothing besides a Medicaid expansion for the poor.

While the current proposal is better than nothing, the American people shouldn’t have to settle.

It is a shame that the Democrats did not take the single-payer, Medicare-for-all route.  Quite simply, they do not have the guts to defend significantly expanding government, even when doing so is manifestly in the public interest.  The irrational, paranoid stigma attached to big government looms over their every move.

http://thebrandeishoot.com/articles/7486

A Fresh Approach to Health Care Reform

By MARK E. WILSON
Birmingham News
March 7, 2010

Recently in clinic at Cooper Green Mercy Hospital, I saw a man in his 50s who had a good relationship with his doctor until three years ago, when he lost his job and his health insurance. Before long, he could no longer afford health care from his doctor. He had a history of “borderline diabetes,” but he felt reasonably well, until last month, when his big toe turned black. He came to our emergency room and was admitted with uncontrolled diabetes, kidney disease and gangrene of his toe, which required an amputation.

This man was at least fortunate enough to live in Jefferson County, where an unusual law requires that a portion of the local sales tax revenue goes toward indigent care. But consider a patient I saw at a volunteer clinic in Shelby County, who injured his shoulder through no fault of his own and became unable work at his regular labor job which did not offer health insurance. He received emergency care, but he was unable to pay the money required upfront to see an orthopedic surgeon or have the operation required to restore his shoulder to a level of function necessary to resume his work.

I consider myself fortunate to be a physician who works at a public hospital dedicated to providing quality health care regardless of a person’s ability to pay. I get to be what I’ve wanted to be since I was a kid: a medical doctor who helps people in need, especially those who cannot find help elsewhere.

In the national health care reform debate, I’ve heard other doctors object to any system in which the government plays a major role in financing care. They say they don’t want government getting between them and their patients. These doctors do have some legitimate concerns, but part of me is perplexed. Several times a day, I see patients who had something come between them and their doctor, but it wasn’t the government. It was the loss of a job, loss of private insurance, new restrictions imposed by a private insurer or just a simple lack of money.

I see patients like these again and again, often with some really sad stories. They run out of medicines and get sick. Some end up with strokes, heart attacks, amputations, incurable cancers or premature death, all of which may have been prevented if their care had not been interrupted. Some may get to us before they get sick, but only after unnecessary anxiety, disruption and waste of resources, such as emergency room visits or unnecessary duplication of medical tests.

I have no trouble believing the study in the September 2009 American Journal of Public Health estimating that 45,000 people die in the United States each year due to lack of health insurance. That’s one death every 12 minutes. An American Journal of Medicine study published last year showed 62 percent of bankruptcies in 2007 were linked to medical bills. Three-quarters of these medical bankruptcies were for people who had health insurance when they first got sick. A report by Families USA showed that 73.6 percent of the medically uninsured in Alabama are members of working families.

The human tragedies buried in these grim statistics occur because our society has not found the will to ensure everyone has lifelong access to health care. The legislation currently being considered in Washington is not going to provide this or do much to control runaway costs.

Before Medicare was passed in 1965, millions of our nation’s elderly were without adequate health care and driven into poverty by high medical bills. Once signed into law, our seniors’ plights changed overnight. Medicare, even with its imperfections, has served this population relatively well ever since, and with relatively low administrative costs.

Physicians for a National Health Program, using research done by Steffie Woolhandler, M.D., and David Himmelstein, M.D., of Harvard Medical School, estimates that a publicly funded, single-payer system can save about $400 billion annually by eliminating the enormous administrative costs associated with a multi-payer system that includes for-profit, private insurance companies. This would be enough money to cover all of those who are currently uninsured. Additional savings could be attained through bulk purchasing of medicines. I suggest that we start with an overhaul of the Medicare program, which already has an infrastructure in place, and offer it to all citizens.

With this kind of true health care reform, I would be able to say to any patient in Alabama, “Welcome. We’re going to do our best to provide you with the care that you need.” Wouldn’t every doctor like to be able to say that?

Mark Wilson, M.D., practices general internal medicine and is chief of staff at Cooper Green Mercy Hospital. E-mail: wilsonm@jccal.org.

http://blog.al.com/birmingham-news-commentary/2010/03/viewpoints_a_fresh_approach_to.html

Massachusetts Senate election: A call to start over on healthcare reform

Dr. James C. Mitchiner
Ann Arbor (Mich.) News
March 7, 2010

Count me among those who were not terribly disappointed at the outcome of the recent Senate race in Massachusetts to fill the un-expired term of the late Sen. Edward Kennedy.

The election of Scott Brown, a conservative Republican who until recently was an obscure state senator, in a state well known for its liberal politics, should be construed as nothing less than a revealing denouement of the Democratic health reform agenda. Nor should the outcome of this election be seen as an unanticipated surprise; well before the historic Jan. 19 vote, there was indeed a sense that the Massachusetts voters were collectively acting as the nation’s proverbial “canary in the coal mine” for the Democrats’ ambitious social agenda.

Exit polls suggested that voters’ concerns over the scope and speed of health care reform provided the primary motivator for their electoral decision. Whether the reforms proposed by the Democratic congressional leadership were too radical, too costly, too confusing or too partisan for the taste of the average independent voter, one conclusion is certain: health care reform, in its current iteration, made people uncomfortable. Clearly, the proposed health bills are unnecessarily convoluted, bureaucratic and controversial. And if Brown’s election provides the 41st vote needed to scuttle health care reform in the Senate, perhaps he has done the country – and the Democrats – a big favor. It’s not that I want to wait the next 16 years for yet another attempt at overhauling our deplorable, inept and inequitable health care system. Rather, I join the chorus of those, particularly the Republican congressional leadership, who are demanding that we start over on health care reform. We can begin by recognizing what works: Medicare. Yes, Medicare has its faults. It underpays doctors and hospitals, is going broke, is subject to fraud (although perhaps not to the extent that some claim), and has its own bureaucracy. But it also has an established infrastructure, provides universal coverage and is highly popular among senior citizens.

In terms of reimbursement, its apparent pecuniary stinginess stems from doctors’ need to pay their office overhead, which of course can be traced to the extra costs and time spent dealing with our rapacious for-profit health insurance industry. And the way to “save” Medicare from its impending bankruptcy is to expand its risk pool by incorporating younger – and healthier (read: less costly) – beneficiaries, and pay for it through a more progressive tax structure than what now exists.

In other words, we need to extend the benefits of Medicare to all Americans by creating a universal, equitable, portable and more cost-effective single-payer Medicare-for-All health care system.

Single-payer’s mischaracterization as “socialized medicine” can be remedied by educating citizens to understand that a single-payer system will permit them to go to the physician and hospital of their choice, an option they lack now because they are limited to a provider within their health plan’s network.

Single-payer will permit them to have health insurance coverage independent of their job, and even if they are unemployed. Single-payer will stay with them as they switch jobs or move from state to state. A single-payer system will simplify billing, capture administrative economies of scale, and provide uniform benefits, including coverage for pre-existing conditions. And single-payer will reduce racial, gender, financial and geographic disparities of care.

In his State of the Union address last month, President Barack Obama asked rhetorically, “But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know…. I’m eager to see it.”

Well, Mr. President, I know of a solution that will meet all those goals: a universal, single-payer, Medicare-for-All program. I’m eager to see it, too.

Dr. James C. Mitchiner is an Ann Arbor emergency physician and the former president of the Washtenaw County Medical Society.

http://www.annarbor.com/news/opinion/massachusetts-senate-election-a-call-to-start-over-on-healthcare-reform/

AMA and Goldman Sachs on insurer market concentration and decline in price competition

Health plans extend their market dominance

By Emily Berry
American Medical News
March 8, 2010

Members of Congress and state lawmakers have called health insurance executives on the carpet to make them explain why their companies are hiking individual insurance rates so steeply across the country. A recently released American Medical Association study of health insurance markets gives one answer: Because they can.

The AMA’s most recent look at the health insurance market — “Competition in health insurance: A comprehensive study of U.S. markets,” released Feb. 23 and based on 2009 data — finds that 99% of 313 metropolitan areas tracked would be considered to have “highly concentrated” insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked “highly concentrated.”

One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year’s study. In 92% of the 313 markets in the report, one insurer held at least a 30% share.

In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA — echoing other experts — noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.

http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm

And…

A front-line perspective on 2010 commercial price & product trends

Transcript of conference call with Willis
Goldman Sachs
March 3, 2010

Matt Borsch, Goldman Sachs:  Let me jump right in here with, perhaps, the most important question from the standpoint of institutional investors looking at the sector, and that is, what are you seeing in terms of competition between the carriers, specifically relative to last year or two years ago or whatever you want to use as the baseline, has price competition increased or decreased?

Steve Lewis, regional leader for the employee benefits practice of Willis, the third largest insurance broker in the world:  As a specific answer to that, we would say, price competition is down from year ago. An overall theme that we would characterize this year, meaning, when I say this year, the just completed January 1 renewals, and continuing up and through today. We feel this is the most challenging environment for us and our clients in my 20 years in the business.

Not only is price competition down from year ago (when we had characterized last year’s price competition as being down from the prior year), but trend or (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.

And that’s a significant adjustment from last year where we saw aggressive pricing on the renewal front but not so much on the new business front.

http://graphics8.nytimes.com/packages/pdf/health/20100307_GOLDMAN.pdf

Comment: 

By Don McCanne, MD

So 99 percent of metropolitan areas have “highly concentrated” private insurance markets, and price competition of private insurers continues to decrease as private insurers are “more willing than ever to walk away from existing business.” Competitive pricing has almost disappeared from the private insurance market, so insurance has become a “take it or leave it” proposition.

And precisely what does the legislation before Congress do to ensure a competitive market of private insurance plans? Look at the Senate bill which forms the basis of the Obama proposal. When you read “Part II – Consumer Choices and Insurance Competition through Health Benefit Exchanges,” you will see that this legislation does virtually nothing to expand insurer competition in these concentrated markets.

President Obama and the members of Congress need to give up on the idea that they can legislate a thriving, competitive market of private health plans that will bring affordable health care to all of us. The changes that would be required are not in this bill, and, besides, they would be more complex, more expensive, and less effective than merely replacing the private insurers with a single payer national health program – an improved Medicare for all.

Once again today, in a pep talk at Arcadia University near Philadelphia, President Obama said that they put all ideas on the table, but they didn’t. They left single payer off. He did mention that people on the left wanted single payer, and judging by the cheers, apparently the audience wants single payer as well. Too bad he doesn’t listen.

AMA and Goldman Sachs on insurer market concentration and decline in price competition

Health plans extend their market dominance

By Emily Berry
American Medical News
March 8, 2010
Members of Congress and state lawmakers have called health insurance executives on the carpet to make them explain why their companies are hiking individual insurance rates so steeply across the country. A recently released American Medical Association study of health insurance markets gives one answer: Because they can.
The AMA’s most recent look at the health insurance market — “Competition in health insurance: A comprehensive study of U.S. markets,” released Feb. 23 and based on 2009 data — finds that 99% of 313 metropolitan areas tracked would be considered to have “highly concentrated” insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked “highly concentrated.”
One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year’s study. In 92% of the 313 markets in the report, one insurer held at least a 30% share.
In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA — echoing other experts — noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.
http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm

And…

A front-line perspective on 2010 commercial price & product trends

Transcript of conference call with Willis
Goldman Sachs
March 3, 2010
Matt Borsch, Goldman Sachs:  Let me jump right in here with, perhaps, the most important question from the standpoint of institutional investors looking at the sector, and that is, what are you seeing in terms of competition between the carriers, specifically relative to last year or two years ago or whatever you want to use as the baseline, has price competition increased or decreased?
Steve Lewis, regional leader for the employee benefits practice of Willis, the third largest insurance broker in the world:  As a specific answer to that, we would say, price competition is down from year ago. An overall theme that we would characterize this year, meaning, when I say this year, the just completed January 1 renewals, and continuing up and through today. We feel this is the most challenging environment for us and our clients in my 20 years in the business.
Not only is price competition down from year ago (when we had characterized last year’s price competition as being down from the prior year), but trend or (healthcare) inflation is also up and appears to be rising. The incumbent carriers seem more willing than ever to walk away from existing business resulting in some carrier changes.
And that’s a significant adjustment from last year where we saw aggressive pricing on the renewal front but not so much on the new business front.
http://graphics8.nytimes.com/packages/pdf/health/20100307_GOLDMAN.pdf

So 99 percent of metropolitan areas have “highly concentrated” private insurance markets, and price competition of private insurers continues to decrease as private insurers are “more willing than ever to walk away from existing business.” Competitive pricing has almost disappeared from the private insurance market, so insurance has become a “take it or leave it” proposition.
And precisely what does the legislation before Congress do to ensure a competitive market of private insurance plans? Look at the Senate bill which forms the basis of the Obama proposal. When you read “Part II – Consumer Choices and Insurance Competition through Health Benefit Exchanges,” you will see that this legislation does virtually nothing to expand insurer competition in these concentrated markets.
President Obama and the members of Congress need to give up on the idea that they can legislate a thriving, competitive market of private health plans that will bring affordable health care to all of us. The changes that would be required are not in this bill, and, besides, they would be more complex, more expensive, and less effective than merely replacing the private insurers with a single payer national health program – an improved Medicare for all.
Once again today, in a pep talk at Arcadia University near Philadelphia, President Obama said that they put all ideas on the table, but they didn’t. They left single payer off. He did mention that people on the left wanted single payer, and judging by the cheers, apparently the audience wants single payer as well. Too bad he doesn’t listen.

Obama’s Reprehensible Rhetoric Against Single-Payer

By Matthew Rothschild
The Progressive, March 3, 2010

When Barack Obama gave his “this is it” speech on health care reform on March 3, he once again swerved out of his way to hit advocates of a single-payer system.

He said: “On one end of the spectrum, there are some who have suggested scrapping our system of private insurance and replacing it with government-run health care. Though many other countries have such a system, in America it would be neither practical nor realistic.”

You can argue about whether it is realistic politically but there should be no question whatsoever that it’s practical in the sense of being functional. It works well in other countries, including Canada, and there is no reason it can’t work well here. Canada’s health outcomes, and the health outcomes of every other advanced industrial country with government-run systems, are superior to ours.

Maybe Obama was using the “neither, nor” construction to try to strengthen his weak and illogical opposition to single-payer and even to a robust public option like Medicare for all who want it—and 65 percent of the American people do want that kind of a public option.

There is not that much difference between “practical” and “realistic” if by both he meant to say politically possible. I suppose he could have really stretched the sentence out by saying “government-run health care . . . would be neither practical nor realistic nor feasible nor possible nor doable nor achievable nor viable.” But it would all mean the same thing. At bottom, he didn’t want to expend any political capital for it, or even for the robust public option.

Subscribe to The Progressive

Instead, he exploited advocates of a single-payer system as a foil to say, in not so many words, “I’m not an extremist like they are.”

He juxtaposed them with Republicans who want to “loosen regulations on the insurances companies.” And he did so in order to try to claim the middle ground, on the false and facile assumption that the middle ground is always the best ground.

Here’s how he put it: “I don’t believe we should give government bureaucrats or insurance company bureaucrats more control over health care in America.”

By damning “government bureaucrats,” Obama played right into the hands of the anti-government crowd and made any durable expansion of health care coverage all the more difficult. He also insulted every single federal employee in the Medicare and Medicaid and VA and Indian health programs.

This was reprehensible rhetoric.

Matthew Rothschild is the editor of The Progressive magazine.

http://progressive.org/wx0303b10.html

Why Is Barack Obama Writing GOP Talking Points?

By John Nichols
The Nation, The Beat Blog
03/05/2010

If you want to know where conservatives in Congress get all their ridiculous talking points about how dysfunctional the federal government is, how incapable the public sector is when it comes to doing anything right and, above all, how worthless federal employees are, we’ve tracked down the source.

It’s not Rush Limbaugh.

It’s not Michael Steele.

It’s Barack Obama.

The president, who was once an ardent advocate for repairing are broken health care system by developing a single-payer “Medicare for All” program, now rejects the wisdom he expressed before moving to Washington.

As recently as 2003, Obama told an AFL-CIO gathering in Illinois: “I happen to be a proponent of a single payer universal health care program. I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its Gross National Product on health care cannot provide basic health insurance to everybody. And that’s what (another speaker) is talking about when he says everybody in, nobody out — single payer health care plan, a universal health care plan.”

Yet, after excluding single-payer advocates from his health care summit, the president explicitly rejected the option when he delivered a March 3 speech pressing for final action to enact some sort of health care reform.

Just as his speech dismissed “Party of No” Republicans who want to “loosen regulations on the insurance companies,” Obama took a swipe at the real reformers with whom he once stood in solidarity.

“On one end of the spectrum, there are some who have suggested scrapping our system of private insurance and replacing it with government-run health care,” the president declared. “Though many other countries have such a system, in America it would be neither practical nor realistic.”

The president is wrong about what is practical or realistic.

Those “other countries” he mentions are industrialized democracies that budget analysts and physicians have long argued that, by expanding access to care while cutting costs, a “Medicare for All” plan would improve the competitive position of U.S. industries in global markets.

But the president is even more wrong to dismiss a single-payer response as unworkable because of some supposed flaw in the DNA of the public employees who would implement real reform.

“I don’t believe we should give government bureaucrats or insurance company bureaucrats more control over health care in America,” declared Obama.

So the president is equating career civil servants – like the folks who organize the military’s health care, services for veterans, the existing Medicare and Medicaid programs, the Indian Health Services and the care provided for the president and his family – with insurance company profiteers who refuse coverage to people with preexisting conditions, discriminate against women and the elderly in establishing pricing structures and connive to deny care to Americans when they need it most.

My friend Matt Rothschild, the able editor of The Progressive magazine, describes Obama’s statement as “reprehensible rhetoric.” It is difficult to disagree.

But what Obama’s flawed calculus does is even more damaging than his word choice.

By suggesting that “government bureaucrats” are no better than “insurance company bureaucrats,” the president reinforces everything his Republican critics are saying. Republicans in the House and Senate argue that a “government takeover of health care” would not do a thing to expand quality of care or to reduce costs.

With his inept comparison, Obama says pretty much the same thing.

In effect, he is writing the GOP’s talking points.

The U.S. needs a new health care system, to be sure.

But, even more urgently, Obama needs a new speechwriter.

http://www.thenation.com/blogs/thebeat/537639/why_is_barack_obama_writing_gop_talking_points

State single payer waiver provisions in the Senate healthcare bill – legislative language and fact sheet from Vermont Sen. Bernie Sanders

Why the 1332 Waiver in the Senate Health Reform Bill is the Only Opportunity for State Single Payer Systems Under the Bill

The health care reform bill passed by the Senate requires that all states set up Exchanges through which private insurance companies could sell their plans.  Because federal laws preempt state laws, the federal health care reform bill would supplant any state attempt to set up a single payer system in lieu of an Exchange, which by its nature calls for multiple payers to compete.  If the Senate bill is enacted, the only opportunity for states to move toward a single payer system is found in Section 1332.  This section would allow a state with a plan that meets certain coverage and affordability requirements to waive out of the requirement to set up an Exchange for private insurance companies.  Only with such a waiver could a state move in the direction of a single payer system.

The requirements of the Senate bill

Section 1311(b) of the Senate healthcare reform bill requires that “each state shall, not later than January 1, 2014, establish an American Health Benefit Exchange” through which a variety of health insurance plans could compete for buyers.  Additionally, states would have to create “Small Business Health Options Program Exchanges” through which small businesses could purchase insurance.  The bill allows regional or interstate Exchanges if the States agree to and the Secretary approves them. 

State governments would have to run the Exchanges according to guidelines and minimum criteria established by the federal government.  State insurance commissioners would continue to provide oversight regarding consumer protections, rate review, and solvency.  States would also be allowed to create additional requirements for offering insurance to their residents and employers through the Exchanges, provided that they defrayed any related additional cost.  

In each Exchange, traditional insurance companies would be allowed to compete for customers provided they met the federal requirements and any additional state requirements.  Exchanges would include web portals and a toll-free hotline and insurance companies would use standardized formats and definitions to allow easy comparison of the prices, benefits, and performance of health plans, as well as standardized health insurance enrollment applications and standardized marketing requirements.

Under Section 1321(c), if the Secretary of Health and Human Services determined before 2013 that a State would not have an Exchange operational by 2014, or would not implement the standards, the Secretary would be required to establish and operate an Exchange in the State and to implement the standards.

Federal Pre-emption

From a legal perspective, it is quite clear that the federal requirements of the Senate bill would prevent a single payer system that excludes such an Exchange.  Under Article VI of the U.S. Constitution, federal law is “the supreme law of the land, … anything in the laws of any State to the contrary notwithstanding.”  For that reason, courts have held for hundreds of years that when a federal law conflicts with a state law, the federal law trumps, and the state law is “preempted,” or void.  The most obvious type of preemption, known as conflict preemption, occurs when it is impossible to comply with both the federal law and the state law at the same time, or where the state law stands as an obstacle to the full purposes and objectives of Congress.  In these cases, courts will quickly find preemption and strike down the state legislation.

This is exactly the type of preemption that is in play here.  If the Senate bill were enacted into law, state agencies would have to set up Exchanges and allow private insurance companies to sell plans through them.  It would be impossible for states to do this while at the same time operating a single payer system, which by definition would prohibit or prevent private competition through the Exchanges. Such a state law would therefore be effectively preempted by the federal bill.

Waivers from the federal Exchange requirements

If the Senate bill is passed, the only opportunity that states would have to move towards a single payer system would be to get a waiver from the Exchange requirements through Section 1332.[1] 

Section 1332 enables a state to apply for and receive a waiver (beginning in 2017) from the requirement to operate an Exchange.  In order to get such a waiver, the state would have to present an alternative plan that would provide coverage at least as comprehensive and affordable, to at least a comparable number of residents, as the federal legislation would achieve.  The state plan could not increase the federal deficit.

States could apply for Section 1332 waivers for up to 5 years at a time. To do so, they would have to comply with transparency regulations in the development of the state plan and enact a law providing for state action under the plan.  If the state waivers were approved, the federal government would provide the State the aggregate amount of any tax credits and cost-sharing reductions that would have been paid to residents of the State in the absence of a waiver, which may only be used for providing health insurance coverage under the state plan.

Section 1332 does not expand existing waiver authority under any existing federal health program (e.g., Medicaid, Medicare, CHIP), but it would require the Secretary to create a coordinated waiver process so that a state could submit a single application for waivers under Sec. 1332 and under any other federal health law for which waiver authority already exists.

In order for states to try a different approach without first having to set up an Exchange, the date the waivers are currently available under Section 1332 of the Senate bill would have to be changed from 2017 to 2014.  Otherwise, a state seeking to innovate using a different model – including something approaching a single payer system at the state level – would first have to go through all the trouble and expense of establishing and operating an Exchange before having the opportunity to receive a waiver.

Assuming the date in section 1332 is changed, however, this provision will facilitate state efforts to set up single payer systems.  If a state plan to cover everyone through an alternative model is approved, they will not be required to set up an Exchange through which private companies compete.  In other words, after receiving such a waiver, states would no longer be preempted from setting up their own systems in lieu of an Exchange.

~~~~~

[1] Another section of the bill, section 1331 creates a separate, relatively narrow waiver opportunity, allowing State flexibility to establish a “basic” health program for low-income individuals who are not eligible for Medicaid, but only those up to 200% of the Federal Poverty Level.  It requires the Secretary to transfer to such states 95 percent of the tax credits and cost-sharing reductions that would have been provided to individuals covered by the “basic” plan if they were instead enrolled in qualified health plans in the Exchanges.  However, it does not enable a state to avoid creating the Exchanges required by the bill – rather, it simply allows them to create one additional plan for a limited percentage of the population – those between 133% and 200% of the FPL.

WAIVERS FOR STATE INNOVATION – SEC. 1332 OF THE SENATE BILL

  • We need to change the date the waivers under Sec 1332 of the Senate bill are available from 2017 to 2014 because making them unavailable until 3 years after states have to start the exchanges all but renders the provision meaningless. 

WHAT THIS PROVISION DOES:

  • This provision would allow states to propose to HHS an alternative system for delivering affordable, quality health care insurance to state residents. 
  • Before submitting a plan, the state must go through a thorough notice and comment process to ensure that its citizens supported the plan, and its legislature would have to pass a law authorizing the plan.
  • This provision would allow states to receive waivers from certain components of the new law (exchange-related requirements only), only if the HHS Secretary finds that the under the state’s alternative plan:
    • at least as many state residents would get health insurance coverage;
    • the coverage would be at least as comprehensive as the Essential Health Benefits under Sec 1302 – to be certified by the CMS Actuary; and
    • the coverage would be at least as affordable – in terms of both premiums and cost-sharing.

WHAT THIS PROVISION DOES NOT DO:

  • It would NOT allow states to offer lower quality or less affordable coverage to its residents than would be available in the exchange – and it would NOT allow states to cover fewer people than would be covered.
  • This provision does NOT amend or address ERISA.  
  • This provision does NOT allow waivers of the insurance market reforms in the bill, such as the bans on pre-existing condition discrimination.
  • It does NOT expand existing waiver authority under any existing federal health program (Medicaid, Medicare, CHIP, etc.), but it would require the Secretary to create a coordinated waiver process so that a state could submit a single application for waivers under this section and under any other federal health law for which waiver authority already exists.