Does Obama Have Enough Votes in the Senate?
Over at Health Care Pollicy and Marketplace Review Bob Laszewski explains why the insurance industry has made a second concession to health care reform. In November, the industry said it was willing to cover everyone. Now, it has decided that it is willing to move toward charging everyone in a given community the same premium, regardless of pre-existing conditions. (Today if you have employer-based insurance, chances everyone in your company pays the same price for a particular plan, but if you are in the individual market, buying insurance on your own, insurers in most states are allowed to charge you more if you are sick or if you are old.)
Earlier this week, insurers sent a letter to Congress this week offering to phase in “community rating” as long as legislators enact “an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance. Laszlewski translates: “as long as the federal government mandates that all men, women, and children in America have to be in the risk pool we’ll take the underwriting risk.”
But just how much risk are insurers taking on? Laszewski’s answer: not much.
He explains: “Underwriting rules are meant to protect [the insurer] against people buying insurance on the barn after it burns down.” By the same token, you don’t want people waiting until they are sick before buying health insurance. “But if everyone is required to buy the insurance from the start, you don’t have the problem of people putting off or buying insurance when it is advantageous for him or her and not for the insurer.
“Therefore, if there is a mandate that everyone buy insurance ‘you don’t’ have to charge the sick more than the healthy because not only are all the sick folks covered ,but you also have all the healthy people covered to offset their costs—a mandate that everyone buy insurance automatically has a perfectly balanced risk pool.
“It is possible that one insurance company, particularly a small one, could somehow get more of the sick people in their pool,” he acknowledges, “but if that occurred it could be relatively easily taken care of through reinsurance between players.” This would level the risk.
“A few months ago, the industry offered to guarantee that everyone would be insured—if there was an individual mandate. Now they have added the offer to charge the sick and the healthy the same rate—in the individual market.
“At that time of the first offer,” Laszewski says, “I called it, ‘Much Ado About Little’.
“The latest offer is ‘Much Ado About Little, Part Deux’”
Insurers really are not taking on much added risk. But, Laszewski points out “at a time when liberal Democrats are pushing to put a government-run health plan in direct competition with the private sector,” this is “good PR” for the insurance industry.
And that is why insurers are making this second offer. They are desperate to block that public sector alternative that we at HealthBeat have decided to call Medicare E (Medicare for Everyone—hat tip to reader Pat S. for suggesting this label.)
Both the insurance industry and conservatives are adamant on this point. Will the Obama administration give up the idea of forcing private insurers to compete with a public sector plan? I don’t think so. As the president said at the health summit, many think we need the public-sector option to give people “choice” and to “keep the private insurers honest.”
Insurers loathe the idea because they realize that if they are competing with Medicare E, it will serve as a benchmark for regulation. In order to protect Medicare E from unfair competition, the government will have to lay down very strict rules, requiring that private insurers offer at least as much coverage as the public plan (so that they don’t “cherry-pick” younger healthier customers looking for a less comprehensive, cheaper plan.) For the same reason, private insurers probably would not be allowed to offer low-premium, high-deductible plans. And they wouldn’t be able to sell Swiss Cheese policies filled with hidden holes.
Yet today, this is how many for-profit insurers make their money. And they know that if the government is not trying to protect a public-sector plan, it is much less likely to issue tight regulations, and much more likely to let companies “compete” with each other however they like—even if consumers end up buying plans that really don’t deserve to be called “insurance.”
How Will This Play Out in Congress?
A couple of weeks ago, Robert Blendon professor of health policy and political analysis at Harvard’s Kennedy School of Government told me that if the administration refuses to cave on the public sector plan “no Republican in the Senate will vote for universal coverage.” In other words, unless the president gives up Medicare E, Democrats will not have enough votes in the Senate to pass the legislation this year.
But Blendon, who is also a professor at Harvard’s school at public health thinks that, in the worst-case scenario, it is likely that Democrats could succeed in passing “Phase 1” of universal coverage this year.
Just what would that mean? I put this question to Blendon because he knows more about health care policy and politics than many reformers. While some have immersed themselves in the wonky intricacies of health care policy, and others are well-versed in the intrigue of American politics, Blendon knows both–as his cross-appointment at the Kennedy School and the School of Public Health suggests. Even when what he says is not what I want to hear, I recognize that Blendon understands “the political process.” He knows that Democracy is messy and that, often, it is disappointing. Above all, it is a process of constant, unending negotiation.
This year, Democrats will take whatever they can get: they are committed to making progress on healthcare reform. So they will not make the mistake Democrats made in the early 1990s when they insisted on “all or nothing.” Blendon suggests that this year, Phase I might mean a bill that mandates that all children must have insurance, with subsidies for families who cannot afford it.
The administration also is likely to begin Medicare Reform this year, in an effort to lift the quality of Medicare while lowering the costs. By using the comparative effectiveness research we now have when deciding how much to pay for certain services, and by beginning to reimburse Medicare physicians for outcomes rather than volume, reformers could start to set standards for national health reform..
Finally, Blendon suggests, Congress might decide to let 55-65 year olds buy into Medicare. Though this
would be expensive. Today, Medicare is so wasteful that the premiums for this age group would be high; many would require subsidies.
The idea that this year, Congress may only pass Phase 1 of universal coverage will disappoint many.
Yet as observers such as Dr. Atul Gawande have pointed out one cannot transform a $1.7 trillion industry “with the flip of a switch.” I agree. Inevitably, universal health reform will unfold in stages. The goal, as President Obama has said with great consistency, is to cover everyone “by the end of my first term. “
Finally, Blendon points out that in 2010 a number of Republican Senators will be running in states that Obama won. Following that election, liberal Democrats might well have the votes they need to pass universal coverage— without making concessions that could, in the end, hand control of national health reform over to the for-profit insurance industry.