They are running scared.
And why are they so scared?
Because they know that the public sector option is still alive. And here I’m not talking about the possibility that some states will offer public plans: Most state plans would be too puny to challenge the strongmen of the health care industry. I’m talking about a federal public plan–Medicare E (Medicare for everyone) a public option for patients under 65, run by the federal government. The scent of real competition is what has insurers on the run.
Some progressives have declared a strong federal government insurance plan dead because it isn’t in the Senate Finance bill. But, as I have argued in earlier posts, the Baucus bill should not be seen as the template for health care reform. Max Baucus possesses neither the muscle nor the gravitas of past Finance Committee Chairmen. And my guess is that when it comes to sensing how the political power struggle is unfolding in Washington– and how it might threaten insurers — Karen Ignani, president of America’s Health Insurance Plans (AHIP), has better antennae than any political pundit. This is why AHIP has suddenly gone out on a limb, becoming the “chief foe” of President Obama’s reform effort. Granted, there is good reason while many think that a final reform bill will never embrace Meicare E. Within the for-profit health care industry, opposition to a government plan is fierce. Drug-makers, device-makers and inefficient hospitals that have been over-paid by private insurers (see HealthBeat here) fear that such a plan might introduce rational pricing for their products and services. Some specialists suspect that reimbursements for certain particularly lucrative tests and procedures might be trimmed. And insurers, of course, are loath to compete with a version of Medicare–arguably the most popular public program this country has ever invented. But for that very reason, support for the public option remains high among both patients and physicians. Meanwhile, legislators are beginning to realize that the premiums for mandated private sector insurance could prove too rich for many Americans.
An Associated Press headline summed up the situation yesterday: No Quiet Fadeaway for Federal Insurance Option. “Republicans say the fix is in for a public plan. Behind the scenes, Democrats will take Baucus' middle-of-the-road plan and turn it hard to the left . . . ‘We know that the bill written behind closed doors here in the Capitol will be another 1,000-page, trillion-dollar Washington takeover,’ said Senate Republican leader Mitch McConnell of Kentucky.
Admittedly McConnell is not a man known for his optimistic outlook on life (you have only to look at his face). But Senate Majority Leader Harry Reid (D. Nev) has refused to assuage insurers’ fears. “Asked Wednesday if he thought it was likely there would be a public plan in his merged bill, he responded: 'I'm not betting on health care. "Likely" is in a game of craps.'"
The public plan is still on the table. And I believe that this is why AHIP has shelled out millions for a sudden– and I would say suicidal—media blitz aimed at blocking reform. Because the insurance industry is panicked, it has been doing itself more harm than good.
First, last week-end, AHIP issued a study that it had commissioned from PriceWaterhouseCoopers ,warning that if we adopt the blueprint for universal coverage embodied in the Senate Finance Plan, by 2019, the average family premium will be $4000 higher than it is today. (To be fair, AHIP is right on two points: the subsidies in the Baucus Bill to help the middle-class pay for insurance at current prices are too low —as are the penalties for those individuals who choose to ignore the mandate. As it stands, young healthy Americans who earn too much to qualify for subsidies are likely to pay the fines rather than buy the insurance. This pushes premiums higher for the older, less healthy and less wealthy Americans left in the insurance pool. But subsidies—and even penalties—can be adjusted as the bill moves forward. There was no need for AHIP to launch an all-out assault on health care reform itself—unless it saw a public plan on the horizon.)
PCP was embarrassed by the way AHIP attempted to use the study as a blunt instrument to bludgeon reform. As a result it all but disavowed the report, pointing out that AHIP had “engaged PricewaterhouseCoopers to prepare a report that focused on four components of the Senate Finance Committee proposal”—and ignored anything in the proposal that might lower premiums.
Then the insurance industry floated a second report , this one fashioned by the Blue Cross Blue Shield Association (BCBSA), with the help of accounting firm Oliver Wyman.. Over at TNR Jon Cohn rightly describes this documentt as “a transparently hyperbolic and self-serving study on the effects of health reform” that has discredited the industry “ in the eyes of the media elite, alienated potentially sympathetic members of Congress, and rallied Democrats around a common foe.” Like PCP’s study, it aimed to frighten the middle class: Pass reform, it threatened, and health care premiums will soar out of sight.
The final blow to the industry’s public image came yesterday when CNN had to acknowledge that AHIP had planted a mole in its midst. As Greg Sargent explains on “The Plum Line” policitcal pundit Alex Castellanos’ consulting firm, National Media, was placing over $1 million of TV advertising for the insurance industry's anti-reform ads while Castellanos appeared on air as “an ostensibly independent-minded, if right-leaning commentator.” His financial ties should have been disclosed. On the Hill, House Speaker Nancy Pelosi seized the opportunity that AHIP offered . Late yesterday, the Washington Post reported that Pelosi had declared that she will “urge the House to adopt the toughest possible version of a public option, applying Medicare’s low reimbursement rtes to it, to strengthen prospects that the provision would survive final negotiations with the Senate.” As Paul Krugman notes: “the end result of AHIP’s blunder may be a better bill than we would otherwise have had.” How National Public Option Could Make Mandated Care Affordable: Everyone in Washington understands that if politicians promise affordable, high quality health care –and then can’t deliver—both Congressional Democrats and the White House will be pilloried.
Fast forward three years to November 2012, just two months before health care reform becomes a reality. At that moment of truth, voters will be going to the polls, deciding whether or not to grant President Obama a second term. By then, tboth he cost of insurance, and the size of the subsidies, will be known.
If voters realize that the insurance policies the middle class is being asked to buy are beyond their —or that the cost of subsidizing premiums is going to place a crushing burden on taxpayers– they will feel betrayed, duped—and very afraid
If the United State Government cannot find a way to guarantee health care coverage that costs less than a monthly mortgage payment, how can a mother hope to secure care for herself and her family? At that point, the temptation to vote the bums out of office will be overwhelming.
Progressive understand this. If they cannot deliver, it would have been shrewder to let Republicans and conservative Democrats bury hopes for healthcare reform sometime in the last few months. At least then, conservatives would be the villains.
But ,to their credit, today's liberals are intent on achieving what Congress has tried and failed to do for more than half a century: overhaul the nation’s health care system. At the same time, they know that over the next three years, they have no choice: they must figure out how to make the numbers work. The subsidies have to be large enough to make coveage affordable —but not so large that they require hiking taxes for the vast majority of Americans. (The House bill would help seed reform by raising taxes for the wealthiest 1 ½ percent, bringing the top rate back to the levels of the mid-1990s. The White House finds this acceptable, but is not willing to go further. )
The best solution, by far, is to find the funding within an out-of-control health care system that has taken on a life of its own. We know that the medical-industrial complex no longer serves the patient. Rather it is designed to benefit those who profit from the system. The only way to turn it into a patient-centered system is to eliminate both the waste and the profiteering —and this is where a public option can set an example.
At the very least, the non-partisan Commonwealth Fund reports, a government sponsored insurance plan would cost roughly $2,000 less than private sector coverage for a family simply because the government’s administrative costs would be so much lower. This represents savings you can count on.
Moreover, and this is critical to understanding the importance of a pubic plan —if it adopts much-needed Medicare reforms, it could provide better care than Medicare does now, at a lower cost.. In other words, when it comes to offering value for healthcare dollars, a government plan could set a very high bar for private sector rivals. Just How Much Would Mandated Insurance Cost With and Without the Public Plan ? Here, let me repeat what I have said in the past: No One Knows.
At long last, even Congressional Budget Office Director Douglas Elmendorf has learned to accept that some of the most important aspects of reform can’t be measured. Wednesday, the Washington Post reported that “Republicans pressed CBO chief Douglas W. Elmendorf on the impact of the [Senate Finance] bill on total health spending nationwide and on insurance premiums, but he did not take a side in the debate: "We can't assess the effects on national health expenditures," he said. "There are so many conflicting forces we have not been able to assess the effect on premiums." (This isn’t to say that CBO won’t “mark up” bills—that is its job. But Elmendorf is acknowledging that the legislation contains so many moving parts, that it is all but impossible to calculate a final cost.)
Nevertheless, dogged reporters will never take an honest “We don’t know” for an answer.Reporters, and their editors, want facts—even if said facts don’t exist. So today, the Washington Post announced that it had obtained a report from CBO showing that it has now scored two versions of the House plan, estimating the cost of one version of the bill at $859 billion over the next decade and the other at $905 billion.
Am I the only person on the planet who wonders how they arrived at exactly $905 billion–versus precisely $859 billion (instead of $860 billion)– when projecting the costs and savings involved in reforming an extraordinarily complicated $2.6 trillion industry over the course of a decade?
In 1999, if you had tried to project how much your own household would gain and lose in savings and income over the next ten years, how close would you have come?
(t might well be a useful exercise to do a back-of -the envelope estimate of your likely household income over ten years, just to try to set a budget and get a feeling for how much you should be saving. But unless it’s a very uneventful ten years, your calculations will probably be way off. And when it comes to healthcare costs, the next decade may be many things—but predictable is not one of them.)
In an earlier post, I quoted former Medicare executive Bruce Vladeck on CBO’s 10-year estimate of the cost of overhauling the health care system: Valeck called the projection “an informed wild guess.”
For one, we don’t know where premiums will be in 2013. If private insurers’ reimbursements to doctors, hospitals and patients continue to rise by 8% a year (as they have for the past ten years), premiums will be 25% higher than they are now. One can predict, with some certainty that this is what will happen if we don’t have reform.
But if Washington begins to prepare for reform , and starts to look for savings by scraping some of waste out of our Medicare system, we may begin to find the squandered health care dollars than we need to help to fund universal care. Over the next three years, Medicare reform can pave the way for system-wide reform.. President Obama has told us that there are savings to found within Medicare that willl not lower the quality fo care for serniors-and he is entirely right.
Both the House bill and the MedPAC reports of recent years recommend ed financial carrots and sticks that would steer Medicare patients and doctors toward the most products and services that would be most effective for particular patients. Sometimes these are the most expensive treatments; sometimes they are not.
Already, lower co-pays for generic drugs have led patients to realize that in most cases, generics just as good as brand- name prescirptions. Lower co-pays could also guide them to other treatments that offer an equal or greater benefit for less. Quietly, private sector insurers have told MedPAC that if Medicare provides political cover, they will follow its lead in realigning financial incentives, rewarding providers, not for the quantity of care they provide, but for the quality. However, Medicare will have to go first. Private insurers never again want to find themselves on the evening news, accused of sacrificing human lives in order to line their own pockets.;
This is what happened when insurers attempted to “manage care” in the 1990s. They did this badly because, when deciding which treatments to approve, insurers did not turn turn to medical reserarch. Instead, they looked at the cost. of the product or procedure. Going forward, the American public does not want to see for-profit insurers making decisions about what is and isn’t “needed care.” Insurers have neither the political nor the moral standing to set the nation’s health-care priorities. Nor do they have the public's trust.
Most Americans do trust physicians. This is why we need an independent federal panel, made up doctors and other medical experts, using medical evidence to compare the effectiveness of various treatments for certain patients. (The President has proposed setting up an Independent Medicare Advisory Commission (IMAC) that would be shielded from political influence. We know that up to a third of our health care dollars are squandered on unnecessary, often redundant tests, and unproven, sometimes unwanted treatments that provide neither comfort nor cure. We know that many drugs and medical devices are fantastically overpriced—and some are not safe.
What we don’t know is how successful reformers will be in wringing the waste out of the system.
To guess how much they might save, one would have to read the minds of thousands of doctors, hospital executives and patients, predicting how they will react to financial incentives designed to steer them toward more effective, lower-cost care. Medicare Begins to Make Cuts
What we do know is that Medicare is already taking steps to put a lid on gratuitous outlays. .While the media focuses on the healthcare debate in the Big Tent on the Hill, over at the Centers for Medicare and Medicaid, regulators are planning on reducing reimbursements for many types of diagnostic imaging, particuarly when done in a physician’s office.
MedPac data shows that when physicians own or lease their own imaging equipment, they are likely to prescribe twice as many scans and tests as physicians who send patients to the hospital for tests.
After all,if the euipment is there, why not do the test? It's convenient for the patient. And the only way physicians can pay for this very pricey medical equipment is to use it. .
But stepping back and looking at use in a single city, it becomes clear that it’s just not economical for so many doctors to duplicate the equipment in their offices that is already available at hospital outpatient centers. We all wind up paying for the redundancies.
Medicare is particularly concerned about the overuse of MRIs and CT scans. CT scans cost anywhere from $300 to $1,000. MRIs run as high as $1300. And from 2000 to 2007 the annual number of CT scans almost doubled to 69 million.
The yearly price tag for imaging is now $100 billon. And experts estimate that up to one-third of these tests aren't necessary. That's potentially $35 billion wasted every year.
Worse, patients are being exposed to unnecessary radiation that could increase the risk of cancer.
"It's too easy, too fast,too good,” New Hampshire radiologist Dr. Steve Birnbaum, told CBS News last month. "So it's much easier to order the test than it is to observe the patient, to monitor the patient, "
When Dr. Birnbaum’s own daughter, Molly, was in a car accident that left her with multiple injuries, Birnbaum stepped in to make sure that she wasn’t over-treated. Molly had fractured her pelvis and suffered a sharp blow to the head. “I broke the windshield with my skull,” she told reporters.
As a result, she was given a total of nine CT scans during her week-long hospital stay. Doctors wanted even more, but her father, resisted. "At that point, I drew a line in the sand and said, absolutely not. There is no reason to do this anymore," recalled Birnbaum.
Radiologists know, better than anyone, that we are doing too many of these tests. .
There is no medical evidence that doubling the number of scans in recent years has improved patient health. This is one area, many agree, where Medicae can discourage excess by lowering fees,, reducing costs, and protecting patients. Of course, one group strongly disagrees– the corporations that make the diagnostic testing equipment.
Medicare Reform and the Public Option It is telling , I think, that the White House has not yet named a new director to head the Centers for Medicaid and Medicare (CMS).. To me, this suggests that the administration plans to appoint someone who will have the spine to stand up to lobbyists. That could explain why the White House hasn’t yet made the announcement; it didn’t need a battle over the CMS director while fighting the larger war over reform legislation. But the steps Medicare is already taking suggests that this administration is serious about redistributing healthcare dollars to improve care both for seniors and for all Americans.
What does all of this have to do with the public option? As the House bill makes clear, succedssful Medicare reforms would be incorporated in the public plan when –and if–it is rolled out in 2013.
Under the House bill–which I continue to think will leave its mark on the final bill– Medicare and the public plan could ulimtately use their combined clout to change how we pay for care, what we pay for, and how care is deliverdd. This means movng away from reimbursing proividers for how much they do, and instead rewarding them for how well they do it. . . Health Care Lobbyists May Be in For Some Surprises. But,will the finaly legislation actually include a vigorous public plan? At this point, I would guess "yes, " putting the odds at 60/40. But my guess is not as important as this: I see no reason to give up on the core of health care reform until the game is over. In all honesty, I don't have a great deal invested in being right. But I would argue that the threat is real enough to have sent AHIP on a disastrously self-destructive course. Setting itself up as the enemy of health care reform—just as the White House is heading into the home stretch—was not wise. I would predict that the insurance industry will pay the price for this mistake.
I have long argued that whatever “deal” some observers think that health care lobbyists made with the White House, unless White House Budget director Peter Orszag has forgotten how to add and subtract, he and President Obama know that the “concessions” that the industry has offered are far too small to make national health insurance workable. We cannot let health care continue to be a growth industry. If we want a health care system that works, we’re going to have to break the inflation curve – and shrink the pie, just a bit.
Right now, our so-called health care “system” is filled with redundancies, outright fraud and contradictions. While some patients receive too little care, others are over-treated and over-medicated Meanwhile, they see seven doctors, yet somehow, no one ever seems to listen to them. Often it's not clear if the doctors listen to each other.
A final word: If we begin to spend our health care dollars rationally—rather than haphazardly– we can have a better coordinated, more patient-centered, and affordable health care system. No one should be afraid of Medicare cuts.
Experience demonstrates that when it comes to health care, lower spending and higher quality go hand in hand. Anyone who tells you otherwise is lying, pure and simple.