What Has Been Accomplished; What Still Must Be Done
These days, many progressives are expressing deep disappointment with the health reform legislation now moving through Congress. Some suggest that some legislators made deals with lobbyists and let them write the bills. Others complain that both the subsidies and the penalties are too low. Still others don’t like the fact that states can “opt out” of the public insurance option, and decide not to offer Medicare E. Finally, many ask: “Why can’t everyone sign on for the public plan in 2013? Why do we have to wait until 2013? Why can’t they roll out universal coverage next year?”
Normally, I would be among the first to critique the bills. By temperament and training, I’m both a skeptic and a critic.
But in this case, I think it is important to recognize that we cannot expect this first piece of health reform legislation to be anything but wildly imperfect. In fact, I’m impressed by the progress Washington has made in just ten months. I’ve been watching the struggle for health care reform since the early 1970s, and compared to what has happened over the past 39 years, this is mind -boggling.
I also believe that those who favor overhauling our health care system should send a strong signal to legislators: we support you for having come this far. We realize that you have three years to strengthen, change and refine the plan before rolling it out in 2013.
What Has Been Accomplished
What is astounding is that this Congress has made as much progress as it has. We may have a new administration in the White House, but we do not have a brand-new group on the Hill. The majority of our legislators are moderates; many are conservatives. Nevertheless, a sufficient number have found the will to stand up and back changes that would make health care affordable for millions of poor, working-class and middle-class Americans.
For example, under the House bill, a family of three making $32,000 a year would pay just $1,360 in annual premiums for good, comprehensive coverage; under the Senate Finance Committee bill, the same family would be asked to lay out only $2,013. Today, without reform, if that family tried to buy insurance, it would find that the average plan costs $13,500. For this household, the current legislation makes all of the difference.
Too often, the press suggests that such a family would be expected to pay $10,000 out-of-pocket to cover co-pays and deductibles. That just isn’t true. Even if the entire family were in an auto accident and racked up $200,000 in medical bills, at their income level, the House bill caps out-of-pocket expenses at $2,000 a year. Under the Senate Finance bill, the family would have to pay $4,000. Moreover, under both bills, there are no co-pays for primary care. Even private insurers cannot put a $25 dollar barrier between a family and preventive care.
Moving up the income ladder, a median-income household earning roughly $55,000 would pay premiums of $4,300 to $6,500—depending on whether the Senate Finance bill or the more generous House bill sets the terms. Without legislation, they too would face a $13,500 price tag –and that is if they could get a group rate. If they are buying insurance on their own, coverage could easily cost $16,000.
For self-employed workers, early retirees, and those who work for (or own) a small business, the legislation offers major savings.They will be able to buy coverage on the Insurance Exchange, where they would suddenly become part of a group—which makes their premiums much lower. Whether rich or poor, this is great news for anyone who works for himself, retired early (voluntarily or involuntarily), or is part of a small firm.
Granted, the legislation now on the table still doesn’t make insurance affordable for many Americans at the upper-edges of the middle-class–-or the upper-middle-class. They don’t qualify for subsidies. But, as I discuss below, the legislation does point the way to lowering their premiums. Before reform becomes a reality in 2013, I am convinced that this will happen, in part because it must. We can no longer ignore the waste, inefficiency and pure fraud in our health care system. There is absolutely no reason why we should pay so much more for health care than any other nation in the developed world.
And at least the current legislation protects these more affluent households from medical bankruptcy. No matter how much a family earns, they cannot be asked to pay more than $10,000, out of pocket, in a given year. For households that have savings and property to protect, this means that they don’t have to worry about being wiped out by a medical disaster. Even if you and your family are in that car accident that leads to $200,000 in doctors’ and hospitals bills, you will owe only $10,000. In that situation, doctors and hospitals will let you pay off your bills over time, because they know you can.You won’t be forced into bankruptcy court. This represents an enormous step forward.
In addition, under reform, private insurers will not be able to put a cap on how much they will pay out to you and your family, over the course of a year, or over a lifetime. If tragedy strikes and a child needs six or seven years of cancer treatments, your insurance will not “run out.” For some families, this one provision will mean the difference between being able to care for their child and financial ruin (coupled with the suspicion that, if they had just had more coverage, they might have been able to save their child.)
Moreover, in the very first year of reform, the public plan will offer less expensive, higher quality coverage to millions of Americans. Congressional Budget Office director Douglas Elmendorf disagrees. He has been spreading misinformation about the government plan. First he low-balls the number of Americans who will be eligible for the Insurance Exchange where they can choose between a public plan and private insurance. . He then asserts that only 20 percent of Excharge shoppers will choose the government plan while 80 percent will pick private insurance. Here Ellmendorf pretends that he can read minds.
Elmendorf goes on to argue that despite the fact that its administrative costs will be far lower , the public plan will cost more than comprehensive private insurance. This theory is based on the unfounded assumption that very few people will select the public plan , coupled with speculation that the public plan will make no effort to control costs and utilization. This makes no sense; as reform legislation makes clear, part of the purpose of the publc plan is to offer higher quality care for less. (In part two of his post, I will examine Elmendorf's gesstimates in detail.)
For peculiar reasons that I don’t fully understand, progressives have been listening to Elmendorf’s numbers. They seem to forget his past: a student of the Dean of Conservative Economists. Elmendorf first made his mark in Washington by helping to quash the Clinton’s hopes for health care reform.
Finally, under the House and Senate reform bills, insurers will no longer be able to deny coverage, or charge a customer more, because of a pre-existing condition. If you’ve begun to take that idea for granted, keep in mind that the Republican’s recent 11th hour proposal for reform “gives the insurance industry more leeway” as the Wall Street Journal put it yesterday. (Media Matters points out that this WSJ story disappeared from the paper’s website sometime last night.) Under the Republican proposal, insurers would be able to take pre-existing conditions into consideration.
House Speaker Nancy Pelosi’s “Fact Sheet” offers two examples illustrating just how easy it is for insurers to deny coverage today:
Peggy Robertson: A Colorado mother of two who was denied health coverage because she had a c-section in 2006. The insurance company told her if she got “sterilized” she would be eligible for coverage.
Christina Turner: After being sexually assaulted in Florida, Christina Turner followed her doctor’s orders and took a month’s worth of anti-AIDS medication as a precautionary measure. She never developed an HIV infection. Months later, when shopping for new health insurance coverage, Ms. Turner was repeatedly denied coverage because of the precautionary treatment she received after being raped.
Today, in most states, this could happen to anyone. I live in New York, where we have community rating, so I don’t have to worry about pre-existing conditions. My employer provides excellent insurance, with no annual or lifetime caps, so the current reform legislation would probably have no immediate effect on my life.
But, we all should recognize that the bills on the table would change the lives of millions of Americans, giving them the security that they don’t have today.
Progressives cannot let this opportunity slip through our fingers because we are so busy critiquing the legislation–and arguing with each other. The WSJ online reports that Senate Majority Leader Harry Reid has begun to warn that the Senate may not be able to complete the legislation by the end of this year.
Given all of the criticism he has faced, Reid could be losing heart. After all, Conservatives continue to argue that legislators like Reid will be punished at the polls. Congressmen who have been pushing for reform need our encouragement. Progressives should continue to make it clear that the majority of Americans want reform– and a public option– even if the legislation is far from perfect.
2010 is an election year. Fearful of losing, some Congressmen will begin to back away from change. It is critical that broad reform legislation is passed this year. Over the next three years, it can be amended as the critical details are fleshed out. Anyone who thought that Congress would be able to overhaul a $2.6 trillion dollar industry with just one bill was, I submit, terribly naïve.
What Remains To Be Done In the Next Three Years
There is so much to be done: this is one reason why reform cannot be implemented until 2013.
Congress must figure out how to regulate the private insurance industry. This will require enormous cunning.
Reformers will have to find a way to stiffen the penalties for those who choose not to buy insurance, without alienating young, healthy voters. This is a job for a charismatic president.
Legislators must map out how the Insurance Exchange will work.
They also will need to come up with a formula that will adjust for risk if one plan winds up with a larger share of poor and sick customers. (Some fear that this will happen to the Public Plan, so this, too, is a crucial detail.)
Finally, and perhaps most importantly, Medicare needs time to begin eliminating waste in the system—saving billions of health care dollars while simultaneously lifting the quality of care. In fact, while all eyes are focused on the legislation, Medicare already has begun putting its own house in order.
What many reformers don’t seem to understand is that when the public plan begins to negotiate fees with providers in 2013, Medicare fees for some very expensive services will be significantly lower than they are today, while reimbursements to primary care doctors will be higher. Medicare already has announced plans to cut fees for CT scans and MRIs next year, and has proposed trimming fees to cardiologist by 6 percent . Meanwhile, it would hike fees for primary care physicians by 4 percent. Congress has just 60 days to respond to the changes in reimbusements to doctors or they will automatically take effect January 1. Over the next three years, we can expect more changes in the fee schedule. And private insurers will follow Medicare’s lead. As they have explained to the Medicare Payment Advisory Commission (MedPAC), they just want Medicare to provide political cover.
In other words, in 2013 the public plan will be negotiating fees with providers in a very different, less expensive, and more rational context.
This is another reasonwhy public plan premiums will be significantly lower than Congressional Budget Office (CBO) director Douglas Elmendorf suggests.
Over the next three years, Medicare will be realigning financial incentives to reward preventive care and management of chronic diseases, while reducing payments for overly aggressive tests and treatments that have no proven benefit– and penalizing hospitals that don’t pay enough attention to medical errors. In the process, Medicare will be conserving health care dollars while protecting patients from needless risks. As President Obama has promised, Medicare cuts can make healthcare safer and more affordable for everyone—including the upper-middle class. Because most private insurers will mime Medicare’s efforts to reduce overpayment, the cost of care will come down for everyone.
The Public Plan will incorporate Medicare’s reforms, and it will have clout.Seven percent of Americans purchase their own insurance in the private sector market. . Most are neither poor nor sick. (If they were, they wouldn't be able to buy insurance in the individual market.) More than half earn over $55,000. They will be able to go into the Exchange and sign up for the public plan. In additon, a large share of relatively young Americans (ages 25-34) are uninsured. Most are relatively healthy. No one knows how many will choose the public plan, but since it will have much lower administrative costs than private sector plans, it will be less expensive. This should make it attractive to younger Americans.
States will not opt out. It would be too difficult for politicians to try to explain to voters why they cannot have access to a government plan that will be able to offer comprehensive insurance for less.
In part 2 of this post, I will explain what Medicare is already doing to pave the way for a structural overhaul of our health care system, and why none of these cost-saving reforms need to be –or should be–spelled out in reform legislation.