Glass Half Empty/ Glass Half Full—Part 1

 “Every Decision from Here on In Must Put Patients’ Interests First”

Does anyone remember the original goal of healthcare reform?  I could type it in my sleep: “to provide high quality, affordable care for all Americans.”

Today, the goal has shrunk; the current Senate compromise aims only to make certain that 30 million uninsured Americans have insurance–which may or may not provide access to the care they need.

Washington would do this by mandating that all Americans buy insurance—or pay a penalty. Insurers, in turn, will be required to accept all customers, despite pre-existing conditions. Insurers will not be able to charge you more if you are sick– though they will be able to put a gun to your head if you are middle-aged.

Optimists say that by providing insurance for everyone, we will save tens of thousands of lives.  Maybe. Maybe not.

 Glass Half Empty

Over at Firedoglake, Scarecrow takes a grim view of the “compromise” that Senator Joe Lieberman has extracted from his colleagues: “Whatever Joe Lieberman’s motives, the reality is that he just performed a moral crime on national television. He’s essentially said that if Democrats want to provide even poor health insurance to 30 million uninsured Americans, the federal government and those citizens will have to pay blood money to an industry protection racket that will have the economic and political power to set the terms of that protection, shield itself from oversight and competition, and raise prices at will.  . .

 “The health reform debate is no longer about ‘reform,’” Scarecrow argues. “It has now become a hostage rescue effort for more than 30 million innocent victims”—i.e. the uninsured. "Every decision from here on must put the victims’ interests first, and whether we pay the extortionists’ ransom demands or not depends how that serves the victims’ safety.”  I agree. This is not a time to stop negotiating.  

Let me be clear: the “extortionists” are not just the private sector insurance companies (which desperately need 30 million new customers), but the hospitals, drug-makers, specialists and other players in the system. Will they put patients’ interests first? In other words, under the new scheme will they agree to make safe, comprehensive care available at a price that patients and taxpayers can afford?

Much depends, first, on how the private sector insurers are regulated. At present, we’re told that they will be overseen by the Office of Personnel Management (OPM), the group that administers Federal Employees’ Health Benefit Plans (FEHBP).  

OPM does not “regulate.” It oversees.  Rand  Health Compare explains: “There is no designated minimum benefit package for FEHBP plans. The federal government does mandate certain coverage (such as for catastrophic expenses and mental health parity), but in general FEBHGP  plans can provide highly variable products that differ in types of services covered, copayments, and out-of-pocket limits within broad categories (such as hospital, surgical, ambulatory, and obstetric care).  . . . Depending on the plan selected, enrollees may have different cost sharing for out-of-network providers.”

How good are the “in-network” providers?  That varies.

Within the FEBHP, “choice” means that you are “free to choose” (forced to choose) the plan that you can afford. Typically, less expensive plans carry higher co-pays. The FEBHP  Chinese menu also offers “high-deductible” plans that some employees cannot afford to use, except in an emergency. This may mean that they go without the regular care and chronic disease management that their families need.  

When it comes to using the sheer size of its membership to negotiate lower premiums for federal employees, OPM has made little or no effort. From 2001 to 2008,, average premiums have risen by 62.3%.  Over the same span, Medicare has done a better job of controlling spending, keeping health care inflation down to 6% a year.

On top of runaway premium increases,  FEHBP participants have watched co-pays climb the least expensive Blue Cross/Blue Shield plans patients are charged $25 for each visit to a primary care physician who is “in network.” If they go to a doctor who does not accept the plan’s fees, patients must pay the full bill, without help from their “insurance.”  If a patient winds up at the ER, his co-pay is $75. If he is hospitalized, he pays $100 a day up to $500 –unless the hospital is “out of network;” in that case, he pays all charges. For some prescriptions that are not in the plan’s formulary, the co-pay is 50% of the cost of the drug.

The major reason federal employees like their insurance is that the government pays up to 75% of annual premiums. (Though some federal employees still don’t sign up because they cannot afford 25% of premiums that can run as high as $13,000 for a family plan.)  Under the Senate plan, the uninsured will not be so lucky. Unless they qualify for subsidies, families who sign up for a menu of private plans modeled on FEHBP will have to foot the entire bill themselves.

Keep your eye on what happens when the House and Senate plans are merged. The House legislation calls for federal regulation of insurers. The Senate bill leaves regulation to the states —and many states just won’t be inclined to regulate.  

In part 2 of the post, I’ll talk about why the Senate plan would leave many older Americans uninsured, and why it is not likely that the private insurers overseen by the OPM will take it upon themselves to put patients’ interests first. 

That said, I also will elaborate on the features of the House and Senate plans that deserve progressive votes– as long as they survive final negotiations.  

Finally I will explain why I’m not giving up hope. Reformers have lost the game, not the match. This is just the first piece of health care legislation that you will see over the next three (or four) years.

22 thoughts on “Glass Half Empty/ Glass Half Full—Part 1

  1. Professor Mahar,
    I’m Back! Just made your day!
    Anyway, it has come to my attention you are NOT progressive enough!
    According to the very progressive Canandians, we should be ELIMINATING health care, not promoting it!
    All us ugly primate CO2 emitters are not good for Mother Earth. Sez who?
    Diane Francis of the National Post, that’s who.
    Using her “logic,” the medical profession should be CAUSING cancer, heart disease, diabetes, flu epidemics, etc. in a determined effort to cut the population of the USA in half (or more) by 2050!
    Sarah Palin’s Death Panels? Seems she had good intel from Alaska’s Eastern border.
    Get with the program, you so-called progressive, and champion the elimination of humans from Planet Earth. Anything else would be so……
    Republican =8-O

  2. different folks have differing fehp perspectives. for those of us who’ve learned that our premiums will remain flat for the third straight year, having declined from where they were four years ago, we’re feeling pretty good and can understand why others might want to share our situation. but, clearly, that’s not how it seems to all.

  3. I think, Maggie, that your emphasis on the critical need for adequate insurer regulation is well placed. However, as I understand the proposed reforms, ultimate oversight will rest with the HHS Secretary, and OPM would only oversee the FEHBP option, not the myriad of private plans that might be offered on the Exchange. Is that wrong?
    I’ve looked at the latest Senate version, anticipating that the Senate may have more influence on the final product than the House. As I read it, the Secretary will oversee state Exchanges, but these, in turn, will be required to establish some oversight and feedback provisions that may be valuable. They will be required to design standard forms for explaining the details of each individual plan to the public, standard criteria for judging and rating quality, and feedback mechanisms via an Internet portal overseen by the Secretary that inform prospective and existing subscribers of the relative ratings and costs of plans, and which report the experiences of patients who register their satisfaction or dissatisfacton.
    It seems to me that if these mechanisms are actually operationalized in a reasonable manner, they would maintain pressure on insurers to compete on a rational basis rather than simply via gimmicks. I believe some systems elsewhere – e.g., The Netherlands – have had satisfactory experiences with these feedback mechanisms as a regulatory tool.
    I also note that the Senate and House bills prescribe risk adjustment mechanisms that reduce insurer incentives to game the system by attempting to discourage subscribers with higher than average risk from signing up.
    How well do you think these various mechanisms might operate even in the absence of the robust public option that would have been a first choice?

  4. So it looks like the healthcare reform legislation that some (not me) had so much hope for has turned out to be a turd.
    I will again say what I said at the beginning of this process. The US government (and people) don’t have the wisdom or courage to do what is needed to reform healthcare.
    Much of this process reminds me of an incident that occurred in while I was in college. A number of us had ordered a pizza and we were collecting money to pay for it. One of my classmates (who is now a lawyer) uttered the immortal phrase “if we do this right, everyone will come out ahead”.
    This attempt to make everyone “come out ahead” has been one of the huge motivating factors in all kinds of tricks and cost shifting that are embodied in the bill. Everyone must buy insurance to make it affordable, young people must pay higher premiums to subsidize the old, all insurance must contain benefits for every disease, etc. etc.
    Face it, we ordered a pizza we can’t afford, we need to order a smaller pizza with fewer toppings. And no matter how we do this – NOT EVERYONE CAN COME OUT AHEAD.
    In the immortal word of “The Who”: I want it, I want it, I want it, I want it — Ya can’t have it!

  5. “This is just the first piece of health care legislation that you will see over the next three (or four) years.”
    I’m pretty doubtful of that. After this long, nasty fight, why would they want to enter the fray again? I think either we’ll be stuck with what we get on this go around for a long time – or it all will be repealed when the Republicans gain control of the Congress again, which I wouldn’t be surprised if happened sooner rather than later.

  6. I have to think what Legacy Flyer says about the US government and its people not having the wisdom or courage to do what is needed to reform healthcare has some merit. There is more interest (through lack of trying) to preserve the status quo.
    U.S. Senator Joe Aetna has laid his cards on the table. His objective is not finding common ground to pass comprehensive health care reform, but rather killing health care reform to satisfy his masters (controllers).
    Talking Points Memo, Josh Marshall, wrote that Lieberman continues to play Lucy to Reid’s Charlie Brown, yanking away the football again and again with a cheerful grin on his face, with no apparent regard for the fact that this is making Reid look like, well, Charlie Brown; a putz!

  7. I must be missing something. The Senate bill will mandate coverage but provide no protect from premium increases; will prevent insurers from denying on the basis of pre-existing conditions, but let them charge whatever they want; and continue their antitrust exemptions. I don’t doubt that this Senate bill will put some millions of Americans in the category of lawbreakers, because they won’t buy insurance they can’t afford and will silently refuse to pay the penalty to the gov’t. And the Federal gov’t no doubt will raise some millions from other citizens who will be more able to pay $1000 or so a year than the $8000 a year the insurers will be asking.
    Honestly, I have no hope that any bill coming out of this Congress will save any lives, improve any lives, or reduce the financial burden on most American families now without proper medical care.
    Our focus should shift toward getting murderous miscreants like Lieberman out of office, so we can reach our goals.

  8. Jim,Fred, Legacy, Kimber
    Jim– I’m glad your FEHBP premiums have remained flat.
    But since the vast majority of people in FEHBP plans have seen premiums sky-rocket I don’t see how that’s pertinent the our conversation.
    The question is: does OPM do a good job of negotiating with private insurers to keep costs down?
    The answer: No. In fact premiums have climbed a bit more than average premiums in the private sector.
    Fred– A great many state insurance regulators are already in bed with insurers.
    Traditionally, they have looked the other way while insurers break laws.
    From what I’ve read, no one is very optimistic that HHS will be able to regulate states in a way that causes them to regulate insuers.
    I did a tv show (Laura Flanders, Grt TV) with Jacob Hacker (the father of hte public optoin) yesterday and while he too emphasized that regulation would be critical, he didn’t sound hopeful.)
    In European countries where non-profit private sector insurance works,insurers are very tightly regulated. The government typically sets premiums. Insurers cannot raise them without
    permission from the government. The government specifies what must be included in policies–there is no “menu” of plans, some with such high co-pays and deductibles that people can’t afford to use them.
    In many countries the gove’t does not allow co-pays or deductibles–and definitely not for primary care. Insurers usually all have to offer the same package.
    In the U.S., insurers are already figuring out how to “cherry pick” by having few cncologists in their network (so that cancer paeints don’t pick the plan), and by offering gym memberships (so that healthy customers do.)
    Blue/Cross Blue/Shield plans will dominate, and they will be competing with other Blue/Cross Blue/Shield plans.
    The history of corrupton in the Blues is depressing.
    Kaiser, etc. won’t be part of the system.
    Legacy– As usual, you’re jumping to conclusions.
    The bill is neither an empty glass nor a full glass.
    And as I have said many times, reform is a process that will take many years. (The fact that Peter Orszag and ATul Gawande each said the same thing in the past couple of weeks gives me confidence on that point.)
    As White House Budget director Peter ORszag has pointed out: spiraling health care costs are the single greatest threat to the U.S. economy.
    If we don’t have more health care legilsation in the next 3 years, you can count on: the dollar declining further; oil-producing countries pricing oil in a currency other than the dollar; higher unemployment than we have now; and the standard of living in the U.S. falling sharply, for all exect the very, very, very rich (top 2%.)
    This is possible. But I think there are just enough people in Washginton who understand that this is what will happen that they will continue to fight health care inflation. That means more legislation.

  9. Why do we expect that the federal government can handle our health-care? What is happening now in Washington is worse than nothing happening at all. We are being bum rushed into a deal that will be written and re-written after the fact.
    I currently am unemployed and have no health care and I’d rather stay that way than accept the hook and sinker the federal government is casting in the pond.

  10. Christian–
    All I can say is that you are unusual. Most people who have No health care would prefer something to nothing.
    My guess is that you’re fairly healthy and under 40.

  11. Gregory & Michael
    Gregory —
    Comparing Lieberman to Lucy is apt.
    It’s possible that the American people and their gov’t lack the political will to pass true health care reform.
    IF so, the result will be a fairly rapid decline in the U.S. economy that will affect everyone.
    The upper-class will become upper-middle-class/middle-class. The middle/class will become working/class poor. And the poor will becoome homeless in larger numbers than ever before.
    I am not exaggerating. I understand Int’l finance, the U.S. position in the global economy and why Orszag calls rising health care costs the single major threat to the U.S. economy.
    On the other hand, in teh past people said that the U.S. government and the American people were too selfish, too corrupt, etc. to every abolish slavery.
    But eventually, they did.
    There was grave doubt as to whether we would ever pass civil rights legislation.
    Many were shocked when we passed Medicare (incluidng a great many doctors).
    Each of these things took a long, long time, but they did happen.
    So perhaps health care reform will be next.
    But as both Orszag and Gawande very recently pointed out,it will take at least 10 years.
    Virtuallly everything you say it true. But you forget the things that will help people.
    What if you had an 11-year-old son who couldn’t get health insurance because he had cancer (a pre-existing conditon) and now, under reform he would qualify for help (probably very soon, through the emergency fund?)
    What if you were a 58-year-old woman paying more than you can afford for health insurance in the private market, both because the individual market is so expensive (high administrative costs) and because you are a woman, and insurers charge women more?
    Suddenly you would qualify for group rates and they wouldnt’ be able to discriminate against you because you are a woman.
    Insurance that wrecked your budget could become affodable. You wouldn’t have to pick a plan with high co-pays and put off going to the doctor or buying medication.
    I’m not saying that this bill will save “tens of thousands of lives.” I doubt that it will.
    But for tens of thousdands of individuals, it will make a difference.
    That is more than nothing.
    Also, if you came fro a low-income home and wanted to go to med school– now there is far more funding ot provide scholarships and loan forgiveness to students who want to go into primary care. (Students from low-income homes are much more likely to pick primary care.)

  12. Legacy Flyer:
    What a great story to illustrate your very important point: Everyone cannot come out ahead.
    Especially when we are looking at insurance from a proper financial perspective: the many support the few.
    We are at a point in the health care dollar game, in which providers are going to have to accept less.
    That is the only way to lower premiums, so that we are not subsidizing 80% of Americans, just to pay the premiums.
    Subsidizing inflated premiums to pay exorbitant prices merely delays the game plan: to put providers against the wall, and say, “Fellows, the money is just not available.”
    Don Levit

  13. I guess my response to Maggie’s comments about “what’s good for people” is that it amounts to going from the ankle to the knee. The rest of the body is as badly off as before. It’s useless (IMO) to mandate that no denial for pre-existing conditions will be allowed, when the insurer can still charge you $10,000 for coverage. What they’ll do is exactly obvious: they’ll raise the premium beyond affordability. I’ve told this story before: when I tried to get insurance for myself and my wife, Aetna wanted $15,000/year, because she takes Cymbalta for depression and RelPax for RLS. And the outcome for “high risk” group rates is prefigured in this story:
    Unless there is some significant change, as yet not in view, the group rate will be as unaffordable for most people as the private rate. Yes, people do buy into existing “high risk” insurance pools, but only upper income people that can afford it. The mass of citizens “going bare” are not in that group.
    I’m really discouraged about this whole process. And I put the blame at the feet of one man: the President. He has not been a leader on this issue. He has not gotten out front and jawboned, he has not given the nation any sense at all that this is an issue of primary importance. He has pursued the classic “Rose Garden” strategy, locking himself up in the Ivory House and letting niggling Congressional leadership take charge of the issue. What a colossal political and moral blunder.

  14. mp–
    Under the current compromise Senate proposal, an insurer could not charge your family more than it charges any other family in your community for the same policy.
    So the article from the Colorado newspaper about “high risk” patients does not apply. Under reform, there would be no “high risk” patients–everyone would be treated equally –except older customers. (Insurers would be able to charge older customers them more. I think that is a problem but it’s a separate issue, and not your problem now.)
    Also, under the Senate compromise, you would automatically be part of a group, so you would get group rates.
    That said, the average group rate for a really good family plan is now about $13,000. By “really good” I mean it is comprehensive, the deductible is pretty low and co-pays are low.
    If the government was offering the plan it would cost about $2,000 less because the govt wouldn’t have to advertise, market, lobby, and pay exectuives such high salaries.
    But the plan would still cost $11,000 . . .(unless you could afford a somewhat high deductible and co-pays.)
    If you earn less than median income (roughly $58,000 joint per household) you would get a subsidy. If you earn substantially less than median income, you would get a large subsidy.
    So for low-income and lower-middle class households, insurance would be affordable.
    Unfortunately, if you’re at the upper edges of the middle-class or are upper middle-class (earning more than $88,000 if you’re a family of four) you get no subsidy.
    At the same time $13,000 a year (or even $11,000, if we had a public option, which we don’t) would be expensive for a famly of four earning, say $90,000.
    And if you’re a two-person household earning more than about $58,000, you don’t qualify for a subsidy)
    Why is insurance so expensive? Because there is so much waste in the system. Unncessary tests, treatments and medications.
    Plus, we over-pay for many services and products.
    If reform is going to make healthcare affordable for everyone, someone has to begin to cut fees for many specialists’ services–and refuse to pay hospitals for inefficiecy and errors. We also must refuse to pay for over-priced drugs that are no better than the drugs they are trying to replace. At the same time we need to pay more for primary care.
    Under the current Senate compromise bill, Medicare may begin to do that.
    And if Medicare does trim waste, then some private insurers may follow suit. But they will want Medicare to provide political cover.
    That’s where things stand now. For low-income households and the lower-middle class, the Senate bill makes health care significantly more affordable.
    And if Medicare leads the way, and insurers follow health care might become more affordable for the upper-middle class.
    Finally, if insurnace costs more than a certain percentage of your income (8% to 10%, I think) you won’t be forced to buy insurance. You’ll be exempt from the mandate. . .
    So the SEnate compromise will help some people, but not everyone.
    Finally, I don’t think there was much that the President could do. You have to understand that many moderate/conservative Demcrcrats (and the people who voted them into office) do not like or respect President Obama.
    Only 48% of white voters voted for Obama–even though he was running against a fairly weak candidate.
    The fact that a Congressman felt free to shout “You Lie!” –while the president was delivering a speech to Congress tells you something.
    This has never happened before.
    Conogress– and the country– is so polarized that President Obama has very little leverage over Congressman who are on the other side.
    This includes Lieberman and Nelson. Arm-twisting, exhorting, offering them his support, would do no good.
    Appealling to the public would do no good. The majority of the American people say they want a public option, but without 60 votes in the Senate it’s impossible to pass.
    Part of the problem is that the Senate is structured so that a simple majority (51%) is not enough. This makes it very, very hard to pass controversial or very progressive legislation.
    All you can do is to think long and hard about who you elect to Congress in 2010. We need more progressives in Congress. While Democrats are in the majority, progressives are still in a minority.
    Too many people either don’t vote in Congressional elections, or just vote for the name they recognize–without finding out where he/she stands on the issues.
    In 2010 and 2011 Congress can still go back, revisit the public option and amend health care reform.
    Alernatively–if conservatives take control, they can repeal the compromise we have now.
    People get the government they elect.

  15. Maggie:
    You say that the $13,000 premium would not apply to this family – is that because they are younger, and thus would pay a lower community-rated type premium?
    The legislation calls for some ratio between the younger and older, right – something like 3 or 4 to 1?
    Well,if so, then while a younger family would pay less, aren’t the insurers free to charge enough premiums to stay solvent?
    If there is a strict ratio of older to younger, of 4 to 1, or even 2 to 1, this still allows insurers to charge enough premiums to the younger, so that twice those premiums to the older would stil be profitable.
    Don Levit

  16. Don–
    When you quote me saying “the $13,000 premium would not apply to this family” I’m not sure what you’re referring ot.
    Under reform, with community rating and guaranteed coverage,
    the average premium for a relatively young family who wants a comprehensive plan with a fairly low deductible and co-pays (i.e. the “Plantium” plan in the Senate bill that covers 90% of essential health care costs) would be about $13,000–in today’s dollars. (In 2014, it will be more.).
    The average premium for an older couple would be closer to $24,000—as it now is in Masschusetts, where insurers can charge older customers twice as much as they charge younger customers. (See part 3 of my glass half-full post)
    Under the current Senate bill, insurers can charge older customers 3 times as much as they charge younger Americans..
    I realize that private insurers show a profit margin of only about 3% (including the biggest and most successful.)
    So yes, if they are going to cover everyone, without denying coverage because of pre-existing conditions, they have to charge what health care costs.
    BUT– and this is a big But–if they were truly concenred about their customers they would do everything possible to beat back health care prices– hard-knuckled negotiating with Pharma, take-no-prisoners negotiating with hospitals and specialists–refusing to over-pay.
    Private insurers have not done that becuase it’s in their interest to see the health care pie growing. If the industry’s revenues are higher. and premiums are higher, than the 15% to 20% of premiums that they keep to cover exectuive salaries, marketing, advertisign, lobbying and profits is more in absolute dollars.
    That’s the difference between a private sector insurance plan and a government plan.
    A government plan (Medicare for example) has no interest in seeing total health care spending grow. And, in fact, in the past 10 years, Medicare has done a somewhat better job of keeping costs down (6% annual inflaton vs. 8% average annual increases in reimbursements for private sector insurance.)
    Arguably, private sector insurers should be putting their shareholders ahead of their customers, and growing revenues as much as they can, by agreeing to pay pretty much whatever pharma asks for popular brand-name drugs, and whatever brand-name hospitals demand–and then passing the cost along in the form of higher premiums. .
    Under our laws, a for-profit corporation’s first responsiblity is to shareholders–not to customers.
    But, as a country, we cannot afford to let this
    game continue.

  17. Maggie:
    I agree with everything you said.
    It seems like the legislation merely subsidizes the overpriced premiums to the ultimate benefit of the private insurers.
    If there is nothing in the legislation to prevent insurers from simply passing on the costs, what are we to do – have faith they will abruptly see the light?
    Don Levit

  18. Don–
    The legislation says that that insurers in the large group market must pay out 85% of premiums in reimbursments, leaving them 15% for administrative costs.
    And as it stands today, insurers are keeping only 3% in profits. Higher premiums reflect higher reimbursements–they are just “passing costs along”
    But I am arguing that they should be negotiating harder with docs, hospitals, pharama, etc. to bring those costs down.

  19. Regarding OPM efforts to reduce premium increases, you said that “From 2001 to 2008, average premiums have risen by 62.3%.” Was that from Jan 1, 2001 to Dec 31, 2008?

  20. Folks:
    I am curious if any of you have information on the insurers’ position of the pending legislation.
    It seems to me they are in the driver’s seat.
    Don Levit

  21. “Someone has given you misinformation.
    People who pay for their own insurance also get a tax break.”
    Excuse me Maggie but it is you who are uninformed and I find that disheartening.
    I know very well what the tax treatment is for individual subscribers… because I am one. Your assumption that everyone who pays is own way for healthcare is self-employed is grossly inaccurate.
    As you well know, 40+% of small businesses cannot afford to offer any insurance and a large proportion of those who do include diminished coverage. People in that situation do not all just “go bare”
    Neither do all under- and unemployed 55+ year-olds. Many are are trying to hold on until they age into Medicare by paying for health insurance –either individual or COBRA –with savings. Why don’t those who are committed to maintaining their coverage deserve as much attention as those who have already exhausted their savings? Why aren’t they at least entitled to equitable tax treatment?
    Under the current tax code, individuals who are not self-employed may only claim an excess above 7.5% of their AGI and they must itemize. 50-somethings with paid off mortgages are unlikely to have any deductions anyway and, unless one experiences a medical crisis, are even less likely to have expenses that exceed that amount. These people are not wealthy — they were simply careful with their money when it counted and are effectively penalized by the tax code for their self reliance.
    Your misguided response is indicative of the short shrift that we self-payers have received throught out this faux “reform” discussion. Legislators and liberal journalists have focused on the uninsured and virtually ignored those who are paying their own way. I understand that many people have been shut out of the individual market but what about those of us who are already paying? Why don’t we deserve comparable consideration from the liberal politicians we help elect?
    Analysts and politicians who talk about a disconnect between patients and cost of care have no credibility when they advocate policies that punish those who are actually paying their own way.