What concerns you most about the direction that health care reform proposals are taking in Congress? A few that have drawn particular scrutiny:

• Financing and taxes
• Affordability to individuals
• The overall price tag
• Cost to businesses
• Medicare cuts
• Reductions in payments to medical providers
• Medicaid and other government program expansions
• Scope of provisions to bend the cost curve

Information about the plan released by Senate Democrats:
• Summary Of Senate's Health Care Reform Bill [PDF]
• Timeline For Implementation Of Senate Bill [PDF]

The new Senate health bill marks a major step toward comprehensive, fiscally responsible health reform. It would extend health insurance coverage to 31 million Americans who lack it, reduce the budget deficit, and put long-term downward pressure on health care costs.

The bill would reduce deficits by an estimated $130 billion over the 2010-2019 period and by about one-quarter of one percent of GDP in the decade thereafter, according to the Congressional Budget Office (CBO). This amounts to about $55 billion in 2020 and several hundred billion dollars over the 2020-2029 period. The bill also would likely slow the growth of health care costs over time by, for instance, imposing an excise tax on high-cost health insurance plans, reducing overpayments that private insurers receive through Medicare Advantage, and reducing the cost of prescription drugs in Medicaid.

Moreover, while the bill extends health coverage to 31 million more Americans, it keeps the total federal cost for all health care spending and tax subsidies in the decade after 2019 essentially where it would be under current law, according to CBO. That’s because the bill finances its expanded health coverage by redirecting existing spending and tax subsidies from less productive uses elsewhere in the health sector.

All of this represents a stark and welcome change from the treatment of major tax and spending initiatives for nearly a decade. Congress enacted, for instance, the 2001 and 2003 tax cuts and the Medicare prescription drug benefit without offsetting costs that totaled in the trillions of dollars. By contrast, the Senate health reform bill would expand coverage while reducing deficits over both the short and long term. (For more on the fiscal implications of the Senate bill, see here)

Affordability

The bill strengthens affordability by improving the premium subsidies in the Senate Finance Committee bill for the millions of households with incomes between 154 percent and 400 percent of the poverty line — that is, between $28,200 and $73,240 for a family of three. Unfortunately, the new bill reduces the subsidies in the Finance Committee bill for near-poor households at the bottom of the subsidy range, which already were less than adequate. A family of three with income of $27,465 (150 percent of the poverty line) would have to pay $1,250 for premiums, or over $400 more than under the House bill. Many families with incomes this low already struggle to pay the rent and utilities and put food on the table and could have difficulty paying this much for health coverage. (For more on affordability, please see here)

Employer Responsibility Requirement

The new bill significantly reduces the disincentives that the Finance Committee bill would have created for employers to hire workers from low- and moderate-income families, an important improvement. For some employers, some disincentives to hire or retain such workers would remain, however. Like the Finance Committee bill, the new bill would also create some incentives for employers to convert some full-time positions into positions of just under 30 hours per week. (For more on this point, please see here)

Fortunately, the House-passed bill is strong in both the affordability and employer responsibility areas, so Congress can address these problems in a House-Senate conference committee when it irons out a final version of the bill, if not before then.

The Senate should now move without delay to consider this landmark legislation, which would represent a dramatic improvement over the current health insurance system.

Sen. Max Baucus, chairman of the Senate Finance Committee, released this statement after the Sen. Reid unveiled the Senate Democratic bill:

The CBO score we received today illustrates the Senate health reform legislation is a balanced, fiscally-responsible package that will deliver the real reform that American families, businesses and the economy need.  The Senate bill is fully paid for, won’t add a dime to the federal deficit and helps pay down the national debt. It ensures choice for consumers and increases competition in the market, bans insurance company practices that deny and drop coverage for sick Americans and creates new tax credits for working Americans and small businesses to make coverage more affordable.  The American people are counting on us to act, so we must continue the hard work and compromise it took to reach this point until we deliver a bill to the President’s desk.  Too many parents struggle to pay for health insurance and also try to save for college, too many employers are forced to drop health coverage because they simply can’t afford the premium while remaining competitive in today’s global economy, and for too long, health insurance companies have put profits before patients.  This is the moment to change that."

For America's families, the key assessment about health insurance
reform will be a personal pocketbook test, namely: Will the legislation
result in needed financial relief for families struggling to pay for
health coverage and care?

The newly announced Senate bill scores high marks on the personal
pocketbook test-making health insurance much more affordable for
hard-working middle-class American families. 

Through tax-credit subsidies made available for plans in a newly
created marketplace, the Senate bill limits a family of four with income
under about $88,000 a year from spending more than 9.8 percent of the
family's budget on health insurance premiums. With the average cost of
family health insurance coverage at $13,000 a year, families could see
their insurance costs cut in half or more. This affordability protection
in the new bill is stronger than the previous provisions in the Senate
Finance Committee bill.

As the bill moves forward, we urge that the pocketbook test scores
continue to improve-with special attention to America's lowest-income
families who have little room in their family budgets for spending on
premiums, deductibles, or copayments. We hope that the Senate bill
passes soon and that the strongest affordability protections possible
are established in the Conference Committee bill.

The Senate bill looks very much like the House health care bill. It ends insurance company abuses like denying care for those with pre-existing conditions and it sets benefit standards to make sure the coverage people receive - both on their own and through their employer - actually covers the care they need. It gives people the choice of a public health insurance option like the one in the HELP bill, though states would be able to opt-out of the public option if they passed a law saying so. And it sets up a health insurance "Exchange" that would provide tax credits (subsidies) to make health care affordable, as well as helping business afford health care for their employees.

This bill is not perfect. It can be more affordable for lower-income families, it does not ask employers to pitch in their fair share, and while it is more fairly financed, it still taxes health plans. However, the fact that Majority Leader Harry Reid did the right thing and listened to the American people by including things like a public health insurance option and a tax credit level that goes a long way towards making health care affordable means that this bill deserves a debate and a fair, majority up-or-down vote.

Republicans and the insurance companies will try to block this bill any way they can, even going so far as to recommend the Senate not even talk about this bill, let alone vote on it. These tactics only preserve the status quo. The American people deserve health care reform - reform that delivers affordable coverage, a choice of a public health insurance option, and fair financing - and this bill deserves a fair vote by the full Senate so it can meet the House bill in conference.

The fact that the Senate bill has been completed with a financing mechanism in place, a low CBO score and forecast that it will reduce the deficit even beyond the initial ten year period adds momentum to the prospects for Democratic backed health reform legislation. Since both the Senate and House bills now contain income-related financing measures the outlines of a deal between the two bodies on the all important question of financing health reform may be coming into view.

One prediction I will make is that as the process moves forward there will be a much greater opportunity for the media and the public to focus on details, especially the adequacy of the subsidies and the underlying coverage people in the exchanges will get.  I suspect attention will focus in particular on the size of the deductibles people pay, if only because that is an element of health insurance people understand.  It's possible that the process may move too fast or these issues will be too technical to come into focus, or that the pressure to keep the price tag down to garner moderate Democratic support will be too great. If affordability does emerge as an issue, with the CBO score for the Senate bill now well under the 900 billion dollar marker the President set down and even further below the one trillion dollar line many seem to regard as an ultimate ceiling, there may be at least a little wiggle room to address these issues.

For close to a century, Presidents and congressional leaders have debated ways to fix our healthcare system. A system that leaves too many hardworking families struggling to get by or facing economic ruin.  Each go round, politics, special interests and scare tactics said we can't.  "We can't change.  We can't make our country better.  We just can't." Not this time.

 Just eleven days ago, the United States House of Representatives defined leadership by passing the historic Affordable Health Care for America Act. And now, under Senator Reid's strong leadership, the Senate has introduced their own legislation that gets us one step closer to healthcare that works for the American people’s bottom line, instead of insurance company profits.  Senator Reid listened to the American people and made sure this bill keeps insurance companies from controlling our healthcare system by guaranteeing choice and accountability through a public health care option.

 This is the Senate's opportunity to stand up and say "Enough!" No more scare tactics. No more kowtowing to conservative obstructionism. No more politics as usual. No more hesitation. 

We all know the stakes, and we've all seen the statistics.  But on the minds of each of the 44,000 Americans losing their health insurance this week lurks the threat of a potential disaster.  Each of the 17,000 Americans forced into bankruptcy because of medical debt this week must accept the death of their dreams for their family.  And the loss of 400 of our sisters and brothers this week simply because they lacked insurance is nothing short of a national tragedy.

We are at this historic moment because Democratic members of both chambers chose leadership and governance over obstruction and timidity. But there is no such thing as a Republican filibuster. Every American deserves a vote on healthcare. And, every Democratic member must stand shoulder to shoulder with their fellow colleagues and allow the Senate to vote on true health insurance reform.

The American people expect and deserve results. It's up to the Senate to deliver.

Senate Democrats yesterday unveiled their health reform bill, which looked much like the bills already approved by committees of jurisdiction, and which cost $849 billion. The bill is paid for in part through Medicare cuts, according to CongressDaily, including an increase in the Medicare payroll tax for individuals making $200,000 or more, and a tax on high-cost insurance plans. The Medicare payroll tax would bring in $54 billion and the Cadillac tax would raise $149 billion in revenue.

Senate Minority Leader Mitch McConnell , R-Ky., called the bill another “trillion dollar experiment,” and said it was like paying your mortgage three years before moving in.

Here’s how CongressDaily sums up the new bill, which is expected to go to the Senate floor this weekend for procedural votes, with the thought that the Senate will get down to business debating the bill after Thanksgiving.

Reid Releases $849B Bill, Initial Vote Expected Saturday

Senate Majority Leader Reid released an $849 billion healthcare overhaul bill Wednesday that includes a public option and will extend coverage to 31 million uninsured Americans, though a few Democrats are still on the fence over whether they will vote to proceed to the bill.

The bill would extend insurance to 94 percent of eligible Americans.

The measure, which would reduce the deficit $127 billion over a decade, creates an insurance exchange where people can compare and purchase coverage; allows insurance co-ops to be formed; expands Medicaid to those earning 133 percent of the federal poverty level; and offers federal subsidies to help those without employer-sponsored coverage purchase insurance.

The public option would allow states to opt out if they choose. Sen. Christopher Dodd, D-Conn., shepherded a more comprehensive public option through the Health, Education, Labor and Pensions Committee but called the opt-out version a strong public option.

The overhaul also includes an individual mandate with penalties reaching $750 per person for noncompliance by 2016. Employers that do not offer coverage will pay a fine for each of their employees who receive federal subsidies to purchase insurance in the exchange of as much as $750 per employee at the company, a senior Democratic aide said.

The bill is paid for in part through Medicare cuts; an increase in the Medicare payroll tax for individuals making $200,000 or more and couples earning $250,000 or more to 1.95 percent; and a tax on high-cost "Cadillac" insurance plans valued at $8,500 for individuals and $23,000 for families. The Medicare payroll tax will bring in $54 billion and the Cadillac tax raises $149 billion in revenue.

The income thresholds triggering the 0.5 percent increase in the Medicare payroll tax are not indexed for inflation, meaning it will ensnare more people each year. The House bill's "surtax" on the wealthy is not indexed for inflation, and critics will likely note this case can be compared to the alternative minimum tax. Congress has to pass a costly AMT fix almost every year because it was never indexed for inflation.

The medical device tax has been cut in half to $2 billion annually to appease Minnesota, Indiana and Massachusetts senators. A fee on insurers remained at $6 billion a year as well as a fee on drugmakers at $2 billion annually.

The bill includes a new 5 percent excise tax on elective cosmetic surgeries that would raise $5.8 billion. An earlier 10 percent tax floating around during initial Finance Committee talks was written off by senators at the time, who said no one was seriously considering such a tax.

Democratic Sens. Ben Nelson of Nebraska, Mary Landrieu of Louisiana and Blanche Lincoln of Arkansas were undecided on how they would vote on the motion to proceed, but Landrieu sounded more positive than she has to this point.

"I am now neutral because he gave me some assurances that there would be opportunity for amendments and improvements to the bill," Landrieu said after the three met with Reid.

She said she has concerns with the bill's focus on driving down cost and with the public option. "I understand proponents of the public option think it's necessary to keep insurance companies honest," she said. "I want to reform the insurance industry. I do not want to eliminate them."

Landrieu also met with Interior Secretary Salazar Wednesday, where she said they talked mostly about climate issues but also about health reform.

Democratic leaders' arguments for backing the motion to proceed hinge on their plans to move to a shell bill that will be filled in with the actual bill, Senate Majority Whip Durbin said. Durbin said he will argue that Democrats should agree to move to the bill and hash out disagreements through the amendment process.

A senior Democratic aide said they expect to vote on the motion to proceed Saturday. Senate Finance Chairman Max Baucus was absent from the bill unveiling to be in Montana with his ailing mother. That raises questions whether the vote could be held as planned. "His mom is doing better today," Reid said. "We'll get him back here when we need him."

While Landrieu appeared near conceding to Durbin's strategy, Lincoln avoided reporters Wednesday, and Nelson said he could not make a decision based on the information he had, though he did say he believes the real test will come on the vote to end debate after the amendment process.

The bill includes a long-term insurance program known as the CLASS Act that some senators have concerns with, saying its early savings would eventually be eaten up by benefits paid to enrollees. Reid attempted to appease them by not applying the $75 billion in savings from the program to the offsets.

On abortion, the bill attempts to extend current law, prohibiting federal funds from being used for abortions by requiring those funds be segregated by private insurers that offer abortion coverage. The HHS secretary would determine if the public option will cover abortion.

That sets up a conflict with the more restrictive House bill. It also might face challenges via amendments from anti-abortion senators on both sides of the aisle.

Republican attacks began immediately. "The healthcare reform plan revealed ... reaffirms the intentions of the majority party in Congress to grow the size of our government exponentially, explode federal spending, and provide lower quality, government-run health care for all Americans," Senate Budget ranking member Judd Gregg said in a statement. "Though this plan may claim to be deficit-neutral, it uses sleight-of-hand budgetary tricks by assuming unrealistic tax increases and Medicare cuts that members of Congress will not be willing to follow through on."

by Anna Edney, with Dan Friedman and Peter Cohn contributing

Without a doubt, the time has come to reform our healthcare system. But the direction reform proposals have taken over the past 10 months have been alarming. Today, I signed a letter, along with dozens of other national leaders, lawmakers, and former administration officials, calling on President Obama, Speaker Pelosi and Leader Reid to abandon current healthcare legislation and instead seek sound, bipartisan solutions that increase quality, lower costs and don’t break the bank. Read the letter.

Dear President Obama, Speaker Pelosi, and Leader Reid:

There is no doubt that improving healthcare for all Americans is one There is no doubt that improving healthcare for all Americans is one of our country’s top priorities. From the quality of care to how much we pay, from insurance coverage to access, from treatments to technology, healthcare profoundly affects every American, every community, and every business.

We can all agree that we need to work together so that every American has more choices of greater quality at lower cost.

Unfortunately, the last several months have shown yet again that many in Washington are more interested in playing politics than achieving a positive result for the American people. It is not too late. There is still an opportunity to get health reform right. Here are commonsense ways to find the right solutions, the right way.

Slow down. Ramming through a trillion-dollar bill without giving three hundred million Americans the chance to study the legislation raises legitimate questions of why some leaders are trying to avoid a careful review by the American people. In a democracy, a secretive, one-sided process is never the right way to govern.

Open up. A 2,000-page bill written in secret by a handful of politicians and staff is the wrong way. Republicans have offered time and time again to bring constructive ideas to the table, only to be shut out by a cold shoulder and a closed door. We need an honest and open process free of artificial, political deadlines and open to input from everyone. Cooperation, not confrontation, is a better approach.

Don’t break the bank. The director of the Congressional Budget Office said this in July:

“In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for healthcare costs.”

Nothing has changed since then to bend the cost curve down. Why should the American people believe that spending another $1 trillion will somehow reduce healthcare costs? Why should the American people believe that a $1 trillion price tag from Washington won’t put our country further into debt? Why should governors and state officials believe that the largest unfunded mandate in American history will not break their banks when they are on the hook to pay for these reforms? With unemployment at 10 percent and with more than $9 trillion in federal debt on the horizon, why commit to spending another trillion dollars before stopping the waste, fraud, abuse and mismanagement in current government programs (Medicare and Medicaid) first?

Reform does not mean replace. The vast majority of Americans are satisfied with their current coverage and doctors, a fact that has been borne out in every public opinion study for years. Improvements must certainly be made to make health insurance more portable, more accessible, and more affordable, but our first priority should be to protect and strengthen what the American people already have and support.

The right reforms. Neither party has a monopoly on sound solutions. Good ideas and sound decision-making, regardless of their origin, are desperately needed. For example, the Congressional Budget Office recently concluded that reforming medical liability laws would save the federal government $54 billion. Despite these important savings and overwhelming support from the American people, medical liability reform has never been part of the discussion because of political reasons. Where money can be saved, it must be. This is particularly true today, given the fragile state of the economy and this year’s record budget deficit.

Real competition and real choice. You talk often about the important principles of “competition and choice.” We enthusiastically agree. But instead of creating one huge government-run insurance plan, let’s break down the existing barriers to greater competition. A better approach is a nationwide marketplace where all 1,300 insurance companies are forced to compete, giving Americans real choices. This will bring down costs and improve quality—just as it does wherever competition is allowed to flourish.

Save Medicare from bankruptcy. The non-partisan Medicare Trustees concluded that Medicare will be broke in eight years. Medicare already has an unfunded liability of at least $37 trillion in benefits that have been promised future generations. The emerging legislation does nothing to save Medicare. Rather than cutting Medicare to pay for new federal subsidies or a government run insurance plan, we should save and strengthen it. The right way would be to root out the fraud, waste, and abuse first that is costing the current program tens of billions every year.

Unleash American innovation. Science, research, and innovation are a vital part of improving healthcare. We should reform the Food and Drug Administration to expedite the movement of drugs, devices, and new technologies to the market. We should invest in new science to cure diseases like Alzheimer’s and cancer. Inexplicably, the Senate Finance Committee goes in the other direction, raising more than $60 billion in new taxes on medical technology and drug research – the people responsible for the medical breakthroughs in America.

These kinds of innovators should be rewarded, not punished.

Health reform or “health insurance reform” should not be a political wedge, pushed to satisfy political allies at the expense of the American people. Healthcare is too important and the stakes are too high. The American people deserve and have demanded better. With an honest process, the right priorities, and the right solutions, we can and will succeed.

Sincerely,

Newt Gingrich, Former Speaker of the House; Founder, Center for Health Transformation
Jeb Bush, Former Governor of Florida
Mike Huckabee, Former Governor of Arkansas
Michael O. Leavitt, Former Governor of Utah; Former Secretary, U.S. Department of
Health and Human Services
Mark Sanford, Governor of South Carolina
Senator Richard Burr of North Carolina
Senator Saxby Chambliss of Georgia
Senator Tom Coburn of Oklahoma
Senator Roger Wicker of Mississippi
Rep. Michele Bachmann of Minnesota
Rep. Roscoe Bartlett of Maryland
Rep. Roy Blunt of Missouri
Rep. Dave Camp of Michigan
Rep. John Campbell of California
Rep. Bill Cassidy of Louisiana
Rep. Charles Dent of Pennsylvania
Rep. Jo Ann Emerson of Missouri
Rep. Randy Forbes of Virginia
Rep. Phil Gingrey of Georgia
Rep. Louie Gohmert of Texas
Rep. Dean Heller of Nevada
Rep. Jeb Hensarling of Texas
Rep. Pete Hoekstra of Michigan
Rep. Darrell Issa of California
Rep. Mark Kirk of Illinois
Rep. John Linder of Georgia
Rep. Kevin McCarthy of California
Rep. Thaddeus McCotter of Michigan
Rep. Cathy McMorris Rodgers of Washington
Rep. Tim Murphy of Pennsylvania
Rep. Sue Myrick of North Carolina
Rep. Devin Nunes of California
Rep. Tom Price of Georgia
Rep. Dave Reichert of Washington
Rep. Paul Ryan of Wisconsin
Rep. Pete Sessions of Texas
Rep. John Shadegg of Arizona
Rep. William “Mac” Thornberry of Texas
Rep. Lynn Westmoreland of Georgia
Rep. Frank Wolf of Virginia
Fmr. Rep. Sue Kelly of New York
Fmr. Rep. David McIntosh of Indiana
Douglas Holtz-Eakin, Former Director, Congressional Budget Office
Benjamin E. Sasse, Former Assistant Secretary, U.S. Department of Health and Human Services
David Brailer, Former National Coordinator for Health Information Technology,U.S. Department of Health and Human Services
James C. Capretta, Former Associate Director for Human Resource Programs, Office of Management and Budget
Andrew von Eschenbach, Former Director, National Cancer Institute; Former Commissioner, U.S. Food and Drug Administration
Tevi Troy, Former Deputy Secretary, U.S. Department of Health and Human Services

There are three issues that worry Americans about health care: Will there be a doctor in the house when I need one? Will I be able to pay the bill? And will the system and its people care for me? While answers to the second question—access to insurance-- are now coming into sharper focus, the issues of whether we will have enough doctors and whether we will achieve the kind of reform that results in well-coordinated, patient-centered systems of integrated care, are still largely unsettled.

While the nation’s medical schools are working hard to meet growing physician demand, these efforts alone will not result in more doctors unless residency training is also expanded.  In 2009, enrollment in both new and existing U.S. medical schools rose by 2 percent over 2008 to nearly 18,400 students . Half of that increase came from four new U.S. medical schools which seated their first entering classes (Florida International University Herbert Wertheim College of Medicine, The Commonwealth Medical College, Texas Tech University Health Sciences Center Paul L. Foster School of Medicine, and the University of Central Florida College of Medicine).  In addition, 12 existing medical schools expanded their 2009 class size by 7 percent or more, continuing the upward trend of the past few years (and standing in contrast to the lack of growth between 1980 and 2005).

However, these expansion efforts alone will not avert the expected shortage of 124,000 to 159,000 physicians. Concomitantly, we must increase the number of residency training slots. None of the reform bills currently before Congress includes more Medicare funding for graduate medical education positions. Instead, both the House and Senate legislation would redistribute about 1,000 unused residency training slots among a small group of targeted states.   The Association of American Medical Colleges strongly supports the "Resident Physician Shortage Reduction Act" (S.973/H.R.2251), which increases the number of Medicare-supported training positions for medical residents by 15 percent (approximately 15,000 slots).

With regard to improving care delivery, we have only started to scratch the surface on this complex issue.   Many new and promising patient care models have been suggested—such as the medical home and accountable care organizations—but have not been tested in the real world. What’s needed is a way of closing the gap between theory and practice, which is one of the reasons why legislation proposing health care innovation zones (H.R. 3134)  offers tremendous promise.

Updated at 10:07 a.m. on Nov. 17.

Late last week, the Centers for Medicare and Medicaid (CMS) Office of the Actuary (OACT) released a report projecting that total national health expenditures (NHE) would increase by $289 billion under the historic health care reform act recently passed by the U.S. House of Representatives out of the $35 trillion otherwise expected to be spent over the period from 2010-2019. Several commentators have seized on this estimate as evidence that, contrary to the claims of its supporters, the bill will raise costs and allow the United States to continue on its unsustainable trajectory of health spending. Lost in this argument are three key points:

First, both the new CMS/OACT report and the most recent Congressional Budget Office (CBO) estimate of the House bill demonstrate that the act contains many effective Medicare savings provisions, which, in combination with other reforms, will strengthen the program for beneficiaries and bring federal spending growth rate down to more sustainable levels. Medicare outlays are currently projected to grow at a 6.6 percent compounded annual rate from 2010-2019; CMS/OACT anticipates this will slow to 5.4 percent under the House bill, while CBO estimates it will slow to 5.2 percent over the same time period. As a share of GDP, Medicare spending would comprise 3.8 percent under current law in 2019. CBO projects this will fall to 3.3 percent if the House bill were to become law.

Second, while the CMS/OACT report shows the potential for substantial federal savings under the House bill, similar savings are not anticipated in the private sector. This finding underscores the need for a strong public plan in the health insurance exchange, or, in the absence of a public plan, an alternative cost-containment solution from the private insurance industry.

Finally, both the House bill and two Senate bills introduce a range of payment and delivery system changes likely to result in a significant slowing of health care cost growth. Like CBO, the CMS/OACT report attributes very little savings to measures that would reform provider payment, negotiate prescription drug prices, increase competition among plans in an insurance exchange, public reporting, or apply the results of comparative effectiveness research. Yet these measures have been effective in other industrialized countries and are widely supported by health care opinion leaders. In short, the health reform bills passed by the House and under consideration in the Senate lay the foundation for fundamental change in the U.S. health system. We can not afford to continue on our current course with ever increasing numbers of uninsured and rising health care spending without commensurate value. Health reform is essential to put the U.S. health system on the path to high performance.

Costs will be higher. Quality will be lower. Access to care will probably be worse. We will have created new entitlements that we cannot afford.

But bad as all this is, the worst feature of the reforms is more subtle: We will likely make it impossible for entrepreneurs to develop real solutions to our problems without going off shore.

Perhaps the single best idea is to reform the current tax break for insurance purchased through employers. The Senate Finance Committee included a tax on so-called Cadillac health plans, which would spur sales of lower cost insurance that promotes greater cost awareness and more efficient health care delivery. Not the ideal policy—capping the tax exclusion would be more direct and fairer to low-wage workers—but not bad.

It now appears that Senate majority leader Harry Reid is considering scrapping it in favor of a higher Medicare payroll tax imposed on workers making more than $250,000 a year. That replaces a provision that promotes health system efficiency with one that discourages work in the teeth of the recession.

Worse yet, this turns the payroll tax into another source of general tax revenue that can be tapped for any new spending, rather than using the funds to shore up the financially-endangered Medicare program. The reform bills are more than willing to cut Medicare payments to support a new health insurance entitlement for younger people. Raiding the payroll tax is simply the next step in a process that will leave us with enormous fiscal problems in Medicare and in the broader budget without policy tools to solve them.

If we truly wish to create a sustainable health system, we cannot rely on easy-to-score budget cuts that keep intact payment methods and delivery methods that have produced unaffordable health care. The key is promoting smarter purchasing and smarter medical practice, and that means changing the way we do business. There is little in the reform bills to suggest that it won’t be business as usual.

There are several reasons why many of us who for years have supported health reform and coverage expansion are now so concerned about the direction the bills are taking. Here are just a few:

Congress is taking a “big bang” approach rather than reforming in stages. The US health care economy is larger than the entire economy of Britain. Trying to fix something that large in one bill is impossible to get right.

The bills bend total spending up, not down, and America already spends far too much. And since little will be spent in the first three years, the enormous price tag for 10 years is just the tip of the iceberg.

The Medicare program is $37 trillion out of long-term balance and that must be addressed if we are to avoid financial disaster for our kids. Yet the bills would cut Medicare spending to partly finance a new health entitlement, not to move the existing one towards long-term solvency.

But can anyone who has spent time in Washington really believe there will actually be serious future cuts in Medicare – especially if the savings are not ploughed back into Medicare? More likely the bills will lead to a huge new unfunded obligation. We’d better be nice to the Chinese, who hold much of our debt.

The Senate bills seek to hide their cost in new taxes and cash income reductions for all insured Americans. Lawmakers could have built on the long-held bipartisan agreement that we need to limit and reform the tax exclusion, especially for upper-income households. Instead they chose the politically easier route of taxing plans and medical products and shamelessly pretending those taxes will not be passed through to ordinary Americans.

And those are just a few causes for concern.

Editor's Note: This week, former House Speaker and founder of the Center for Health Transformation Newt Gingrich is providing the question and serving as guest host for the blog.

The U.S. health care system wastes between $505 billion and $850 billion every year -- 22 percent, or approximately $200 billion, of which is fraudulent Medicare claims, kickbacks and other scams -- according to an October Thompson Reuters report. A few weeks ago, "60 Minutes" estimated that Medicare fraud costs U.S. taxpayers about $60 billion a year and has become among the most profitable crimes in America today, with increasing participation by organized crime.

I remember a 2005 New York Times article that revealed that New York's Medicaid program had become so massively complex and so lightly policed that it was easily exploited by a new breed of criminals. Stories like a dentist who billed 991 procedures in one day and one Buffalo school official who sent 4,434 students to speech therapy in a single day without talking to them or reviewing their records never cease to amaze. James Mehmet, the former chief inspector, estimated that up to 40 percent of all claims were questionable.

This New York Times story was the spark that eventually led to our book Stop Paying The Crooks. It provides an in-depth look at the fraud, waste and abuse crippling the U.S. health care system and offers solutions designed to end it. We believe it totals at least $100 billion each year in Medicare and Medicaid alone.

Unfortunately, current draft legislation does nothing proactive to eliminate fraud, waste and abuse in our health care system. Congressional Budget Office projections put savings at less than 1 percent of what they could be. We need real solutions that would dramatically reduce health care fraud so that savings could serve as a major pay-for for health information technology and covering the uninsured.

Questions:

• Reuters estimates $200 billion and 60 Minutes says $60 billion in annual Medicare fraud. We at CHT believe it is at least $100 billion in yearly Medicare and Medicaid fraud. Are these figures reasonable? If not, how much fraud do you think is actually out there?

• Are the anti-fraud efforts contained in the leading Senate and House bills likely to produce significant savings?

• What sort of provisions should be contained in order to maximize savings?

-- Newt Gingrich

What The Bills Would Do

John Iglehart wrote a primer on the issue over the summer in the New England Journal of Medicine ("Finding Money for Health Care Reform -- Rooting Out Waste, Fraud, and Abuse").

Here's how the major health reform bills propose to tackle fraud, according to the Kaiser Family Foundation.

• The Senate HELP bill would establish an integrity coordinating council; a fraud, waste and abuse commission; and two federal positions to oversee and coordinate oversight of health care fraud, waste and abuse in public and private coverage.

• The House committees approved bills that would allow provider screening, enhanced oversight periods and enrollment moratoria in areas at elevated risk of fraud in all public programs; they would also require Medicare and Medicaid providers and suppliers to establish compliance programs.

• The Senate Finance Committee bill calls for intensive screening of providers, the development of a database to capture and share data across federal and state programs, increased penalties for submitting false claims, and an increase in funding for anti-fraud activities.

Updated at 11:18 a.m. on Nov. 18.

These responses are a good indication of why fraud in Medicare and Medicaid has festered for decades and now reaches into the tens of billions of dollars annually. It largely goes unacknowledged and/or is dismissed in favor of discussing other issues. For example, the mention of tax evasion is completely unrelated to a health care blog (But on that topic, it is worth noting that tax evasion is highest in high-tax jurisdictions both domestically and internationally so lower, flatter taxes would go a long way toward ameliorating tax evasion).

Yes, we could talk about the jaw-dropping amounts of fraud in the TARP bill, the stimulus package, the General Motors bailout, the Long Island Rail Road pension program, or the antics of Bernie Madoff. But all of those are beyond the specific topic of fraud in Medicare and Medicaid and what to do about it.

Mr. Reinhardt’s concern about the lack of a concise definition of fraud is a pitch-perfect academic response. You can just picture a gathering of ivory tower college teachers sitting around for months debating what is fraud and what isn’t, while convicted murderers with seventh grade educations swindle Medicare for services never delivered. Here again I commend to readers the 60 Minutes piece that began with Steve Kroft’s warning that what you are about to see may, “raise your blood pressure.” Average Americans know theft when they see it.

Among Medicare’s bigger problems is lack of front-end authentication of new suppliers. Here, health information technology can play a significant role. Consider lessons from the credit card industry which processes $2 trillion in transactions every year, supports 700 million cards and involves millions of vendors selling countless products. The fraud rate in that industry is less than one-tenth of one percent because they actually keep bad actors out of the system in the first place and use advanced algorithms to detect and shut down suspect behavior within hours.

In his September 9th address to a joint session of Congress, President Obama spoke of the, “hundreds of billions of dollars of waste and fraud,” in our health care system. He was right. Unfortunately, the leading bills in Congress represent a colossal failure to deal with fraud in any serious way. The CBO says anti-fraud efforts in the Dingell bill will capture at most a few billion dollars in fraud over the next ten years combined. The CBO score of the Baucus bill was equally anemic. If Senators want to be serious about cracking down on fraud in Medicare and Medicaid, they can start by looking at the solutions provided in the bipartisan Seniors and Taxpayers Obligation Protection Act.

Joe Luchok, a communications consultant who has worked on health care issues for organizations including the March of Dimes and the now defunct Health Insurance Association of America, argues that health information technology might offer limited improvement, but that the biggest help would come from increased enforcement. Here’s what he has to say:

 “Health care fraud will be very difficult to stop. We may be able to control some of it but stopping it is a daunting task. The system is so large that it would take a massive army of people to control it. 

 According to a recent report funded by the Robert Wood Johnson Foundation(RWJF), estimates of the cost of health care fraud ranges from $68 million to $220 billion. Speaker Gingrich splits the difference and assumes around $100 billion, but the bottom line is that we do not know how much fraud there actually is.

 The report also estimates that 80% of the fraud is committed by providers,10% by consumers, and the remaining 10% by others such as insurers or their employees. It will take multiple systems to control all three.

 A good IT system will help if there are enough skilled people to monitor the system but it will not eliminate the problem. 

 As long as the system is run by people there will be fraud. The basic rules of control are the same for all things, the bigger the system, the more difficult it is to control. A number of fraud laws have been enacted, such as the Federal False Claims Act, the Anti-Kickback Statute, and the Health Insurance Portability and Accountability Act, yet we still lose money to fraud.

 The best we can hope for is to control some of the bigger abuses of the system and that will take more people working enforcement.”

Two features of Mr. Gingrich’s set-up stem stand out.

            First, he does not offer a concise definition of fraud. Second, whatever he may mean by it, he seems to believe it occurs only or mainly in the public Medicare and Medicare programs.

            Defined-benefit health insurance contracts, whether they are public or private, are among the most complicated contingency financial contracts. A third party promises to pay for all or a defined fraction of all expenses triggered by what is loosely defined as the “medically necessary” response to a perceived illness, real or imagined.

One should expect that such a contract would invite fraud and waste. Further-more, it is not easy to distinguish ex ante or ex post between waste and fraud.

Unlike, it seems, Mr. Gingrich, I believe fraud and waste are triggered by both public and private defined-benefit health insurance contract. We talk more about fraud in Medicare and Medicaid because these programs are at least semi-transparent. By contrast, the world of private health insurance is opaque and shrouded in carefully kept secrecy on virtually any feature of the insurance contracts.

In fact, I am not aware that we know in which sector – the private or the public – the incidence of fraud and waste is higher. Any estimates on that account probably are driven as much by ideology as by robust empirical evidence.

After all, payments under Medicare are not made by government directly, but by private intermediaries who also manage their own private health-insurance contracts. If these intermediaries are unable to detect fraud against Medicare, what would make us believe that they can detect fraud under their own private contracts?

Furthermore, the fraud against Medicare and Medicaid reported in the press usually involves small, fast-footed entrepreneurs who conduct hit-and-run raids against public programs. I am not sure how much of such fraud can be traced to established health systems.

Having served on the board of directors of both non-profit and for-profit hospital systems, I can attest to deep fear these boards have of the Office of Inspector General of Medicare and of similar state agencies. We have hotlines to report any hint of fraud against these public programs anywhere within the organizations, we have elaborate internal control departments, we have a V.P. of Compliance, we engage external consultants to make sure that our internal-control systems and hotlines work properly to preclude fraudulent billing – especially miscoding. And we have no such apparatus to watch over private billing.

I do believe there is fraud in our health system, but there is probably more waste than outright fraud, as John Goodman observes.

Furthermore, one cannot but agree wholeheartedly with Henry Aaron’s remark that there is something odd about the endless hand wringing over fraud in health care, often by people who shrug their shoulders at tax cheating. Perhaps these folks view cheating on income taxes as just good supply-side economics and thus good for the economy.

Scott Kimmel, founder of Biometric Technologies, Inc., argues that fraud prevention is all about health information technology, and he offers here an explanation of biometrics as one possible solution.

“Perhaps Mickey Mouse is the answer to eliminating health care, Medicare and Medicaid fraud. The Disney theme parks have 45 million  visitors who enter their parks every year by placing their finger on a biometric device. The same technology can and should be used to eliminate health care fraud.

 Blue Cross states that at least 75% of health care fraud is committed by the provider and 18% by the patient. The largest type of provider fraud (approximately 36%) is billing for services not rendered. By replacing a conventional sign in sheet with a biometric device, biometric software can provide the Government or insurance company  with an auditable record consisting of the patient being billed, the physician submitting the bill and a biometric record which confirms patient presence on the date of the bill. This simple change to a biometric sign in product eliminates billions of dollars in phantom claims.

 In addition, a biometric device eliminates “card swapping” fraud where one member loans his or her insurance card to another to receive fraudulent benefits. By linking each member’s ID to a given biometric template, if a patient were to use someone else’s insurance card, although the member ID would be the same, the biometric template is different for each person and would be rejected before service is provided.

Many of the solutions to eliminate fraud suggest hiring more prosecutors or using software tools for data analysis of claims to look for patterns of fraud. The problem with these suggestions is they do not adhere to the “K.I.S.S” principle. First, hiring more prosecutors is useless of you can’t catch the criminals you seek to prosecute. Second, software looks for patterns which flag a potential fraudulent claim. The “K.I.S.S” principle would suggest instead of looking for patterns, look for patients. We could all agree that in almost every instance if a patient never entered a medical office on the date of the submitted bill, it is not necessary to adjudicate a claim and perform data mining analysis.  Only biometrics can confirm patient presence at the point of service as the patient must have physically entered the office to place his finger on the biometric product.

Importantly, Biometrics is entirely a pre payment solution. No more pay and chase and trying to recoup paid claims, with biometrics the insurance company or Government receives this confirmation PRIOR to the bill being paid.

Biometric use in health care is not just an anti fraud solution. Providers and patients are protected from medical Identity theft which is the fastest growing form of identity theft. By linking a patients ID to a biometric id,  even if a  patient were to have their medical identity stolen, although the member id would be the same,  the biometric would never match . Biometrics protects a provider from liability by ensuring their electronic medical record is accurate and not filled with entries based upon medical id theft. As the movement to electronic medical records, catastrophic consequences await when a provider relies upon another physician's record which was based upon a false identity.

Lastly, the big brother argument about biometrics is archaic. A fingerprint is never stored, it is converted to a numeric code to protect patient privacy.”

Time To Get Serious

Fraud on Medicare is a crime. Rooting it out should be a high priority—a much higher priority than it is today. That takes money to support enforcement agencies—the HHS Inspector General, the FBI, and others. Even with the meager resources now available to it, the HHS Inspector General currently identifies billions of dollars of fraud each year. No call to deal with health care fraud that does not endorse increased spending and more staff to deal with it should be taken seriously.

The idea that instituting health IT will contribute in any significant way to solving the fraud problem is breathtakingly naive. Electronic fraud is not materially harder than paper-based fraud. Tax computation, for example, is now largely electronic and the biggest frauds still go undetected. Why? Because enforcement agencies are starved for staff and budget to go after it.

Furthermore, tax fraud—genteelly labeled ‘evasion’—still vastly exceeds Medicare fraud. It would be refreshing if Mr. Gingrich would be as vocal in supporting staffing and funding adequate to root out tax fraud as he is on behalf of likely-ineffective technological ‘fixes’ to detect health care fraud. To root out both kinds of fraud will take bigger budgets and more staff than are now available for responsible enforcement agencies. Because fraud is serious, those talking about it should get serious!

The biggest waste of resources is not the result of fraud. It is the result of over consumption of care. Too many doctor visits, too many tests, too many procedures -- all because health care to the patient is free and because providers derive income from these services.

The answer is to empower patients, give them control over more of the health care dollars, and allow them to pay the full cost of the services they receive. This in turn, will cause providers to compete on price and compete in other ways that will lower costs and raise quality.

This is also the surest way to eliminate fraud.

Under all of the bills now before Congress, new insurance market regulation requiring individual and small business health plans cover everyone and charge the same premium regardless of health status will do a great deal to increase affordability, especially for people with major health concerns.

The bills differ, however, on the levels of coverage and assistance offered. The latest version of the House bill, like the HELP bill, would expand Medicaid eligibility up to 150 percent of the federal poverty level. By comparison, the Finance bill expands coverage under Medicaid up to 133 percent of the federal poverty level.

Similarly, cost-sharing credits in the House plan for those who purchase coverage though the insurance exchange are more generous and extend farther up the income ladder then such credits in the Senate Finance bill. Cost-sharing is minimal under Medicaid for those under 150 percent of poverty under the House bill; for those between 133 percent and 150 percent of federal poverty level about 97 percent of medical costs would be covered. Subsidies for people living between 300 and 350 percent of poverty would increase the actuarial value of the basic plan to 72 percent.

By comparison, under the Senate Finance bill, cost-sharing subsidies for those between 100 and 150 percent of poverty would increase actuarial value of the lowest-tier plan to 90 percent, and, for those with incomes between 150 and 200 percent of poverty, to 80 percent.

Another provision key to ensuring affordability is having employers contribute to coverage–as they now do for 162 million people. Our analysis shows that an average family with employers contributing to coverage could expect to pay $6,700 a year in premiums and out-of-pocket costs, while a family without employer contributions could expect to pay $10,000 more–or a total of $16,700.

Under the House bill, employers are required to provide at least 72.5 percent of premium contributions for individuals and 65 percent for families, or pay 8 percent of their payroll. Under the HELP bill, employers are required to provide at least 60 percent of the premium contribution or pay $750/year per uncovered full-time worker. Employers are not required to pay anything toward premiums under the Senate Finance bill, though firms with more than 50 full-time employees must pay a flat fee equal to the national average tax credit for each employee who receives tax credit through an exchange.

While these issues will be difficult to resolve, reaching consensus on what constitutes affordability and committing the necessary funds to achieve it are crucial in securing access to essential care for all and protection from the financial hardship that illness can now bring.

Affordability for healthcare insurance is a function of three elements:  premium cost, cost sharing, and scope of covered services.  Ideally, no one should be required to pay more than 10% of their incomes for total health costs, but the ceiling of $900b on the net cost of a health bill makes this an impossible standard to meet.

While the House bill would greatly lower the cost for many people in the individual and small group markets, it would still impose costs above 10% for moderate and middle income individuals and families -- roughly those between 300 and 500% of poverty.  Furthermore, escalating health costs could easily worsen the affordability picture over time if cost containment measures are not effective in bending the cost curve.

I believe affordability for moderate income Americans will be an ongoing issue post enactment.    Very high cost sharing will be a real and ongoing challenge for those who need health insurance protections the most -- those will multiple chronic conditions.  And with age rating permitted at 2:1, the affordability challenge will be greatest for older adults.  The lack of adequate financing in the bill over time will be more obvious as we try to address these concerns.

So while the legislation makes real strides toward more affordable health coverage, the issue is not going away.  We will need to be bolder and more creative if we are to truly achieve affordable health coverage for all.

Low Cost Comes From Competition

Reformers have much more to do when it comes to making health care more affordable for Americans.  Three points stand-out in my mind:



1. Writing in Time magazine (10/26), Kate Pickert points out that during the ongoing open enrollment season millions of Americans with employer based health coverage are going to find themselves paying more for less.  Pickert points out that the percentage of workers with significant deductibles has more than doubled in the last three years while surveys indicate that 40% of workers will pay higher premiums next year in addition to facing increasingly higher out-of-pocket expenses.  She also points out that "of companies that offered health benefits in 2009, 86% offered only one plan." Shouldn't reformers find a way to make health coverage more affordable to this hard-hit group of workers?  Won't these Americans ask why health reform isn't working for them?



2. Doug Elmendorf, head of the Congressional Budget Office, told the Senate Finance Committee that under the legislation passed by that Committee less that 10% of the population will be eligible to go to the new health insurance exchanges, even seven years after the bill becomes law. The CBO estimated last week that about six million people will be in the House public option which CBO says will likely "attract a less healthy pool of enrollees." Both findings are based on the fact that the exchanges for the most part will only be available to the unemployed and the currently uninsured -- a population expected to be more expensive to insure as many in this group have up until now been unable to afford check-ups, preventive care, or chronic care maintenance.  How will creating exchanges with a risk pool that no commercial insurer in America would accept hold the private insurance industry accountable?  Isn't this what private insurers want? Shouldn't reformers be trying to open up the exchange to a larger risk pool with a healthier mix of subscribers?



3. At a time when affordability is so crucial what will happen to subsidies? Julie Appleby in Kaiser Health News 10/29 reports discouraging news: Subsidies are likely to drop, starting in the second year after the bill is passed. Why? Appleby asserts that because subsidies are based on a percentage of the premium paid for the first year--if premiums rise faster than inflation in the second year, millions of hard working middle class folks will have to pay the extra costs out of pocket.



In my mind, subsidies will never be enough to address these issues.  Rather the path to affordability for all Americans is injecting real choice and competition into the health care marketplace.  Health reform must lay out a path to open the exchanges over time so that not just employers, but more and more Americans will be empowered to choose the health insurance plan that works best for them and their family.  The only way to change insurer behavior is to put their entire customer base on the line.  Force them to compete on the basis of cost, quality and coverage.  I don't see how injecting competition into only 10 percent of the insurance market -- while guaranteeing that private insurers will keep the other 90 percent of their customers -- accomplishes that.  Of course opening up the exchanges means taking on what I like to call the "status quo caucus," the many powerful interest groups who claim to want change while hiring lobbyists to protect what works for them.  I believe that reform should address the needs of working families, which means empowering them to choose the health care that works best for them.

Around the country, however, America's families cannot fathom the difference between $800 billion, $1 trillion, or some similar figure. Instead, the value of health insurance reform for America's families, and families' real measure of affordability, will be determined by their own "pocketbook test": Will health reform result in sufficient savings so health coverage and care fit within family budgets.

The affordability test will be extremely important for middle-class as well as moderate- and low-income people and families. It makes sense, therefore, that sliding-scale subsidies be extended to people and families with incomes of at least 400 percent of the federal poverty level. At 400 percent of the federal poverty level -- $88,200 in annual income for a family of four -- health insurance premiums are difficult to afford: Average premiums for family coverage today exceed $13,000, which, even without the inclusion of deductibles and co-payments, constitute a significant portion of families' incomes.

For low-income families and the near-poor, however, the provision of adequate help is even more important. It is these groups that constitiute the bulk of the uninsured today. For them, an apparent nominal premium requirement -- even of two or three percent of income -- is quite likely to make insurance premiums unaffordable.

For this reason, the new House bill, which extends Medicaid eligibility to 150 percent of the federal poverty level (slightly above $33,000 in annual income for a family of four), makes abundant sense. Medicaid's out-of-pocket protections for premiums, deductibles, and co-payments are uniquely tailored to make coverage and care affordable for those who need help the most.

When the final legislation is crafted in the Senate-House Conference Committee, the conferees would be wise to retain this laudable expansion of the Medicaid program.

Real-Life Affordability Debate Will Come

There is no doubt that policies offered to people in the exchanges will be better than what they could get in the broken non-group insurance market. But, depending on how details of the legislation are resolved, questions are likely to be raised about whether policies will be affordable for people who now will be required to have them as a matter of law. There are two key numbers to watch in assessing affordability: the subsidies provided to help people pay there premiums, and the scope of the underlying coverage itself and the size of the deductibles and out-of-pocket costs people will have to pay. In policy terms affordability is measured in terms of a percentage of family income. However, in the real world whether or not a policy is affordable to a family facing a penalty if they don't buy it depends on what else is going on with their family budget. Are they struggling to put kids through college? Do they have a lot of credit card debt? Are they having trouble paying the rent or the mortgage?

Policymakers face a very real dilemma here: they want to keep the overall price tag of the legislation down but they also want policies to be affordable, both to assure access to insurance and to prevent a political backlash to the law. As the process moves to single bills in the Senate and the House and then a final bill in conference the issue of affordability is likely to come more sharply into focus. While benefits for lower income people are stronger, deductibles for middle class people earning between $66,000 and $88,000 in some of the bills are quite high even compared with high deductible plans in the marketplace. It’s possible that there will be pressure to improve the benefits for the middle class before the final deal is done.

Senate Democratic leaders seem intrigued with the idea. CongressDaily on Friday quoted Sen. Charles Schumer, D-N.Y., as saying, "Liberals live with it. Moderates live with it. It's in the middle."

But what about the policy implications? While such a proposal could potentially get enough votes to pass Congress, would a public option really lower costs if only some states offered it? How many would opt out, and why?

While we do not know the details of what kind of public plan states would be able to “opt-out” of, we suspect the center of gravity is closer to a level playing field approach, such as that proposed by Senator Schumer (where the plan would have to negotiate payment rates with providers) as opposed to the version supported by progressive Democrats in the House (where the plan would administer prices based at least in part on Medicare rates).  If the level-playing field approach is in fact adopted, assertions that the plan would simply “underpay providers” rather than “driving real reforms that bring down costs and improve quality” are unfounded. 

Also, let’s remember that all versions of the public plan under serious consideration require it to be self-financing.  Taxpayers will not be subsidizing the public plan.  Rather the main cost of reform will be providing low-income subsidies that can be used to purchase the policy of individual’s choice – public or private.  Americans will get these subsidies whether or not their state chooses to offer them a choice of the public plan, and whether or not they choose the public plan if it is offered to them.  Therefore, the argument that somehow residents of opt-out states will be footing the bill to finance a public plan they are unable to access is just wrong.  The public plan will not be financed by taxpayers.

Repeated fears that the public option will pay less than market rates and somehow be subsidized by taxpayers deny what is being considered seriously by Congress and signal paranoia about the future.  Critics are right to be vigilant.  But we should not decide against doing something that could add real value in markets where insurer competition is lacking just because it might possibly be “turned” into a bad idea by a future Congress.  If someone proposes to give the public option unfair advantages in the future, let’s debate it then, fairly and forthrightly. 

Senator Reid’s announcement is not the end of the public health insurance plan debate.  A weakness of the opt-out approach is that many of the states most likely to “opt-out” because of ideological reasons are the same states that you could argue need the public plan the most because of lack of competition and affordable policies. 

Moving forward we should be on the look-out for new public plan ideas that possibly meld Schumer’s “level playing field” with Reid’s “opt-out,” Snowe’s “trigger,” and Carper’s state “opt-in.”  Stay tuned.

The downsides associated with whether or not states opt in or out pales in comparison to the potential downsides associated with a public option that is not well thought out. Creating a government-run, price-controlled, Medicare-like public plan would be disastrous to the country regardless of who does or does not participate. Many years of experience with Medicare has shown that, despite across-the-board cuts in reimbursement, costs have continued to spiral out of control drawing the country closer to financial ruin.

Effective insurance reform should include mandating that individuals purchase insurance through employers, on the individual market, through cooperatives or through private insurance exchange models like the Federal Employees Health Benefit Program (FEHBP).  The appropriate role for government would be to help people afford the insurance through sliding scale subsidies based on need. Employers could also choose to offer coverage or assist employees in purchasing coverage.

Private insurance must be reformed to eliminate pre-existing condition exclusions and other penalties patients incur from using their insurance as well as incentives to adopt and maintain healthy lifestyles.

This approach offers several benefits including allowing people to choose the type and amount of coverage they want.

He put a public health insurance option in the Senate bill, the merged version of the two health care bills passed out of committee that will now go to the Senate floor for debate, amendments, and passage.

This is a huge victory. Putting the public health insurance option in the Senate bill that goes to the floor makes it much harder to remove later. Opponents will need 60 votes to amend the Senate bill, meaning a high bar will have to be cleared to take out or change the public health insurance option.

Why did Senator Reid do it? As he said:

I believe that a public option can achieve the goal of bringing meaningful reform to our broken system. It will protect consumers, keep insurers honest and ensure competition and that's why we intend to include it on the bill that will be submitted to the Senate for consideration.

For these reasons, the public option is what America wants. In poll after poll, in rally after rally, month after month, the American public has spoken. We want a public health insurance option to keep the insurance industry honest, to increase competition, and to give us somewhere to go if we don't want to be at the mercy of the private insurance industry any longer.

When the Washington Post - harbingers of cautious beltway conventional wisdom - has their polls showing 57% of Americans support a public health insurance option, you can be sure that this is a mainstream position. Senator Reid deserves our thanks today for leading America forward. The fight is far from over, and to be sure, there is plenty in the Senate bill that needs to be fixed. We need:

• To make sure health care is truly affordable to everyone
• Ensure employers are responsible for helping to provide good health benefits to their employees
• Fairly finance reform rather than taxing higher-cost plans

However, Senator Reid stood up for America and he should be encouraged to keep fighting.

Further, consider the implications of punting this to the states. Right now a cabal of far leftist groups have vowed to spend nearly $100 million pushing a public option. On the federal level, this won't go that far, because they have powerful opponents (like the business community) who are organized and prepared to stand up to them and broadcast the truth. On the state level, that money would go a lot further - so don't kid yourself, as soon as an "opt-out" government-run plan was passed, these groups would move their campaigns to the state level.

And if you want to debate whether it's easier to pass bad health care laws on the state level, look at the issue of state coverage mandates - 1000's have been passed on the state level. At the behest of these and other activist groups, many states have literally destroyed their insurance markets. And on the federal level? Opposition from the business community and our allies has prevented all but 5, some (or all) of which we worked to make palatable before eventually endorsing and helping to move forward.

Further, Reid said at his (why was he alone?) press conference that states would "have until 2014 to opt out". What does that mean? Does a state governor make the call? Does a state have to amend its state constitution? Hold a referendum? It might end up being very hard to opt-out even if a state decides they can withstand all the political pressures and attacks and don't mind spending money on a program for other states.

At the end of the day, an "opt-out" government-run plan is unlikely to dissuade many opponents, may alienate some proponents, and will surely still be viewed as the next entitlement crisis to hit all of our pocketbooks in the form of higher spending, higher taxes, and more debt.

The divisive debate about a government-run plan is a roadblock to reform.  It’s time we focus instead on broad-based reforms that will ensure the affordability and sustainability of our health care system

President Barack Obama and his congressional allies want to create yet another government-run health insurance program (call it Fannie Med) to cover yet another segment of the American public (the non-elderly non-poor).  

The whole idea that Fannie Med would be an “option” is a ruse. 

Like the three “public options” we’ve already got – Medicare, Medicaid, and the State Children’s Health Insurance Program – Fannie Med would drag down the quality of care for publicly and privately insured patients alike. Yet despite offering an inferior product, Fannie Med would still drive private insurers out of business because it would exploit implicit and explicit government subsidies. Pretty soon, Fannie Med will be the only game in town – just ask its architect, Jacob Hacker. 

Now the question before us is, “Should we allow states to opt out of Fannie Med?” It seems a good idea: if Fannie Med turns out to be a nightmare, states could avoid it. 

But the state opt-out proposal is a ruse within a ruse. 

Taxpayers in every state will have to subsidize Fannie Med, either implicitly or explicitly. What state official will say, “I don’t care if my constituents are subsidizing Fannie Med, I’m not going to let my constituents get their money back”? State officials are obsessed with maximizing their share of federal dollars. Voters will crucify officials who opt out. Fannie Med supporters know that. They’re counting on it. 

A state opt-out provision does not make Fannie Med any more moderate. It is not a concession. It is merely the latest entreaty from the Spider to the Fly.

Advocates for a public health-care plan continue to look for a way to give political cover to moderates while advancing their goal of implementing a government-run health-care system. Their latest proposal is to create a federally controlled public plan that states can opt out of if they so choose.

The public plan is pitched as if it would simply encourage competition and provide another choice for consumers. But a government-run plan is not just another plan, offering just another choice. It is designed to undercut private insurance.

A government-run plan is dangerous for three reasons: One, it would be cheaper for employers to stop offering private insurance and funnel their employees into the government-run plan. Employers, not employees, would get to make that choice. Two, the government-run plan would use the coercive force of government to dictate the prices that could be charged by others — by doctors, nurses, and hospitals — in a way that private entities cannot. Three, the government-run plan would be subsidized by American taxpayers, while private plans are not.

Let no one be deceived into thinking that Congress would not subsidize the government-run plan. Once in place, Congress would favor it with all kinds of innovative provisions designed to “help” participants “make the right choice.” HR 3200, for example, would offer low-income subsidies — but only for those who choose the government-run plan.

Financial subsidies for a public plan, whether direct or indirect, would be financed by taxpayers — by taxpayers in all fifty states. States would not be allowed to opt out of having their residents pay these federal taxes. They would only be allowed to opt out of receiving their share of the federal subsidies.

Imagine state legislators being faced with the proposition of denying residents of their state access to a subsidized public plan, knowing their residents would be still be required to pay the taxes used to pay for it. What state legislator would vote to do that?

The state “opt-in” is a transparently false choice. It is just another gimmick to try to find votes for an unwise policy that would increase the federal government’s control over health care.

State opt out is appealing to some because political cultures vary across states, thus potentially permitting compromise on what is mostly an ideological issue. What the implications are beyond ideology depends heavily on what type of public option we are talking about. If it is the version where the public plan pays hospitals and physicians at Medicare rates, an extensive pattern of distortions could result. How Medicare rates compare with those negotiated by private insurers varies to a very large degree across geographic areas and also within a geographic area. One result could be that those states with the highest rates relative to Medicare will opt out in response to pressure from providers, substantially diminishing the exercise of purchasing power that some advocates of public plans place a priority on. This could diminish the CBO score for the public option. Distortions could come in populous areas that are divided by state boundaries. For example, if Virginia opted out and D.C. had a public plan, hospitals would get paid much more for treating Virginia residents than residents of the District enrolled in the public plan. This could have an effect on where hospitals build new facilities.

If, on the other hand, the public plan negotiates rates with providers, then having state opt out would not have much impact. I say this because I believe that such a public plan would not be able to negotiate lower rates than private insurers. The plan would lack advantages of incumbency of the leading private plans in an area and would be subject to pressures from Congress about including all providers, even those with high rates in relation to the quality of the services they provide. Such a public plan is unlikely to have much impact on costs.

One thing I find puzzling about the debate about public plans is how little attention has been given to governance of the public plan. Perhaps many are assuming that such a plan would be run by professionals devoted to serving the public. But recent experience with Medicare is not encouraging. Congress appears to be interfering with CMS decision making at an increasing rate. The latest issue, which strikes me as the most serious to date, involves attempts to block CMS from following through with its proposed rule for the physician fee schedule based on a new practice expense survey conducted by the AMA. Specialties likely to lose from these changes, are much better funded than those likely to gain, such as primary care. Creation of an IMAC or MedPAC with power, assuming that it is given authority over Medicare provider payment, seems essential to the integrity of the Medicare program. With a public plan basing its payment rates on Medicare, the integrity of Medicare payment rates would become even more important.

What is the best way to define universal coverage, and what are the most important factors that could keep the nation from getting there? How many of the uninsured should be covered under health reform?

Improving "population health" generally means "helping people live longer."

To paraphrase, Uwe then writes:

If helping people live longer were our objective in health reform, we could do better than universal coverage.  But health reform is not (solely or primarily) about helping people live longer.  It is (also or primarily) about other things, like relieving the anxiety of the uninsured.

I applaud Uwe for acknowledging a reality that most advocates of universal coverage avoid: that universal coverage is not solely or primarily about improving health.

Will Uwe go farther and acknowledge that, since universal coverage is largely about some other X-factor(s), that necessarily means that advocates of universal coverage are willing to let some people die sooner in order to serve that X-factor?

I get my health care through MassHealth [Medicaid in Massachusetts] and I went through 20 names before I finally found a doctor who would see me. I wasn’t going through the Yellow Pages. I was going down a list that MassHealth gave me!

It has been known for many years that, at the aggregate level, the use of health care as we define it is only one of numerous factors that drive the average health status of populations (what we call "population health"). In fact, in health-production-function work or other research on the drivers of population health status, health care per say is only a minor player. Education, nutrition and environment rank higher.

So it is true that if "population health" were our objective in health reform, we would could do better than merely to finance more spending on health care per se. For example, the blasphemous thought occcurs that more could be done for the health status of particular the lower-income and less well educated strata of the population if the Catholic church reallocated real resources drastically away from hopitals systems and towards parochial schools in inner cities.

Even so, these insights are not that helpful when an axious person visits a physicians, looking for a diagnosis and treatment for whatever ails him or her. Telling someone stricken with cancer to forego health care and read a book is not really a staisfactory solution to the problem the uninsured face.

Furthermore, in this country one must contend with the Betsy McCaughey's, Sarah Palin's, Rush Limbaugh's of this world, along with large sections in the Congress, where Cost Effectiveness Analysis evokes talk of  Adolf Hitler and death panels.

So Helen Levy's and David Meltzer's message is interesting among people who can and will think, but unfortunately it is a hard sell in this country.

All of us, I am sure, will from time to time encounter situations or statement that push uas beyond our intellectual capacity. Usually, at meetings, we remain quiet about it, lest someone discover our intellectual limitations.

How refreshing then that John openly admits them, for all of us to see.

Uwe

The more important question is: should Congress even try to achieve universal coverage? 

If the goal is to improve health, then the answer is clearly no. 

Ironically, even though universal coverage is presumably about helping the sick, the Democrats’ pursuit of universal coverage demonstrates not how much, but how little they care about their neighbors’ health.

Economists Helen Levy and David Meltzer explain, in a book published by the Urban Institute, “There is no evidence at this time that money aimed at improving health would be better spent on expanding insurance coverage than on…other possibilities,” such as clinics, hypertension screening, nutrition campaigns, or even education. In the Annual Review of Public Health, they explain further: “The central question of how health insurance affects health, for whom it matters, and how much, remains largely unanswered at the level of detail needed to inform policy decisions…Understanding the magnitude of health benefits associated with insurance is not just an academic exercise…it is crucial to ensuring that the benefits of a given amount of public spending on health are maximized.”

If Democrats were serious about improving health, they would first gather evidence about which of those strategies produces the most health per dollar spent.  (As I recommend elsewhere, the $1.1 billion Congress allocated for comparative-effectiveness research should just about do the trick.) Democrats would then fund the most cost-effective strategies, which may or may not include broader insurance coverage.

But the fact that Democrats are pursuing universal coverage without any such evidence necessarily means that they are willing to sacrifice potentially greater health improvements to achieve…whatever else they hope universal coverage will achieve. 

Universal coverage is not about improving public health. It is about subordinating health to some X-factor that supporters value even more. 

Which leads to an even more intriguing question: what is that X-factor? 

Financial security? (If so, would universal coverage achieve that? Or are there better strategies?) Political power? Dependence on government? Industry subsidies? The appearance of compassion?

I’d like to see that question put to the group.

(Cross-posted at Cato@Liberty.)

But then the question we are answering is sort of nonsensical. Universal coverage has not been the goal since the Democratic Primary contest ended -- some time last August.

Now there is only one goal: pass a bill.

The definition has at least two distinct dimensions: (a) the benefit package that is considered minimally adequate and (b) the fraction of discretionary income (disposable income minus estimated minima spending on food, housing, utilities, etc.) that is absorbed by health spending on that minimum package (out-of-pocket spending on it plus premiums paid).

So we would count as "uninsured" anyone who has less than that minimum package or spends mor than the normative percentage of discretionary inome on it or is characterized by both..

People who spend less than  the normative percentage of their income on the benefit package (perhaps zero) but could afford it within that limit (perhaps with the help of subsies) would be called "self-insured).