Teeing Up (And Teeing Off On) The Senate's Health Bill

While I was down with H1N1 flu last week with the rest of my family, I read an excellent column by Newsweek's Robert J. Samuelson which very directly spoke to why many Americans are skeptical about health care reform legislation. You can access the article here: http://www.newsweek.com/id/222795.

Back in the days of ClintonCare, health care policy experts would say that there are three major components of health care reform: Cost, access, and quality. Most policy changes can touch successfully on any two of them, but it's hard to do all three without creating chaos in the health care market.

The Senate's health care reform legislation, like its counterpart in the House, sacrifices both cost containment and quality improvement to the expansion of access for those currently uninsured and subsidies for those struggling to maintain their coverage.

And as is the case with Samuelson's article, many Americans (not just Republicans) have begun to question very loudly whether the reforms contained in the legislation are worth the cost, and if there might not be a more effective, or at least more honest, way to achieve the goal of expanding access.

As was the case with the House bill, I'm hard-pressed to point to many elements of the Senate's bill which hold out much hope of "bending the curve" on health care expenditures for the upcoming decade. But it's unfortunately pretty easy to identify provisions which will increase cost both to the federal government and, importantly, to the private sector (increases in private sector costs are never considered in CBO analyses).

It should be easy for a layman to understand that one cannot reasonably 1) increase the number of people receiving health benefits, 2)enhance the benefits people receive and 3) directly subsidize those benefits without increasing overall benefits costs. So it's reasonable that regular folks should question how their Members of Congress or their Senators would miss out on that little fact. And yet, those saluting the "historic importance" of this legislation seem to be missing that point entirely.

It is also quite easy for regular people to understand that we cannot reasonably expect to reduce the growth in hospital, drug, equipment and physician costs in any meaningful way, while still giving those players a virtual pass on reform, save a little token trimming.

The recently-documented rush to increase prices on the part of drug manufacturers in order to get ahead of health insurance reform may place a little more focus on the bill's lack of meaningful provider cost containment elements.

Congress' recent efforts to forestall efforts to reduce physician reimbursements under Medicare in a separate bill, so its $200 billion- plus impact on the deficit won't be "recognized" as part of the health reform bill, is both an exercise in political cynicism and an example of the difficulty entailed in holding Congress to any promise to reduce costs in the face of influential lobbies.

I wonder how the President and his Congressional colleagues feel now about the soaring rhetoric of the 2008 campaign, and the sense of urgency they sought to instill for comprehensive reform, in the face of such an ugly bill? Surely they can't just hope Americans hope to forget the President's promises to 1) leave people who like their current insurance alone, 2) not add one dime to the federal deficit, and 3) bring down the cost of insurance premiums. As Samuelson says, "The disconnect between what Obama says and what he's doing is so glaring that most people could not abide it. The president and his allies have no trouble. But reconciling blatantly contradictory objectives requires them to engage in willful self-deception, public dishonesty, or both."

And yet, for all its ugliness and cynicism, the reform, debate has had some value. After over fifteen years (under both Democrat and Republican Administrations) of being virtually ignored, health care reform is back at top-of-mind with many Americans.

And we are reminded that there's a cost to doing nothing. For those who decry "government-run" health insurance, consider that Medicare, Medicaid, The Veterans Administration, and the Federal Employees Health Benefit Plan (FEHBP) will spend one trillion dollars on health care this year. Left alone, by 2020 those plans will double in costs, to over two trillion dollars.

And consider that private-sector health premiums have also more than doubled in the past ten years, and premium costs for small businesses and individuals have more than doubled. Maintaining the status quo will result in their more than doubling again.

I haven't seen any independent analyses which project the costs of this version of health care reform against the cost of doing nothing. That's often a weakness of CBO-type analysis.

While making the sausage has proven to be quite a bit more difficult than Our Leaders may have anticipated, the fundamental rationale for their actions has remained pretty sound. The nation's health care expenditures are on an unsustainable course, both in the private sector and in the government. And for all the resources, public and private, which we direct to health care, Americans are not appreciably healthier or more secure in their coverage than residents of other countries spending half as much.

That's why it's important for those wailing and gnashing their teeth to remember that for all the energy invested in the early stages of the debate, the real debate is just beginning. And things can change dramatically.

I've been saying for several months that, once enacted (and something called health care reform will pass), the actual reforms enacted into law will cost more and do less than meets they eye. The Senate's big financing tool, the "Cadillac Plan" tax, will be out the window, because labor unions (including government workers) won't stand for it. That's $450 billion Congress will have to find elsewhere. A "soak the rich" tax as proposed by the House is probably a non-starter in the Senate, and raises less than the Cadillac Tax anyway.

When the debate is over, we'll likely see insurance reforms (phased in over 10 years for small businesses) and some subsidies, Medicaid expansion, and a few other experiments in cost containment, and not much else.

And unfortunately for Democrats, Americans are likely to get well into 2010 feeling as though all the sturm und drang invested in the health care reform debate over the previous year won't have helped them at all, and that their own health insurance premiums have continued to increase. And that will be bad for the democratic majority.

Insurance Reforms Are "Up Front" In House Health Bill: How Will Insurers Respond To The Challenge?

Think a 1000-page health care reform bill is hard to digest? Well, the latest House version is currently 1900 pages long...before manager's amendments, before any real public debate begins. It's a foregone conclusion that there's much to dislike; it's also a foregone conclusion that much will change.

It is significant, though, that the first three big sections of the bill focus on health insurance reform. There's a basketful of "immediate reforms," a series of required changes in insurer behavior, and a section dealing with insurance exchanges, co-ops, and the public health plan.

We'll try to digest this a piece at a time over the next few days. But overall, it's clear that Our Friends In Congress (majority Democrats, at least) expect to see major changes in the health insurance market, some coming from changes in insurer behavior, and some, at least nominally, from changing the nature of the "risk pool" by encouraging the formation of large purchasing groups, whether public or private.

The politics are far from over, but regardless of the specifics of the outcome, insurers are going to be under great pressure to reduce administrative costs and simplify their marketing, sales, and business processes. It's interesting to wonder whether, somewhere behind the curtain of political opposition, some health insurance industry leaders are thinking about how they'll have to become more efficient and transparent, either to compete effectively against a public option, or to forestall one.

Wouldn't want to bet on it, though...