The Wonk Room

Jumping Through Hoops For The CBO…Again

Ezra Klein and Jonathan Cohn are right to celebrate the Congressional Budget Office’s (CBO) recent decision to exclude the federal mandate to purchase health insurance from the federal budget “so long as people had a variety of private plans from which to choose and a government entity was not in charge of collecting their insurance premiums.” As Ezra notes, an opposite ruling led to disastrous consequences during Clinton’s reform efforts:

In 1994, a pretty similar question was decided in the other direction. Robert Reischauer, then the director of the CBO, decided that the premiums that individuals were charged to purchase private insurance under Clinton’s plan would be included in the budget. This didn’t change the nature of the proposal. But it made its cost tag look huge.

Donna Shalala, Clinton’s secretary of health and human services, later termed the ruling “devastating.” And it was. It made health care reform look obscenely expensive. And the same thing could have happened this year. Rather than costing $100 billion per year or so, it could have cost a couple trillion a year. No change in the plan. Just a change in the budgetary treatment of the plan.

This time, the CBO ruled that the mandate could remain off the books if consumers could “choose among a number of insurance plans,” the plans offered “different levels of coverage,” and consumers could “choose among several different insurance companies competing on price.” Most conceptions of the health insurance exchange envision just this kind of competition — a key distinction from the Clinton proposal which funneled all health insurance dollars through various Health Alliances.

But the very fact that we’re all so worried about the CBO highlights the craziness of allowing one office to hold health care reform hostage. Why exactly are reforms jumping through hoops to satisfy the CBO? We do it because we have to — that’s the process, the CBO has the magic numbers — but shouldn’t we design legislation based on what’s most effective in controlling costs and increasing access, not around how some actuary chooses to calculate something?

Can We Do A VAT And Preserve Employer-Sponsored Heath Insurance?

Ezra Klein argues that “if you rebuild health care financing around a single tax, you’d also have to rebuild health insurance offerings around what is, in effect, a single payer”:

Employer-based insurance, for instance, only exists because employers pay for it. If the government were paying for it through a VAT, then that insurance would no longer be attached to employers. That would be a good thing because employer-based insurance is a bad thing. But it would also mean individuals would “lose” their current insurance (even though it would be instantly and seamlessly replaced). Which is why we won’t have a VAT.

Back in 2003, the Center for American Progress proposed a universal plan that allowed Americans to keep their employer-based coverage, established a new health insurance exchange modeled on the FEHB, strengthened Medicaid, offered coverage subsidies and financed it all through a Value Added Tax (VAT). And as Len Burman notes, the tax has some advantages:

- It is the only plausible revenue source that would pay for universal access to health insurance without very tight targeting by income.

- A VAT combined with free health insurance is highly progressive

- A VAT that is earmarked to pay for health care would serve as a brake on health care spending because otherwise the VAT would tend to increase

- Announcing a future VAT would stimulate spending in the short term

- When fully phased in, a VAT would encourage savings (since it is untaxed by the VAT), which will boost long-term economic growth and provide a cushion against future recessions.

Personally, I’m not convinced by the above arguments, but it is clear that one can preserve the current employer based system and fund the expansion of coverage through some form of new revenue, whether it be a VAT of some other combination of taxes. (Preserving employer coverage would obviously require a smaller VAT and as Matt Yglesias points out, we’ll probably need some form of taxation to sustain the system in the long run.) I just hope that we don’t over-rely on taxation. The present system wasted a lot of dollars and improving its efficiency may be the only way to build sustainable reform.

UnitedHealth Care Completes Obama’s Homework Assignment

Building on their pledge to reduce health care spending by $2 trillion and responding to President Obama’s request for specific cost-containment proposals, UnitedHealth’s new Center for Health Reform and Modernization released a report demonstrating that the federal government could save $540 billion over the next decade if it adopted (through Medicare Fee For Service) existing United Health Care cost-saving measures:

The new research paper provides policymakers and health care leaders with a range of “real world” savings options, based on empirical data and actual results from a selection of UnitedHealth Group programs…. Most of the savings estimates derive from applying more broadly the approaches UnitedHealth Group has found to work either in its commercially-insured or Medicare programs.

Their argument is this: plug United’s existing initiatives into Medicare and save billions over a decade. Some of the savings:

- Member Incentives to Use Highest Quality Providers ~$37 billion

- Cancer Support Programs: Voluntary guidance on cancer treatment best practices and patient options, including hospice care ~$5 billion

- Institutional Preadmission Program: Provision of onsite nurse practitioners at skilled nursing facilities to manage illnesses and prevent avoidable hospitalizations ~$166 billion

Fair enough, but if United is so certain of the savings then why hasn’t it implemented the measures across its entire network, lowered its rates, and attracted millions of new customers? Efficiency, after all, is a competitive advantage. And, as Robert Laszewski asks, “If United Health knows how to save $500 billion in Medicare costs why has it been lobbying for years to maintain the hundreds of billions of dollars in extra payments private Medicare plans–of which United is the biggest player–get from the government? It would seem to me that if they know how to save all of this money in Medicare they wouldn’t need the extra 14% the government pays United and all the other private Medicare plans above what it pays itself under the traditional Medicare plan.”

United cost-containment measures are voluntary and they’re being presented as an alternative to a new public option. But why why can’t both coexist? A new public plan could lead the way in greater cost containment innovation, implementing some of United’s so-called “real-world” solutions with other innovations. It can take what United is calling a voluntary effort and transform it into standard practice across all public programs, muscling private health care insurers to follow suit and reduce spending across the board.

New Details On The HELP Committee Health Bill

New details are emerging on the Senate Health, Education, Labor & Pensions Committee’s (HELP) health care bill, originally slated for release tomorrow, but now pushed back to next week.

According to news reports, “a brief, unofficial summary of the Senate health committee’s draft reform proposal circulating among Washington lobbyists Wednesday includes a public plan option that would pay providers — who would be required to participate — 10 percent more than Medicare rates.”

There is more:

- An individual and employer mandate for coverage

- The legislation would expand the Medicaid program to cover individuals earning up to 150 percent of poverty

- It would subsidize people earning up to 500 FPL to purchase insurance through state-based insurance exchanges

- Expands the Children’s Health Insurance Program (CHIP) to people up to age 26

- Establishing a “federal health reserve” type entity called a Medical Advisory Council that would assist in designing minimum standard benefits

On quick glance, this is very good news for public option proponents who were concerned that the HELP legislation would build on state-employee pools and establish fifty different plans around the country or develop some kind of trigger mechanism. This summary suggests that while providers participating in Medicare would also have to offer services in the new public option, the reimbursement arrangement would give the new plan leverage by allowing it to piggyback on Medicare’s reach. Reimbursing providers less than private insurers, but paying them more than Medicare rates allows the new public option to pass on the negotiated payment rates to consumers in the form of lower premiums.

As Lester Feder, who is covering health care reform for The Nation, explained it:

Of course, we’ll save the most money if the public plan pays what Medicare pays. But short of that, any public plan will be more effective if it doesn’t have to negotiate the rates it pays providers on its own, but can piggy back on the rates the (much much much) larger medicare program can negotiate with providers. It’s about market leverage. Let’s say I run a small chain of department stores. It’s expensive for me to negotiate with my suppliers, and if I’m not very big I won’t get great deals. So instead I say, “I’ll pay you what Walmart pays plus 10%.” Then I’m benefiting from Walmart’s ability to negotiate with suppliers.

There are some political pitfalls here — which I will re-visit– but from a cost-containment perspective, it makes sense.

Big Pharma Afraid Of Losing Its Seat At The Table

In an interview with the Wall Street Journal, Big Pharma CEOs admit what AHIP’s Karen Ignagni have only implied: they’re willing to support health care reform so long as it increases their profits. As the Wall Street Journal observes, “extending health-insurance coverage to millions of uninsured Americans is likely to benefit drug makers,” increasing their “$291 billion in annual U.S. sales” by $15 to $18 billion, according to some estimates.

But that pay increase my be threatened by the introduction of a new public option — that could negotiate drug prices — and comparative effectiveness research that isn’t guided by an industry hand. As the Wall Street Journal reports, “to help accomplish their goals, the drug makers spent $47.4 million on lobbying in the first quarter, up 36% from a year earlier, according to company-disclosure reports filed with Congress and analyzed by the nonpartisan Center for Responsive Politics. Pfizer Inc. more than doubled its spending on lobbying in the period to $6.1 million”:

The pharmaceutical executives are using their new access to try to steer lawmakers away from measures that could reduce drug margins, pressing instead for cost reductions by hospitals and insurers.

In their meetings at the White House and on Capitol Hill, as well as in speeches and op-ed articles, industry executives and lobbyists have backed such steps as shifting insurance coverage toward prevention, which could increase sales for heart, diabetes and other drugs that patients take long term….Pfizer Inc. Chief Executive Jeffrey Kindler says he backs “comprehensive health-care reform in this country” and is willing to make compromises. But he opposes a public insurance plan except for the poor who otherwise can’t afford insurance, saying it would crowd out private insurers and take “the form of price controls” that fail to reward companies for their expensive and risky investments in drug development.

Indeed, the threat of a robust CER effort and a muscular public option have brought the pharmaceuticals industry to the table and it’s terrified of losing it’s seat. The industry heavily lobbied for input over what’s researched and how, and is now afraid that despite it’s best efforts, some of the CER money will still be spent without its input:

Thornhill, whose firm represents the Partnership to Improve Patient Care–an association funded by BIO and PhRMA and other organizations to lobby on CER–puts the chances of getting the Baucus proposal into health care reform at just 50/50. But even it if is included and signed into law this fall, he notes, a new institute won’t be set up until the end of 2010 at the earliest, with research projects beginning no earlier than 2011.

So “you have this gap between when the [stimulus] funding gets handed out until you have new framework even established,” Thornhill noted. “So its hard for us to go out and lobby to have this Conrad-Baucus entity just control the funding. The pushback is ‘What are we are going to do for two and a half years? Just sit on our hands?’”

Anti-Trust Law May Not Prevent Health Industry From Reducing Health Care Costs

Several weeks ago, the health care industry visited the White House and pledged to “work together” with President Obama and Congress “to provide quality, affordable coverage and access for every American” and lower health care spending by $2 trillion. But New York Times’ Robert Pear is reporting that the nation’s anti antitrust laws may prevent the health care industry from voluntarily reducing costs:

Anti-trust lawyers say doctors, hospitals, insurance companies and drug makers will be running huge legal risks if they get together and agree on a strategy to hold down prices and reduce the growth of health spending. Robert F. Leibenluft, a former official at the Federal Trade Commission, said, “Any agreement among competitors with regard to prices or price increases — even if they set a maximum — would raise legal concerns.’”

Some anti-trust lawyers argue that this interpretation may be relying on antiquated view of anti-trust law. In fact, they suggest that the industry’s ‘voluntary effort’ to reduce health care spending is predicated on an interpretation that prohibits “any agreement among competitors.” In other words, while the pledge casts the industry in the glowing light of cooperating with a popular President, anti-trust law serves a cover, legally protecting the industry from having to implement their pledge.

In an interview with The Wonk Room, David Balto, a Senior Fellow at the Center for American Progress explained, “The antitrust laws permit a broad range of collaboration to cut costs and bring lower prices to consumers. Firms have been able to adopt standards and share information that have led to improved cost control. These companies would like to pretend that they want to collaborate to reduce costs, but antitrust is the obstacle. They are simply wrong.”

What’s more alarming is the growing concentration of today’s health insurance markets. “There have been over 400 health care mergers in the last 10 years”; 1 in 6 metropolitan areas is dominated by a single health insurer that controls at least 70% of consumers. As Balto recently pointed out, “In the seven years of the Bush administration, all non-merger enforcement actions have involved health care providers, with no enforcement involving health insurers,” Balto said. This approach has contributed to greater insurer concentration, “more anticonsumer insurance provisions, greater payment delays, less coverage and poorer service.”

Corporate-Sponsored Patients United Now

After orchestrating and funding the so-called Tea Parties movement, Americans for Prosperity — a nationwide front group founded and funded by the right-wing polluter Koch Industries — is launching an ad campaign characterizing President Obama’s effort to reform the health care system as a government take-over that will ration care and care and deny treatments.

Americans for Prosperity is notorious for its fake grassroots efforts, funneling millions of dollars into conservative campaigns designed to undermine Democratic initiatives. As Lee Fang put it, “AFP is a professional AstroTurf machine”:

- Hosted ‘Drill Baby, Drill’ rallies around the country.

- Financed Joe the Plumber’s tour against the Employees’ Free Choice Act and other anti-EFCA rallies.

- Started NoStimulus.com, “a grassroots website that we hope will be a focal point for the widespread frustration ordinary Americans feel at the runaway government growth that we see during good economic times and bad.”

Now, operating under the name Patients United Now, Americans for Prosperity — which is mostly funded by large multinational corporations — is masquerading as an organic grassroots movement outraged over the Presidents health care proposals:

We are people just like you. We went to D.C. with questions about “reform”— because we all favor policies which keep insurance costs down and help those patients with pre-existing conditions get coverage. Buying “care insurance” should be like buying car insurance: flexible, transparent and simple. We support health care for the poor through Medicaid.

But what we found SHOCKED US: Radical solutions. Discussions behind closed doors. Patients like us NOT included, just big companies, lobbyists, unions and politicians.

For many in D.C. cutting costs means CUTTING CARE—-your care.

The effort provides cover or ‘grassroots clout’ for conservative politicians and activists to oppose the President’s health care initiative. But this collection of trumped-up charges, outright lies and complete fabrications makes little headway in critiquing the President’s actual proposal. Because just like all other peddlers of the “government take-over” critique — Frank Luntz, Conservatives for Patients Rights, Betsy McCaughey, and Sally Pipes — the goal is to define Obama’s proposal in their terms rather than to engage in a debate about health care or offer real solutions to the crisis. As Frank Luntz admitted to the New York Times, “we don’t know what he is proposing. We want to avoid ‘a Washington takeover.’”

A so-called “government-takeover” may be a personal ideological crusade for AFP — whose founders also established the conservative CATO organization — and its AstroTurf movement of corporate clients, but most Americans support greater government involvement in the health care system. A recent poll by Lake Research for Health Care For America Now shows that there is “intense and widespread support” for the choice of a public health insurance plan, with 73% of voters favoring a choice of a public or private plan, including large majorities of Democrats and independents (77% and 79%) but surprisingly, even a high plurality of Republicans (63%).

The cast of health care crisis deniers and stone throwers, whose constituency are only as large as their fund raising outreach efforts, are prominent not for their message, but for their coffers. Frank Luntz represents Blue Cross Blue Shield, CIGNA Dental Health and Pfizer. Conservatives for Patients Rights are funded by ‘undisclosed’ special interests and a $20 million personal investment from CEO Rick Scott, Betsy McCaughey sits on the board of a medical device company and Sally Pipes’ Pacific Research Institute receives money from Altria (formerly known as Philip Morris), Microsoft, Pfizer and ExxonMobil.

So if the question is, why do it? Why lie about the President’s efforts? Then the answer is a mix of ideological conservative zeal, political calculation — denying Democrats a victory on the issue — and businesses interest. Ultimately, these groups are expressing the voices and opinions of their particular backers — large corporations — not the American public.