Details of the Senate Finance committee’s draft plan for health reform were obtained yesterday by Ezra Klein (now of the Washington Post).
Here’s how Ezra characterizes the draft:
“The numbers tell the story. In [the original version that was submitted to the CBO] that plan, subsidies reached 400 percent of poverty. In this plan, they’ve been cut to 300 percent. In that plan, Medicaid eligibility was as high as 150 percent of the poverty line. In this plan, it’s 133 percent for pregnant women and children, and 100 percent for childless adults. In that plan, the “gold” coverage was 93 percent of a person’s estimated expenses, and “bronze” coverage was 68 percent. In this plan, those numbers are 90 percent and 65 percent, respectively. That means people with a low-cost plan might be covered for only 65 percent of what they’re likely to need.
Another way of looking at the plan is that it remains a significant step forward. Subsidies to 400 percent of poverty would be nice, but subsidies to 300 percent of poverty are far beyond anything we offer now. Coverage that protects against 65 percent of anticipated costs is better than no coverage at all. The co-op idea isn’t a public plan, but with federal seed money to start new co-ops, it’s a good idea on its own merits. There’s an individual mandate, state-based health insurance exchanges, and a substantial health and wellness initiative. Insurers are barred from discriminating based on health history and Medicaid is sharply expanded.”
Note that this is a draft version, from one committee, from one legislative body. Senator Kennedy’s committee will come forward with its own bill shortly, and the bills will have to be merged/compromised into something acceptable to the House and the President.
Rather than get into the details, which are a) in draft form and b) likely to be changed before the bill emerges from the Finance Committee, here’s what is missing.
Anything having to do with cost control.
A public plan option.
Here’s what’s there.
An individual mandate.
To say this is disappointing is to damn it with faint praise. The commercial insurance industry has shown itself completely unable to restrain cost. As I’ve noted before, I’m not convinced that a public plan is a requirement – BUT – unless there are much stronger cost controls in a health reform bill, the public plan option may be the only way to control cost inflation.
Why? With an individual mandate, there are no incentives for private insurers to hold down costs.
Not true, you say, the market will.
To which I respond, what market?
As I noted in January, There’s been so much consolidation in the health plan industry that many markets are dominated by one or perhaps two health plans.
In two-thirds of MSAs, one insurer had market share equal to or greater than 50 percent, and in a quarter of MSAs, one insurer had market share of at least 70 percent.
Blue Cross of Alabama has market share ranging from 67 percent in Tuscaloosa to 95 percent in Gadsden. Blue Cross of Arkansas’ share goes from a low of 63 percent in Hot Springs to 97 percent in Texarkana. The two dominant health plans in Ohio have combined share ranging from 46 percent to 80 percent.
THERE IS NO FREE MARKET IN THE HEALTH INSURANCE BUSINESS.
The Finance Committee’s effort is a path to financial ruin; without cost controls we’re looking at a deficit creator that will make Part D’s eight trillion dollar ultimate liability look paltry in comparison.
Recall that Part D relies on the private sector to provide benefits to individuals, albeit without a mandate. Well, after Part D, the largest expansion of government-assisted health care since 1964, went into effect drug manufacturers raised prices by an average of 7.4%. Why? Because they knew there was a large new customer base, eager to get drugs, that was not very concerned about cost.
The passage of Part D was a boon for big pharma, as the industry enjoyed a substantial increase in profits and revenues attributable to Part D. In 2009, the big Part D carriers raised premiums significantly; Humana by 51% and United Healthcare by 18%, with copays also on the rise.
On a national scale, the program is a disaster. The ultimate liability for Part D is $8 trillion, a liability that is unfunded.
This is what we can expect if Congress passes and President Obama signs into law national health reform that does not aggressively, and forcefully, address cost – a deficit explosion that will make the cost of the current bailouts look like lunch money.

For-profit corporations are legally and ethically obligated to first deliver value to their shareholders. That obligation has enormous implications for the delivery, evaluation, and reimbursement of health care services.
The impact of this situation was brought home in the film version of Maggie Mahar’s book “Money-Drive Medicine”; I attended a screening of the documentary last week in NYC.
I wasn’t sure what to expect; there have been quite a few films on health care, reform, insurance and related topics recently, but none that defined the fundamental problem as clearly and cogently as MDM. Care is fragmented and disorganized, with patients not treated as humans but as discrete and separate body systems; in the film the care appears coldly mechanistic. Physicians’ narrow focus on their specialty is part of the problem; this isn’t to blame the docs entirely but rather to illustrate how the entire reimbursement process has bastardized health care.
With docs narrowly focused on body systems they ignore issues that affect other systems. Their very deep but quite narrow knowledge seems to stop at the outer layer of the heart tissue for cardiologists or the fluid surrounding the eye for opthalmologists. Of course the body isn’t a collection of ‘systems’ operating independently but a marvelously interconnected and interdependent whole.
Kind of like the health care system.
Maggie’s film doesn’t offer a solution. Instead it reminds us that the health care system is just that. If reform is to work, it must consider the impact of change on the entire ‘body’.
At the top of the list is thinking through the motivations of the players. For profit insurers and health care companies are in business to make profits for their owners. That isn’t necessarily a bad thing. But it does mean patient care is of secondary importance. While insurers and hospital chains and Investors may yell ‘foul’, their charter requires them to work for their owners and to claim they have reordered their priorities isn’t credible.
This isn’t meant to infer that not for profit entities are entirely different; as the CEO of a regional hospital told me years ago; “no margin no mission”.

The Democrats are pushing hard, very hard, to get health reform passed this year. Heck, they want to get it done this summer. And so far, the GOP’s involvement has been limited to standing on the sidelines lobbing rhetorical rocks at pretty much every aspect of reform – and getting little traction in return.
That may change – if they stop repeating pollster Frank Luntz’ talking points, and focus on the real issue – cost.
Today offers the GOP a chance to do just that; the CBO’s scoring of Sen Kennedy’s (D MA) proposal indicates it will cost over a trillion dollars over ten years and only cover 15 million more Americans. This is an initial draft bill, there is much left to do, and the final bill will likely address many of the CBO’s concerns; but it does offer the GOP a chance to focus on the real issue.
Which so far they haven’t done.
President Obama is wooing doctors, employers, politicians, health plan execs, people with a plan that builds off the current employment-based system supplemented by a public plan option. The President, and most of the Dems in Congress, strongly support reform efforts that do not eliminate the current employer-based system.
(Personally, I’d prefer to see a system that eliminates the employment linkage for reasons of portability and efficiency, and to allow employers to get out of the health insurance business, but I can’t say that publicly because my good friends who are insurance brokers will blow up my house.)
Looking just a bit deeper into what looks like the bare bones of reform, it appears:
– some form of mandated coverage will become law, likely over several years;
– strict controls on medical underwriting, risk selection, rating, and benefit design will be mandated;
– some form of medical liability reform will be passed;
– physician payment will be altered to favor primary care;
– supplemental payments to insurers for Medicare Advantage will be dramatically reduced;
– pharmacy costs for Medicare and Medicaid will be slashed (either by a mandated rebate or price negotiation); and
– hospital reimbursement will be cut rather significantly.
There’s no question that’s a lot of ‘change’.
But it is change that appears to be welcomed by Americans. For most voters (the key constituency here), there’s not much in the way of wildly objectionable issues. This isn’t a single payer solution, individuals won’t be forced to get coverage for several years, those currently covered by a health plan at work will continue to get that coverage, docs will continue to practice and pick the insurance companies they work with and bill like they do today.
From a Kaiser Foundation poll to be released today:
“A solid majority of the American people (61 percent) continue to believe that health reform is more important than ever given the country’s economic problems; sizable majorities support key elements of reform currently being debated such as employer mandates (69 percent), individual mandates (71 percent), and a public plan option (65-67 percent depending on wording)…A narrow majority of the public (53%) supported limiting future increases in how much doctors and hospitals are paid under Medicare to help pay for health reform (37% opposed)…A large majority (70%) liked the idea of insurance exchanges–tested with different descriptions–as a way to help people purchase insurance on their own.
And according to the KFF poll, a majority of Democrats (68%), Republicans (69%) and independents (75%) agreed insurance exchanges that guaranteed that “participating plans would not deny coverage to those with pre-existing conditions or charge higher premiums to those who are in poorer health” would be helpful if one had to purchase health insurance on one’s own.
I’m kind of puzzled by the way Republicans are reacting to the Democrats’ strategy, reform initiatives, and tactics.
Here’s how the Republican Congressional leadership reacted to President Obama’s speech to the AMA yesterday.
John Boehner, D OH
“We’re pleased the President has expressed rhetorical support for medical liability reform, but fact is the effect of even the strongest medical liability reforms would be negated by a government takeover of health care that raises taxes, rations care, and drives health care costs even higher.”
Eric Cantor, R VA
Democrats are touting a government-run health care option that creates an unlevel playing field leading to the destruction of the private market, reducing choice and putting Washington bureaucrats in charge of family health care decisions. In addition, their approach will cost over a trillion dollars – money this country simply does not have.
“There is a growing chorus of concern about the Democrat’s trillion dollar government health proposal. More campaign-style events and speeches do not give the American people the answers they need. Can Americans keep what they have if they want to? How will this Administration pay for it? Is it productive for government to restrict our doctors’ ability to treat patients as they see fit? Serious questions remain unanswered, and it’s time for the Administration to end the happy talk and get down to the difficult decisions ahead.”
Sen. Jim DeMint R SC
“I’m working on a bill to give *every* American access to health care they can control, without forcing them into a government rationed plan” [Twitter, 6/10/09; emphasis added]
Sen. John Barrasso R WY
“Their plan is what we know doesn’t work in England, doesn’t work in Canada – it is a complete Washington takeover of health care.”
Rather than engaging on meaningful issues, the GOP is sticking to Republican strategist Frank Luntz’ talking points.
Here are examples.
“some bureaucrat puts himself between you and your doctor, denying you exactly what you need.”
Wait, isn’t that what happens today in the vaunted private insurance sector?
“THEY decide if you’ll get the procedure you need, or if you are disqualified because the treatment is too expensive or because you are too old.”
Deja vu…
reform should “protect the sacred doctor-patient relationship, and allow people to choose the personal care that suits their individual needs.”
Double deja vu…
“The plan put forward by the Democrats will deny people treatments they need and make them wait to get the treatments they are allowed to receive.”
I don’t see this working. Or rather, if the President continues to stick to his talking points, and if the reform bill that emerges follows the current path, the GOP will find itself arguing against a bill that exists only in their minds.
The GOP is already smarting from its label as the “Party of No”. If they continue to avoid meaningful engagement, that label will get increasingly sticky.
That’s bad for them, and bad for the country. The big winner is cost control. The President is finally addressing the cost issue, and his announcement that the plan will cost about a trillion dollars over ten years is the big opportunity. I don’t often offer advice to the GOP, but I’d suggest that the cost issue is where they can regain their long-lost reputation as the party of fiscal restraint. As presently configured, health care reform is unaffordable. We need reform, but we need reform we can afford.
Given the GOP’s proclivity towards parroting Luntz’ anti-clinical guideline nonsense, this may not be possible, but the way to control costs while ensuring higher quality is to make sure patients get the right care, docs are rewarded for delivering that care, and not for providing unnecessary, expensive, and unproven care.
Instead of fighting comparative effectiveness, the GOP should embrace, strengthen, and support it as a way to hold down costs.
I don’t see that happening, as they appear convinced that their future is assured by following Nancy Reagan’s time tested “Just Say No”.

According to an article in the NYTimes, the answer is yes. President Obama is actively considering some form of limits on med mal lawsuits as part of his health care reform plan.
Before we get too excited about this, let’s consider what is on the table, and why.
Reports indicate Obama is going to mention med mal reform in a speech to the AMA this week. The group has long advocated for limits in the form of caps on settlements and ‘frivolous’ lawsuits, claiming that med mal forces physicians to practice defensive medicine thereby driving up costs.
The reality is more subtle, and less problematic. A comprehensive study indicated that the cost of malpractice insurance as a percentage of total practice expenses changed little over the last 30 years, ranging from 6% to 11% of total expenses. This doesn’t mean that docs in certain specialties and specific geographic areas aren’t affected differently, with some faced with significantly higher costs and fewer insurer options. But these issues are largely driven not by high settlements and ‘frivolous’ lawsuits but rather by the mechanics and motivations of the insurance market.
In fact, when insurance premiums were soaring in the early years of this decade, awards weren’t increasing at all. While premiums increased 120% from 200 to 2004, claims were flat while the insurers’ incurred loss ratios (ratio of claims to premiums collected) improved by almost 25% to 51.4%.
There is ample evidence that malpractice and medical errors are much more prevalent than the number of claims filed would indicate. The vast majority of patients injured by error — perhaps 98% percent — never press legal claims.
Equally troubling, “46 percent of physicians surveyed admitted they knew of a serious medical error that had been made but did not tell authorities about it.”
And according to an exhaustive study published in the New England Journal of Medicine;
“For 3 percent of the claims, there were no verifiable medical injuries, and 37 percent did not involve errors. Most of the claims that were not associated with errors (370 of 515 [72 percent]) or injuries (31 of 37 [84 percent]) did not result in compensation; most that involved injuries due to error did (653 of 889 [73 percent]). Payment of claims not involving errors occurred less frequently than did the converse form of inaccuracy — nonpayment of claims associated with errors.”
[readers interested in a detailed and authoritative discussion of the topic should read Maggie Mahar’s treatise]
OK, so the med mal monster is more of a med mal midget that casts a very long shadow when the AMA shines it’s “lets make this thing look scary” light on it.
That doesn’t answer the central question; Why is Obama willing to take on trial lawyers, many in his own party, and reality?
Simple – another very valuable bargaining chip. Politics is the art of making the other guy do what you want by giving him just enough so he can hold his nose and vote for your bill. Obama is seeking to kill two birds with one political stone. His openness to ‘med mal reform’ steals a big chunk of the AMA’s thunder, and his solution – eliminating/reducing litigation/awards for physicians who follow evidence-based clinical guidelines – helps to enforce those guidelines.
Remember the battle over comparative effectiveness (CE)? The final bill was pretty watered-down as the legislative compromises necessary to get it done removed a lot of the ‘enforcement’ opportunities. From here it looks like the bill itself was the first part, and the ‘enforcement’ is going to be linked to med mal reform.
By tying med mal to physician use of evidence-based clinical guidelines, Obama is painting the physician lobby into a very tight corner, one they can’t get out of without politically-untenable contortions.
UPDATE
from Peter Rousmaniere comes this link to an excellent article by Drs. Michelle Mello and Troyen Brennan about the role of medical liability reform in health care reform.
Here’s an excerpt:
“create a federal “safe harbor,” retaining the current process of adjudication but insulating physicians from liability if they adhered to evidence-based medical practices. For example, legislation introduced by Senator Ron Wyden (D-OR) in February would create a rebuttable presumption that care was not negligent if the physician followed accepted clinical practice guidelines.5 Similarly, physicians could be given immunity or a favorable presumption if they practiced in accordance with findings of credible comparative-effectiveness research (CER).”

The public plan is a non-negotiable for some in Congress, a nice to have for others, a bargaining chip for still others, and anathema to the rest. There aren’t two distinct blocs; rather there are a spectrum of views. This is critical to understanding the ‘role’ of the public plan in the process.
My sense is that – as far as the key players (Baucus, Obama) view it, the public plan is something of a trojan horse; try as I might I can’t see an overwhelmingly compelling reason to make the public plan option mandatory.
However, it is vitally important to Waxman and Kennedy and Stark, all key players in the debate, and to all of the Republicans except possibly the Senators from Maine.
This sets it up beautifully as a bargaining chip; the Obama/Baucus faction can use Waxman/Kennedy/Stark to get the GOP to make big concessions in return for a watered-down public plan option.
Myself, I don’t see the public plan as critical to reform, or perhaps more accurately it is not nearly as important as comparative effectiveness with teeth and reimbursement reform and taxing health benefits. That’s the important stuff.
While comparative effectiveness was part of the ‘stimulus’ bill, it was downplayed, perhaps to mute criticism from those who see it as a thinly-disguised rationing tool.
Help is on the way. The Patient-Centered Outcomes Research Act of 2009 was introduced earlier this week by Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senate Budget Committee Chairman Kent Conrad (D-ND). according to the press release, it would create a private, nonprofit corporation, the Patient-Centered Outcomes Research Institute, to “generate scientific evidence and new information on how diseases, disorders and other health conditions can be treated to achieve the best clinical outcome for patients…Research would be conducted by trusted public and private organizations approved by the Institute’s diverse board of directors, which would include practicing doctors, patients, pharmaceutical and biotechnology makers.”
This has been tried several times before; grey hairs out there will remember the old Agency for Health Care Policy and Research (AHCPR) (now AHRQ) and the Patient Outcomes Research Team program. AHCPR was rendered all but powerless by defunding during the mid-nineteen nineties, driven in part by virulent attacks on the agency’s work by several physician groups.
AHCPR’s all-but-demise was partially its own fault, as early guidelines were viewed as weak and ineffective by some, and the development process itself drew fire from the Office of Technology Assessment. In fairness, this was the first real large-scale effort to develop and promulgate clinical guidelines, so it should have come as no surprise that the initial effort was not exactly perfect.
If the bill becomes law, Rockefeller’s Patient-Centered Outcomes Research Institute has a lot of history to learn from, a different political climate in which to develop, and a mandate to make a meaningful difference.
It is also our only chance to restrain cost growth in Medicare.