With the release by the Ways and Means Committee of the first House health reform bill , the debate is about to get much louder and more strident. The ‘bill’ is more of an outline than anything else, although it’s a pretty detailed outline.
It is also very much a ‘moderate’ plan, one that has the fingerprints of the House Blue Dog Democrats all over it.
Notable by their absence from the bill is any mention of a Medicare-based public plan option or employer mandate. This doesn’t mean the Democrats are abandoning either option; rather it indicates a willingness on the part of Baucus, Waxman, Kennedy et al to work with Senate Republicans on compromise language in an effort to gain some GOP support.
Key components of the bills now up for debate include:
– maintains current employment-based insurance structure; employers can keep their plans
– calls for a “public health insurance option [that is] self-sustaining and competes on a “level field” with private insurers”
– an insurance exchange enabling insurers and small businesses to evaluate and select from a list of private insurance options
– prohibits medical underwriting, exclusion of coverage for pre-existing conditions, and rating based on gender, health status, or occupation with some allowances for age rating
– subsidizes coverage on a sliding scale for individuals and families with income up to 400% of the Federal poverty level (family coverage today would amount to 14% of income at that level).
– exempts small, low-wage firms and provides a small business tax credit for those providing health coverage.
-eliminates the Medicare Sustainable Growth Rate formula (used to determine physician compensation) and increases reimbursement for primary care providers
What’s not there is more telling than what is.
There’s precious little discussion of how to pay for this, and specifically whether employer premiums will be taxable and if so to what extent.
As I’ve been saying for months, it’s about the money. Expanding coverage without tough cost controls (note – NOT price controls – that’s very different) is a road to financial ruin. With their recent focus on the cost of the Recovery Bill and apparent strategy to take on the Democrats and the President on the issue of government debt and spending, the GOP has served notice that they will miss no chance to accuse the Dems of profligate spending.
Good for them; the ‘oversight’ is certainly appropriate and necessary, as the most important part of health reform is cost containment.

The health reform battle is escalating. And the President is moving to the head of the pro-reform forces. According to a piece in the NYTimes,
“Ultimately, as happened with the recovery act, it will become President Obama’s plan,” the White House budget director, Peter R. Orszag, said in an interview. “I think you will see that evolution occurring over the next few weeks. We will be weighing in more definitively, and you will see him out there.”
Till now, President Obama has stayed above the fray, talking in generalities about the economic imperative of health care reform, the need to automate the cottage industry that is the health care system (my characterization, not his), and the flaws in the current system. That’s not to discount the significant ‘reform-type’ initiatives that passed early on in this very young administration, including S-CHIP, initiatives that would have been plenty important if expectations weren’t so high. But high they are, and Obama has clearly decided it is time for the President to start doing some of the heavy lifting.
This is where it is going to get very interesting.
Way back in February 2009 the President put forth a health care reform ‘plan’; actually it was more of a list of things to get done, and avoided addressing the key issue – how are we going to pay for reform, and what medical care should we be paying for (a nice way of saying ‘cost control’). Now he’s getting a bit more specific, but avoiding any lines in the sand in an effort to gain some bipartisan support.
What’s interesting is the disagreement between Senate Republicans and the President/most Democratic Senators is centered around the public plan option. I just don’t see this as a huge issue, and continue to wonder why the GOP, AHIP et al are so bothered by the idea of competing with a government-sponsored option.
I’m wondering if the Dems keep promoting the idea more as a bargaining chip than anything else, as it pales in comparison to changes in reimbursement for physicians, pharma, devices, and facilities in terms of overall importance.
That’s where the real battle is going to be fought.

Yesterday we examined the health insurance industry’s role in the current reform process. Today we’ll look at the recession’s impact on reform initiatives.
There are two obvious effects of the recession – fewer folks with insurance, and lower revenues for providers. The latter has been well-publicized, with physicians seeing fewer patients; Hospitals are also suffering.
Colorado, hospitals delivered 29.2 percent more charity care in the first half of 2008 than in the same period in 2007, bad debt was up 6 percent and in total uncompensated care grew by 18.7 percent.
Hospitals in Pennsylvania saw a 12% increase in uncompensated care in 2007, and it is a safe bet that there was an even greater rise in 2008.
Minnesota‘s hospitals saw uncompensated care almost double, a change that contributed to a decline in overall facility profitability from a 4.8% return in Q3 2007 to a loss of 2.5% in Q3 2008.
And that’s not even getting into the states with real problems – New York, for example.
There is a direct link between higher rates of uninsurance the financial fortunes of providers. But there’s also a more subtle issue – the increase in the number of individuals and families with high deductible plans is likely as big a factor in the problem as the number of uninsured.

Although the high deductible plan members ostensibly have insurance, in reality they don’t have coverage unless they have funded their deductible accounts. And it appears that many, if not a majority, have no money in those accounts. As a result, providers aren’t getting paid because their patients don’t have the money.
This will get worse. I projected there would be over 50 million uninsured by the end of this year, and the latest data indicates that may be slightly low – Health Affairs is looking for 52 million to be without coverage in 2010.
This vicious cycle is accelerating. There are fewer workers with coverage who still need care, providers are looking to recoup lost revenue by cost-shifting to those patients with insurance, thereby driving up costs for the payers left in the game.
One study reports insureds are paying more for their health insurance. “That so-called “hidden health tax” in 2009 was $1,017 for a family policy and $368 for an individual…The uninsured who sought treatment in 2008 received about $116 billion in care, the study said. Of that, they paid for about 37 percent of the costs and government programs and charities paid for another 26 percent.”
The rest, about $42.7 billion, was uncompensated care that was passed on to the insured in the form of higher prices for their care.
While I (and others whose opinions I respect) have issues with some aspects of the report, the overall picture for providers is grim. The current system is fragile at best. Providers’ reimbursement is directly tied to the fortunes of the business community, and when that community drops insurance, the impact is broad and deep.
One solution adopted by creative folks looking for care is to head south – to Mexico.
But for the rest of us – prospective and current patients and providers alike, the recession provides a stark reminder of the fragility of the US health care system and its dependence on employment-based health insurance.
What does this mean?
Two things. First, providers’ financial difficulties may well force them to make concessions they otherwise wouldn’t even consider. The current situation is bleak, but the outlook long term is worse if we don’t solve the health care problem – and providers are terrified of the what-if scenario. They may just be scared enough to bend far enough to get something meaningful passed. That’s a big ‘maybe’.

Second, I’ve said, and still say, that the reform package that eventually passes (if one does, (which is still suspect) will build off the current employment-based system. The recession won’t change that, but may result in Congress drafting legislation that provides a much stronger safety net/alternative coverage vehicle for employers and their workers who can’t/won’t pay for coverage via the employer market.

Ya gotta do your research.
That’s a basic lesson in the business world, but one that some seem to forget. The latest example – actually there are two – comes courtesy of Grace-Marie Turner of the Galen Institute. Ms Turner sent me an email, copied below.
Dear Mr. Paduda,
Every day, another politician promises to “fix” health care.
With that in mind, the Galen Institute recently launched a YouTube video contest asking average Americans to create persuasive, 90-second videos bringing attention to the dangers of government health care and the benefits of free market reforms. The contest was inspired by the “First Do No Harm” principle. Doctors follow it — shouldn’t politicians?
Today, we’re announcing the winners of our contest. You can view the entries, along with the winning videos, here:http://www.youtube.com/groups_videos?name=firstdonoharm.
If you’re interested in doing a post on our contest, please feel free to contact me via telephone or e-mail or use the press release below.
All best,
Grace-Marie Turner
President, Galen Institute
Alexandria, VA
Here’s my response:
Ms Galen:
Thanks for your email.
I disagree with the premise and the purpose of your “campaign”. You are erecting a strawman based on a distortion of the plans currently under serious consideration and in so doing not contributing to the dialogue but rather distorting it.
It is unfortunate that you are not able or willing to engage on the merits of the current proposals but instead have resorted to fearmongering and obfuscation. There should be an open and honest debate; this effort damages your organization’s credibility and does not contribute to meaningful discussion.
Sincerely,
Joseph Paduda
Principal
Health Strategy Associates, LLC
The two research blunders committed by Ms Turner are:
a) sending me this press release. Obviously the good folk at Galen have not read this blog or any of my other articles on health care/reform/insurance/policy.
b) deciding this would be an effective way to engage in, and perhaps change the course of, the health care debate. Galen and the right-wing think tanks are rapidly slipping into irrelevance, and with this nonsensical PR effort Turner is accelerating the process. Instead of engaging in a thoughtful, intelligent, fact-based debate, Galen has resorted to the shopworn tactic of trying to scare the pants off common folks.
There are solid, reasonable arguments against a public plan option, single payer, connectors and other aspects of health reform proposals currently under consideration. That’s not to say I agree with some or all of them, but I do believe they are helpful.
It is indeed unfortunate that Ms Turner’s contribution is nothing more than a reminder of why McCarthyism was so destructive.

The chances of meaningful healthcare reform look increasingly likely. Whether it will be reform we can afford is an entirely different question.
We’ll be taking a look at the differences this time around, and today will begin with the role of the health insurance industry.
Don’t expect to see Harry and Louise return to the small screen (TV or computer); while there may be an occasional sighting, the sponsors of the original edition have refused to let the aging couple out of the retirement home. Fearing a catastrophic backlash, health insurers are doing everything possible to be kindler, gentler, and easier to work with. They’ve got a long way to go, but their path is clear. A 2008 USA Today/Kaiser Family Foundation/Harvard School of Public Health poll had the industry with a 40 percent favorability rating with the public, lower than banks, airlines and drug companies, and half the approval rating of doctors.
Many view insurers as part of the problem, and with the continuous drumbeat of bad press, they aren’t doing themselves any favors. The public and the powerful do not trust healthplans, who have not given either constituency any reason to do so.
To the extent the insurers are able to stay at the table, they are finding their influence is dramatically lower than it was even twelve months ago. Particularly in the House, where Reps. Waxman and (even more so) Stark (D CA) are the powers behind reform, the health insurance industry has few supporters willing to publicly advocate for their views. In the Senate, it’s not so much that health plans have more friends as fewer enemies, and the friends they do have are reduced to yelling from outside the door.
Healthplans did this to themselves. Medicare Advantage was seen by most as a flat-out hand-out to insurers, who grew fat and profitable from overpayments funded by taxpayer dollars. The health insurance industry way overplayed its hand. Braying about the power and brilliance of private industry and its obvious ability to easily outperform the stumbling bumbling bureaucracy while seeking huge subsidies from that selfsame government was a doomed strategy. Hypocrisy is always a tough sell.
The industry is now all-but-prostrate at the feet of Congress, offering to give up medical underwriting, stop charging sick folks higher premiums, and even reduce health care costs – in return for an requirement that everyone buy health insurance. This last is no concession at all, adding huge revenue dollars while also aligning the industry with the powers that be. Win-win indeed; in retrospect this is so obviously good for the health insurance industry that it is amazing Harry and Louise weren’t pushing for universal coverage back in 1992. What’s new is the revelation that underwriting is not only expensive, but unpopular.
Health plans should count themselves very lucky that the President and key Senators refuse to engage in discussion about single-payer, instead proposing to build a new health insurance/care system on top of the existing (mostly) private insurance infrastructure.
But they can’t entirely give up their old ways, as evidenced by the public battle over the public plan option. This is where the industry may well make a catastrophic mistake. The public doesn’t like health plans, seeing them as mean-spirited, bureaucratic, monolithic entities ensconced in huge office buildings with leaders that are paid way too much for their ability to reject patient’s pleas for care while raising rates every few months and underpaying physicians. Now these private insurers and their advocates on the Hill are complaining about the unfairness of a public plan option, one wherein the government would ‘compete’ with private insurers.
In today’s world, the industry’s arguments against a public plan ring false. Opponents complain about faceless bureaucrats coming between patients and doctors; their lobbyists may have forgotten this was the health industry’s business model, but the public sure hasn’t. On a macro scale, voters traumatized by the failure of the mortgage and banking industry are loathe to trust yet another big financial industry to do the right thing; there has been precious little indication that the industry is in any way interested in that strategy.
All but lost in the debate has been the question of cost reduction. The industry’s pledge to reduce costs by two trillion dollars over ten years was quickly withdrawn, after President Obama masterfully maneuvered the industry and their supporters into a made-for-TV press event wherein he lauded them for that commitment. I’d expect to see a replay of that confab more than once as the debate heats up, and insurers will find themselves squirming on an increasingly hot seat as they try to spin their past statements. In so doing they’ll just dig themselves an increasingly deep hole – aren’t healthplans supposed to control costs? If so, why can’t you? And if you can’t, why, exactly, are we relying on you as the foundation for a new health system?
If meaningful reform happens, the primary beneficiaries will include healthplans. Yet another example of why it’s always better to be lucky than good.