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The Latest News On Healthcare Reform - Reid Decides Senate Bill Will Include a Public Plan

Reid decides Senate bill will include a public plan

For the past week, Senate Majority Leader Harry Reid has been merging the two health reform bills passed by two different Senate committees. On Monday afternoon, he announced that the bill he takes to the floor for a full-Senate vote will include a public plan option. States, however, can choose not to participate in the government-run plan if they “opt out” by 2014.

This decision, he said, shows that he believes such a bill will have "the support of my caucus." He admitted, however, that he did not have commitments from all 60 Democrats, which he will need to prevent a filibuster.

A statement from the White House said Reid had the President’s support. As President Obama “said to Congress and the nation in September,” the statement said, “he supports the public option because it has the potential to play an essential role in holding insurance companies accountable through choice and competition.”

Other public-option approaches had been suggested. They included an "opt in" provision for states instead of an “opt out,” and a "trigger" that would create a government plan only if private insurers didn’t offer policies at affordable prices. The Senate Finance Committee’s bill included nonprofit health care cooperatives, instead of a public plan, and the new merged bill put together by Reid contains a provision for them as well.

Democratic moderates have said they prefer the “opt in” provision; Sen. Olympia J. Snowe of Maine, the only Republican to vote for health-care reform in either chamber, says she prefers the trigger and was “deeply disappointed” that Reid had chosen to put the public plan option in the bill. Sen. Joe Lieberman, an independent who caucuses with the Democrats, said he will not back any bill that includes a public plan, and Sen. Blanche Lincoln, D-Ark., said she was reluctant to sign on with Reid's plan.

The Business Roundtable immediately issued a statement in opposition to Reid’s decision, saying, “The public plan option will not only shrink the pool of individuals covered by private insurance, but it will siphon off those most needed to create balanced risk pools. To keep costs low, the public plan will also reimburse providers at a sub-market rate. Taken together, these two effects will exacerbate the cost shift to businesses, providers and insurers alike, creating an unsustainable system.”

After the bills passed by the Senate Finance Committee and the Health, Education, Labor and Pensions Committee are merged, the final bill – along with some alternate scenarios – will be sent to the Congressional Budget Office, which will attach a price to the plan. The goal is to bring the bill to the Senate floor for debate the week of Nov. 9.

Reality check on health insurance industry profits

From the Associated Press: A story that fact checks the insinuations that health insurance companies make “immoral profits,” as House Speaker Nancy Pelosi has put it. The story was posted on the New York Times political blog with the headline “FACT CHECK: Health Insurers' Profits 35th of 53.”

“Insurers are an expedient target for leaders who want a government-run plan in the marketplace,” the story says. “But in pillorying insurers over profits, the critics are on shaky ground. Ledgers tell a different reality.”

The story goes on to cite statistics many Humana employees are familiar with: “Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.”

“Health insurers posted a 2.2 percent profit margin last year, placing them 35th of 53 industries on the Fortune 500 list. As is typical, other health sectors did much better – drugs and medical products and services were both in the top 10.

“The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.”

Humana's 2008 consolidated pretax margin was 3.4 percent.

Insurance industry responds

An op-ed in the Washington Post, written by Karen Ignagni, president and CEO of America’s Health Insurance Plans, responded to criticism of the health insurance industry for a report it commissioned from PricewaterhouseCoopers. That report was issued a few days before the vote of the Senate Finance Committee and showed the unintended effects of some of the committee’s proposed health reforms. The “central finding,” as Ignagni put it, was that implementing insurance market reforms without a strong requirement that everyone participate would significantly increase costs for individuals and small businesses.

This conclusion “has long been noncontroversial in health policy circles,” Ignagni wrote. “(It) echoes the message President Obama delivered in his address to Congress last month: ‘And unless everybody does their part, many of the insurance reforms we seek – especially requiring insurance companies to cover preexisting conditions – just can’t be achieved. And that’s why, under my plan, individuals will be required to carry basic health insurance,’ (Obama) said.”

“Doc fix” not fixed yet

One of the more perplexing problems for members of Congress during the reform conversation has been to find a way to execute a “doc fix” – that is, to change a Medicare formula so physician payments aren’t automatically reduced when their costs exceed budget targets. For example, payments to physicians are scheduled to decrease by 21 percent next year.

Most years, Congress votes to block the cuts, largely out of fear that lower rates will lead to fewer doctors accepting Medicare patients. Physicians, of course, want the formula eliminated once and for all, but the cost – $247 billion for the first 10 years – is high. A “doc fix” passed this year would create special problems, since that $247 billion would be on top of the $900 billion to $1.2 trillion cost of proposed reforms. And the President has promised Americans he will not sign a reform bill that adds “one dime” to the national debt.

So Senate Majority Leader Reid’s strategy to fix the problem and get doctors on board for reform was to separate the “doc fix” from the health care overhaul. The legislation he wanted members to consider, however, did not include a way to pay for it. This addition to the national debt bothered a number of senators, and on Wednesday, a majority of them refused to go along. Reid needed 60 votes to proceed, but he got only 47. Twelve Democrats and an independent voted with the Republicans instead.

Minority Leader Mitch McConnell, R-Ky., was triumphant. He said, “In the Senate’s first vote on health care spending this year, a bipartisan majority rejected the Democrat leadership's attempt to add another quarter trillion dollars to the national credit card without any plan to pay for it.”

The Capitol Hill publication Roll Call called the vote “an ominous beginning for Democrats on the health care debate.” The New York Times said, “Democrats lost a big test vote on health care legislation….The Medicare bill has become a proxy for larger issues in the debate.”

Sen. Ron Wyden, D-Ore., explained his "no" vote this way: “On the eve of a historic debate on health care, it’s essential to show a commitment to real reform,” which he said includes fiscal responsibility.

HHS says House reform plan bends the curve in the wrong direction

A report from the Health and Human Services Department says that the nation’s health care bill would increase under the House leaders’ proposed reforms. The analysis says that if H.R. 3200 passed, costs between 2010 and 2019 would actually increase by 2.1 percent over what they would be without reform. Health care would account for 21.3 percent of the economy in 2019, compared to 20.8 percent if no bill passed.

The report also said:

• “With the exception of the proposed reductions in Medicare…(the legislation) would not have a significant impact on future health care cost growth rates.”
• “The additional demand for health services could be difficult to meet initially with existing health provider resources and could lead to price increases, cost-shifting and/or changes in providers’ willingness to treat patients with low-reimbursement health coverage.”
• Forty percent of the 27 million people who would buy coverage through the health insurance exchange would choose the public plan because its premiums would be about 11 percent lower than private insurance.
• It’s “doubtful” that proposed Medicare cuts would stay in place.

Anti-trust and other regulations

Last week, the House Judiciary Committee voted 20-9 to repeal anti-trust regulations for health insurers. The Senate is expected to include similar legislation in its health reform bill.

Since 1945, the McCarran-Ferguson Act has given states broad authority to regulate the insurance business without interference from federal intervention. But as Karen Ignagni of AHIP said in a letter to the Judiciary Committee chairman, the bill is an “attempt to remedy a problem that does not exist.” She pointed out, “Health insurance is one of the most significantly regulated areas of the economy.”

Associated Press said the vote “signaled a growing determination by Democrats to punish the insurance industry for its criticism of President Barack Obama’s health care overhaul agenda.”

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