Compiled by Scott Mertie*
November 4, 2009
Analysis: Public Option Might Play Only Minor Role In Changing Health Care
By Eric Pianin, Mary Agnes Carey and Julie Appleby
November 2, 2009
For all the controversy over a government-run insurance option, the program outlined in health overhaul legislation likely would play a minuscule role in efforts to expand health care coverage, according to many health care experts and lawmakers.
Of the 30 million Americans likely to purchase insurance through exchanges created by the legislation, only six million--or one fifth--would enroll in a public insurance plan, according to a Congressional Budget Office analysis of the House bill. Viewing it another way, the six million using the public option would amount to only two percent of the 282 million Americans under the age of 65 who are projected to have health insurance by 2019, when the legislation is fully implemented.
And that number could shrink because states may decide to opt out of a public insurance plan, an escape clause that's likely to be included in the Senate plan.
"The politics of this issue is totally disproportionate to its likely impact one way or another," said Bruce Vladeck, a former administrator of the federal agency now called the Centers for Medicare and Medicaid Services.
Senate Majority Leader Harry Reid, D-Nev., has said the Senate overhaul bill would allow states to opt out of the public plan--a step political experts say at least some would likely take. Congressional Republicans are united in opposition to a government-backed insurance plan, and political leaders in heavily GOP states may also be opposed. Insurers, which fiercely oppose a public plan, would also be expected to lobby against it.
No matter what the states do, the government-run plan is not likely to attract a large membership, at least according to the CBO. The CBO reasoned that the plan may not be able to offer a price advantage--in part because the House bill requires a government-backed insurer to negotiate payment rates rather than dictate them to hospitals and doctors.
If the number of people in the public plan turns out to be six million in 2019, that would work out to an average of 120,000 per state. But that number probably would be smaller in the smallest states, perhaps totaling just tens of thousands.
No Details Yet
Reid would allow states to opt out of the program by 2014, one year after the public plan would take effect. He hasn't provided details on how such an opt out would work, or how the governors and the state legislatures might decide. Some advocates of the public plan fear that the states could end up with too much power to withdraw from a public plan, leaving residents with fewer health insurance choices.
"A lot will depend on the specific rules, and there's a risk that the legislation would make it so easy for states to waive participation in the plan that it defeats the whole purpose of having a national health insurance entity," said Jacob Hacker, a Yale University professor of political science who favors the public insurance program and an opt-out approach.
Others say, however, that the opt-out clause will rightfully allow states to decide what's best for their residents.
Predicting the states' responses is tricky, even where Republicans and conservative Democrats predominate. Some say the consumer appeal of a public plan could trump criticism that government plans would eventually drive out competition and lead to the federalization of health care.
Congressional Democrats say a government plan would spark competition with private insurers in the exchanges, or marketplaces, where under the legislation millions of Americans who don't have employer-provided coverage would shop for policies. Advocates say that could especially help consumers in states, often smaller, more rural ones, where only one or two insurers dominate the market, and are typically lightly regulated.
Whether states would opt out of the public option would depend on several factors, including the political makeup of the state, the level of competition among insurers and whether insurance companies push state officials to keep out a government-backed plan.
"If insurance companies don't want any public plans to compete with them, they will be pressing the governors and the legislatures to opt out," said Rep. Henry Waxman, D-Calif., chairman of the Energy and Commerce Committee and one of the architects of the House Democratic bill. That legislation doesn't include an opt-out provision.
Useful or Heavy Handed?
In many states, the decision would hinge on whether people view the public option as a useful way to increase competition or heavy-handed government interference in the marketplace.
In Oklahoma, Insurance Commissioner Kim Holland said in an interview that, given the state's conservative political makeup, it's likely "that as long as there is a sense that citizens have options and affordable options . . . [the legislature] won't jump into participating in a public plan."
But some congressional Republicans argued that it would be difficult for GOP-controlled states to reject a public option--thus barring their residents from a program that would be open to millions of Americans in other states.
"What you'd be saying to your people back home [is] 'We're going to take our state out of this but, by the way, you're going to be paying increased taxes'" as part of a health overhaul, said Sen. Mike Johanns, a Nebraska Republican who was governor of the state from 1999 to 2005. "I think the people would look at that and think that's the most foolish thing I've ever heard . . . It's a false option."
The opt-out provision touted by Reid is stirring debate in governors' races that will be decided Tuesday. In New Jersey, Democratic Gov. Jon Corzine, who is running for reelection, said he would not opt out of a public option while his Republican challenger, Chris Christie, said that he would. In the Virginia governor's race, Republican Bob McDonnell said he would opt out; Democrat Creigh Deeds has not said for certain what he would do.
The opt-out provision, if enacted, could also figure in scores of state legislative and gubernatorial races next year.
The issue could be especially contentious in Alabama where, according to the Government Accountability Office, Blue Cross and Blue Shield controls 96 percent of policies sold in the small-group health insurance market. Consumer advocates say the public plan is needed in their state to spur competition.
Rep. Artur Davis, an Alabama Democrat who is running for governor, said that while he is not an advocate of a public plan, he'd want it to be an option for his state's residents. "For me, the public option is not the focus of this debate," he said in an interview. "Having said that . . . if the federal legislation passes, it's your task as governor to enforce that legislation."
A spokesman for incumbent Republican Gov. Bob Riley said it would be "premature" to speculate on whether Riley would favor opting out of a public plan.
Even with strong Democratic majorities in the Alabama legislature, there might be pressure to shun a government-run plan. "I think Alabama is one of those states where they believe in self-sufficiency, they believe in trying to have less government intervention in their day-to-day lives, and right now the public option as proposed is contrary to that," said Rep. Bobby Bright, D-Ala.
New York Approves
New York lawmakers and health policy analysts predicted their state would embrace a public plan to increase the number of health insurance choices. "My guess is in New York the public option is very popular so it would probably stay in," said Democratic Sen. Charles Schumer.
Richard Gottfried, chairman of the New York State Assembly's Health Committee, agreed, but added that state officials might press for flexibility to make the public option work more smoothly with its Children's Health Insurance Program and Medicaid.
"It might make sense to combine the new public option with existing programs" to get more leverage in negotiating rates with doctors and hospitals, he said.
Take This Conservative Argument Seriously
By Jonathan Cohn, Senior Editor of The New Republic
November 2, 2009
When conservatives scream about socialized medicine and death panels, you should tune them out. But lately conservatives have been making an argument you should hear. It's about whether we can believe Congress when it promises to raise taxes or cut spending--and, as such, whether we can believe that health care reform can actually be fiscally responsible.
As you may know, many promoters of health care reform say that the proposals in Congress will pay for themselves and, over the long run, actually reduce what we spend, as taxpayers and as a society. As proof, they point to (among other things) a series of changes in the way Medicare pays for services--changes that would, over time, pay the providers of medical care less and, accordingly, restrain the growth in overall Medicare spending. They also cite a reduction in the tax subsidy for the most generous health job-based insurance policies, or so-called "Cadillac plans." Experts believe this will induce employers and employees to seek out cheaper, more efficient insurance arrangements.
The Congressional Budget Office agrees that these measures would save the government money. (CBO doesn't predict the effect on health care spending overall, but it's a reasonable inference.) Still, the CBO delivered that judgment with a caveat: Cost control will only work if future lawmakers let those changes take effect. As CBO noted--and as conservatives have been arguing, in some cases very loudly--that's hardly a sure thing.
A big reason for doubt is the fate of a law called the "Sustainable Growth Rate." SGR is basically an effort to set a hard budget on physician payments in Medicare. After any year when Medicare reimbursements grew more quickly than the SGR, the government is supposed to cut those payments back. But thanks in no small part to physician lobbying, Congress has in recent years flinched at letting the cuts go into effect, instead passing yearly "postponements."
You can see where this argument is going. If politicians in Washington aren't willing to let the SGR take effect, why should we believe they'd be willing to let the planned Medicare reductions and insurance taxes take effect? It's a good question. But, it turns out, there are some good answers, as well.
For starters, the policies are structured differently. The SGR is a cut, plain and simple, that would affect physicians no matter how they changed their behavior. The planned Medicare reductions are part of a broader package, full of financial incentives that should, at least in theory, reward more efficient care. There would be bonuses, for example, that would reward the formation of integrated groups that deliver more coordinated chronic care. Similarly, both employers and employees would be able to avoid paying the Cadillac tax by shifting to plans that don't cost as much.
Severity and timing of the changes is another distinction. At least today, SGR is a joke because--if it went into effect--the reduction in physician payments would be a highly disruptive 20 percent. The adjustments in the new reform law would be less stark and, in the case of the insurance tax, less direct. The Cadillac tax falls on the insurer, not the individual. That ought to soften the political blow--not entirely, for sure, but perhaps enough to make a difference.
Keep in mind that, notwithstanding the SGR experience, lawmakers in Washington have--from time to time--stuck by decisions to impose higher taxes or hold the line on Medicare spending. It happened in 1990, when President George H.W. Bush and a Democratic Congress agreed to raise taxes; it happened in 1993, when President Bill Clinton and a Democratic Congress agreed to raise taxes again; and it happened in 1997, when Clinton and a Republican Congress agreed to cut Medicare and Medicaid spending, although it later backed off some of the cuts.
Decision-makers in Washington stood by those changes because, during those periods, there was political will to reduce budget deficits. The same seems to be true today. President Obama has insisted reform be fiscally neutral, forcing Capitol Hill to reduce significantly the benefits reform will offer. Just two weeks ago, an effort to wipe out the SGR forever collapsed because, without offsetting revenues or savings, Congress itself was unwilling to authorize the extra money.
That doesn't mean the will to maintain fiscal balance will prevail throughout the next decade, or beyond, as the planned Medicare changes and insurance tax take full effect. But health care reform, done right, should make it easier to maintain that discipline in the future--not only by putting cost-saving measures on the books, putting the onus of action on those who wish to cancel them, but also by getting everybody covered.
For reasons that have as much to do with politics as policy, it's simply easier to control the cost of medicine if most people have insurance. As proof, just look at Massachusetts, where--three years after extending coverage to include 97 percent of the population--the state is looking seriously at truly sweeping changes in the way medical care is organized.
To be clear, a lot of reform advocates--this writer included--would support expansions of coverage even if it didn't reduce the deficit, purely on moral principle. And the case that health reform, as currently written, will actually pay for itself is a lot stronger than the case that health reform will restrain future medical spending. When it comes to the actions of future politicians, there are never guarantees.
But that's not a reason to oppose health care reform. It's a reason to push even harder on cost control--now, while lawmakers are still writing legislation, and in the future, when they have opportunities to improve upon it. Instead of ignoring complaints about cost control, reform advocates should answer them.
Corporate Wellness Programs: Healthier Employees, Lower Costs
By Jenny Gold, KHN Staff Writer
October 30, 2009
Lawmakers trying to curb the rising cost of U.S. health care are eyeing the potential of wellness and prevention programs. The workplace, where Americans spend so much of their time, is seen as a natural place for some of these efforts.
Johnson & Johnson, known to consumers for products such as Band-Aids and Tylenol, is also famous among employers as leader in the field of corporate wellness. The company launched its first such initiative in 1978. More than thirty years later, the program has more than
80 percent of employees participating.
Here's how it works: employees fill out a health risk assessment survey that asks lifestyle questions - such as whether they exercise and if they smoke. Their blood pressure and cholesterol are tested, and body mass index is measured. If the employee is found to be in a high-risk zone for any chronic conditions, such as pre-diabetes, they're asked to participate in free programs and counseling to help them get healthier. As an incentive to participate, employees are given a $500 credit toward the cost of their health care premiums. All employees also are given access to on-site fitness centers and programs and are offered subsidies for gym memberships. Studies
have shown the program--called "Live for Life"--has resulted in significant improvements in employee health as well as a reduction in company health care costs.
Recently, Johnson & Johnson also launched a project to market corporate wellness administration to other companies.
Dr. Fikry Isaac, executive director of global health services at Johnson & Johnson, runs the company's wellness program. He spoke recently with KHN's Jenny Gold about Johnson & Johnson's program and how corporate wellness could be incorporated into the current effort to overhaul the nation's health system. We edited the interview.
Q: Describe what the wellness program looks like.
A: I would describe it as a holistic approach that addresses the needs of individuals, whether it's mental or physical needs or anything related to their family or work. We focus on prevention and behavioral change. But we also offer tools for people to know their health risks and numbers. What's their cholesterol, sugar, body mass index? We offer them ways to learn [this information] and solutions, focusing on three key areas: healthy eating, helping people stop smoking, and we want people to be more active and really address their health needs.
Q: If I come to the company as a new employee and want to be part of the program, what happens?
A: You would participate in the health risk assessment. The output is personal and confidential. Nobody else has access to your information. We take that (and aggregate it with others' information) and assess the health of the population in Johnson & Johnson and target the areas of need. As part of the process, you're told of the two or three top priorities from a health perspective that we have solutions to. For example, if you're a smoker, we would offer you an online digital media smoke cessation program. We would also offer you someone to give you counseling by telephone. Or if you really want to see someone face-to-face, we will offer you that as well. If there's a recommendation for you to use a pharmacological aid we will offer it to you at no cost under your health benefit plan.
All of that is linked to a discount. In 1995, we created a program to give you a $500 discount into your health plan upfront [if you take the health risk assessment]. If, in the risk assessment, you are found to have some of those risk factors and you participate in the program, you maintain the discount. If you're healthy, you still get the discount. All employees are treated the same.
Q: How does a program that sounds like it costs a lot end up saving money?
A: We have shown that we are impacting the bottom line--the cost of health care delivery. We have done several peer-reviewed studies in 2002 which looked at our program before we implemented the [discount] approaches. Those reports show that we've reduced the risk factors in the population that participated in the program. Currently, we still see ourselves as having the healthiest employees if we compare them to the national data on smokers, body mass index, physical activity, cholesterol, hypertension, diabetes.
There is an impact on people's health. We saw in 2002 that there is a $225 per employee per year reduction in health care costs. We have seen their utilization of the health care system go down, so if you project out to 2007, that's $400 per employee per year cost savings.
Q: Why are they using the health system less? Losing weight and stopping smoking seem more like long-term changes.
A: You start to see results within the first two years, but the optimal results you see in year three and four. It's worth the investment. The bottom line is that we track our per capita health care cost trends over the years. Our per capita health care cost over the past 10 years has been 1 to 2 percent below the benchmark, which are the groups that compare to J&J health plan offerings.
Q: You're in Washington, D.C., to meet with congressional staff about these corporate efforts. What will you say?
A: I would like to see that there is something in the reform bills encouraging employers--whether small, medium-size or large--to really address the culture of health within their population, because that is really a reflection on how their business will be successful in the future. It's a good investment and good business.
Q: How would you like to see that done?
I'd like some recognition for employers of any size that if they implement those types of comprehensive health and wellness prevention programs and offer them to employees, they should get some sort of a tax credit, for example. That would be very advantageous.
This information was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery. © Henry J. Kaiser Family Foundation. All rights reserved.
*We would like to thank Scott Mertie, Esquire (Kraft Healthcare Consulting LLC, Nashville, TN), for selecting the articles for this week's update.