26 March 2010

HCR II Done. Where Are We Now?

Health Care Reform Fixes Passed

The second part of the Health Care Reform bill (and accompanying legislation replacing private sector federally funded student loans with a direct loan program from the Department of Education that eliminates the private sector middle man) has passed and awaits President Obama's signature, which is certain to be promptly forthcoming. Thus, fears that House changes in the Senate passed version of the Health Care reform bill, which was signed by the President on Tuesday of this week, have proven unfounded.

This is a second case where Senate Democrats have found a way (in this case through a reconciliation process), to overcome Republican obstructionism seemingly putting an insurmountable sixty vote barrier to taking action. Previously, Senate Democrats thwarted an effort to put a hold on almost all of President Obama's nominations by threatening to make recess appointments.

The House "fixes" to the health insurance reform increase subsidies for middle class families to buy health insurance and reduce the bite of a new tax on premiums of expensive health insurance plans, which will make health insurance available to several million more people, and more generally provides a health care reform closer to the one that the President and Democrats have sought within the general framework of increased coverage through increased use of private health insurance and expanded Medicaid eligibility.


The bill makes access to health care much easier for those with pre-existing conditions, the self-employed, people who work for small businesses, and the poor. As a sole practitioner attorney, this will be a huge help to me. It costs me something like $10,000 a year more than it would a comparable attorney in a large firm to get the same health insurance (if I could get it at all), something that this bill will cease. This bill will also provide thousands of dollars more in subsidies to my family's cost of paying for health insurance in years when business is bad, providing a critical safety net for a self-employed attorney like myself whose profitability is quite cyclic.

The bill also greatly improves the financial situation of primary care physicians who serve significant numbers of Medicaid patients. These are among the lowest paid group of physicians in the United States today, and will be needed in far greater numbers now that many more people will be eligible for Medicaid benefits.

And, the bill places the cost of expanding the scope of Medicaid coverage entirely on the federal government, rather than using the usual 50-50 state-federal split of Medicaid costs. This amounts to long term federal suppport for cash strapped state governments which generally don't have an ability to run sustained deficit budgets the way that the federal government does.

The bill also makes progress in improving the lot of those who have health insurance and are mistreated by their insurance companies, such as people who have their benefits terminated based upon alleged deficiencies in their stale applications for insurance coverage.


The down side of the bill is that its core provisions that expand access to health care don't take effect until 2014. So, we'll have to endure about 45 more months of a slightly modified version of the status quo (and some of the earlier effective date reforms under the bill, like the creation of high risk pools, already exist in Colorado). This is a long time to have to muddle through the problems in the existing system, but it is better than the "possibly sometime" date for reform before the bill was passed and leaves open a clear path to moving the key dates forward is the public becomes more comfortable with the legislation now that it has been passed.

The bill passed is light on measures to reduce health care costs, although it does have some. Reducing the ranks of the uninsured by itself, reduces health care costs for people with private insurance by trimming thousands of dollars of costs shifted by providers from patients who provide only partial or no payment. Reducing the ranks of the uninsured also makes it easier to direct people to low cost primary care and preventative and maintenance health care providers rather than high cost emergency room providers. The bill limits health insurance company's administrative costs and profits (other than investment income) to 20% of premiums, and takes some baby steps towards encouraging competition. The bill adjusts reimbursements under Medicare and Medicaid in a way that is suppposed to signficantly slow the growth of public sector health care spending, and takes a first stab at controlling prescription drug costs.

But, the bill does little to address one of the main reasons that health care in the United States is the most expensive in the world by far, which is the very high rates at which health care providers (e.g. doctors, nurses and hospitals) are compensated, and the lack of incentives in the system for the people who are paying those providers with other people's money to drive harder compensation bargains.

While some of the easiest cost control measures are now law, harder cost control measures with a serious impact remain on the horizon.

Prospects For Progress

The status quo in American legislation tends to be very stable, so it is unlikely that the main elements of the health care reform bill will be rolled back before they take effect in 2014, even if Republicans make gains in the 2010 and 2012 elections significantly greater than anyone anticipated now.

When the bill does take effect, the American health care system will start to resemble that of the German, Dutch and the Swiss who also have near universal health care provided predominantly through private insurance plans. The fact that the system we are moving towards have first world precedents that have a reasonably long history of working well is comforting.

The current round of health care reform has cut the big Gordian knots standing in the way of change. Now, there is plenty of room for isolated, modest, incremental changes that build on this major health care reform in ways that address the remaining problems. Also, many of these proposals, unlike the larger health care reform bill, have some hope of being adopted and working on a state by state, or even a local level.

For example, I assert that it will be much easier to pass a narrow bill to create a government chartered but not funded health insurer (i.e. a public option) in the model of Fannie Mae and Freddie Mac (perhaps limited to states with a lack of competition), to put competitive pressure on existing health insurance companies, now that this concept will be harder to confuse with an attempt to "socialize medicine" or nationalize health care providers. This slight attempt at cost control has had strong majorities of popular support throughout the health care debate, but was scuttled out of concern that it representated a move towards socialized medicine (i.e. long waits and rationing in Soviet style health care provision) inaccurately suggested by the name. Freed of the room for confusion created by its interaction with the larger health care bill, this cost control measure may be irresistable, particularly if Republican campaigns in 2010 based on opposition to health care reform don't work as well as the GOP has hoped.

Similarly, the exclusion of undocumented immigrants from the effort to expand health care coverage, while politically popular, may prove problematic in practice. Uninsured people create externalities for their communities regardless of the reason that they lack access to health care. Either in an immigration bill (whose prospects of passage in 2010 look dim at this point) or in future health care legislation either at a state or a federal level, there is going to be a need to figure out how to provide some sort of health care for undocumented immigrants who can't afford it. My suspicion is that this effort will start by shoring up health care options for children and pregnant women, perhaps through school and community based clinics, and improving treatment options for infectious diseases, at least in places with large numbers of undocumented immigrants.

There is now plenty of time to let the dust settle, determine exactly what the reforms passed by Congress actually do, and prioritize the next steps. Some of the next steps may be controversial, although they will influence far fewer interest groups and thus provide far less of a battle royale in Congress when they come up.

Cost Control: The Next Big Health Care Battle

Some of the key next steps should be able to secure bipartisan support. Now that almost everyone will have access to health care, the big questions will be: (1) what can we do to control health insurance premiums, and (2) what can we do to control public spending on health care while still providing access to health care for existing beneficiaries.

Just about everyone who pays taxes or health insurance premiums, other than profitable health insurance companies and well paid providers will have a shared and similar interest in promoting legislation that will make this happen. Further, the existence of a large comprehensive system of subsidizing the cost of buying private health insurance through the tax code will only add to the intense pressure placed on federal budget writers, already present due to the fiscal crisis created by growing Medicare and Medicaid expenses, to control health care costs.

American businesses and individuals have been fed up with much larger than inflation increases in health care costs almost every years for decades. The health care industry, which suffered less than most other industries in the tech bust and financial crisis, remains a fat target for populist outrage.

Health care providers who we know personally and who provide us the gift of life and good health, have managed to parley the good will that exists towards them into relatively lenient treatment in the current round of health care reform. But, at some point, there is going to be no more room to squeeze health insurance companies who are the bearers of bad news, have been doing a poor job of doing their job and are as a result wildly unpopular.

As the cost of health care mounts (and this year has brought us another record increase), political pressure to do something, anything to ease the pain will rise on a bipartisan basis.

The problem is that while lots of garden variety policy wonks had very good ideas about how to expand health care coverage and were able to find a politically feasible formula for doing so, the ranks of policy wonks with good ideas about how to cut health care costs without undue pain (beyond savings that simply result from universal access to health care) are far thinner, and the level of consensus on one or a handful of general approaches that are likely to be effective are much thinner.

One group of policy wonks wants to move to a single payer system, on the theory that this reduces wasteful costs associated with insurance company bureaucracies and strengthens the negotiating position of this payer vis health care providers. This would probably work (Canada does it, for example), but is politically out of reach, for now.

Still, there must be a solution, because other countries with private insurance based universal health care like Germany, the Netherlands and Switzerland, manage to provide quality health care at a far lower cost. Now that we have made a national decision on what kind of model to use to achieve near universal health care, we need to example the systems whose model we have emulated more closely, see how they manage to control costs, and act likewise. While this takes serious research, some of which was already underway for the current health care debate, this is a project that the nation's think tanks and policy wonks can make real progress upon in a just a few years. If they do their jobs well, they can pave the way to a better informed debate on cost control, freed of the divided priorities that characterized this round of health care reform.

Not Socialized Medicine

The "socialized medicine" concern was widely heard in the health care debate. The round of health care reform that was just passed keeps both providers and health insurance in the private sector to essentially the same extent that they were before the bill was passed. The expansion of Medicaid does expand government provided health insurance, but only to people who overwhelmingly lacked any health insurance before the bill was passed. Most of the reduction in the ranks of the uninsured will come from more people buying health insurance from private health insurers.

For all but the poor, health care reform basically amounts to a new set of tax incentive to buy health insurance paid for mostly with increased tax rates on the unearned income of high income taxpayers. Essentially, the bill leaves the group health insurance market for employees of big business and their families, which was working well enough, although it was expensive, unchanged, while making major reforms to the way the the small group and individual health insurance markets, which were failing to function, operate and are funded.

For states that want to move beyond the default private insurance based model, the bill also makes it possible for states to innovate, for example by moving to something close to a single payer system, so long as they can maintain the health care coverage levels of the status quo bill. But, there is no sign that this kind of effort will happen anywhere, let along sweep the nation, any time soon.

Americans have given the private sector in the health care and health insurance industries a kick in the butt and another chance. If the system works very well, it may even be possible to privatize the some of the public clinics and public hospitals that have served an interim solutions to providing health care to people who don't have it. If it fails, we may have to revisit options that call for a greater level of direct governmental management of the health care system.

1 comment:

Michael Malak said...

Here is where you can find out the real reasons why healthcare costs are rising.

The top reason is that with health insurance now being a medical payment plan rather than insurance against the unexpected, people go to the doctor more often now due to the low co-pays.

Another reason for high costs is the medical profession cartel. The AMA artificially restricts the number of medical schools in the U.S., while simultaneously getting states to require AMA-approved degrees to obtain a medical license. The 30-hour shifts for interns are another way the AMA keeps the number of doctors down.