Tag Archives: American Medical Association

The Not-So-Public “Public Option” in Health Care Reform (Part 1)

Yesterday I wrote about the myriad compromises that are likely to result in a health care reform plan so watered down that it’s hard to recognize as reform. The facet of reform that offered some real hope has also been the most contentious: the so-called public option, a government managed program that could compete with private insurers. The insurance companies don’t want this, of course, because they’re afraid people would quickly find out that the government, for all its bureaucratic shortcomings, could still do a better job at a lower cost than the profit-driven private sector. The insurance industry opposes a public option, and so does the AMA.

Now, the White House and some Congressional Democrats look like they may try to have it both ways on the public option, by offering a pale imitation of a real government-run alternative (which was itself already a pale alternative to single-payer.) Instead of a public option that was in effect an extention of Medicare, the models that now seem to dominate are two others, both of which would keep private insurers firmly in the mix: the Federal Employee Health Benefits program, and the idea of health care “cooperatives.”

Obama has been talking about the Federal Employee Health Benefits program since his campaign days, and it’s possible that this has been the White House’s back-burner strategy for a public option all along. Back in mid-March, Government Executive reported that  “the Obama administration is looking closely at the federal government’s health insurance program as it undertakes nationwide health care reform, a senior adviser to the president said.”

Senate Finance chair Max Baucus–who has received more in campaign contributions from the health insurance industry than anyone else in Congress–has also long hinted that the FEHB might provide the “compromise” that would allow bipartisan support. As Jerry Flanagan of  consumer watchdog.org reported in March:

Many agree that giving Americans an option to the private health insurance market is key to reform.  President Obama promised such a plan on the campaign trail.  Max Baucus made clear on Friday that keeping the public option “on the table” despite opposition from health insurers is central to the negotiations he must shepard as finance chairman.  That’s because he knows that powerful labor unions in particular have made the “public option” a part of their reform agenda.

 But Mr. Baucus also said on Friday that there are several different ways of putting a “public option” into place.  He said that such a system could either allow Americans to buy into Medicare, or in the alternative, open up the Federal Employee Health Benefits (FEHB) program.  But the latter is just another health insurance controlled system and misses the real cost saving benefits of a public option based on Medicare.

The FEHB has plenty of critics, especially when it comes to the costs for plan participants. The program provides coverage to millions of public employees, it is in no way a “public plan.” It simply allows federal workers to sort through a hundred different plans and pick one they want. Their employer, the government, then picks up a majority of the cost with the worker paying the rest. The coverage is generally good, but it is not cheap–in fact, 100,000 federal workers don’t participate because they can’t pay the price.

This is no victory for Obama, or liberal Democrats like Ted Kennedy, or for that matter, reformers in either party. In fact, it is a victory for the Heritage Foundation, and especially its chief of domestic policy Stuart Butler, a Thatcherite Brit who advanced this idea back in the early days of the Reagan administration, when Kennedy and others were pressing for health care reform.

In a recent guest posting on Healthbeatblog.org, FEHB subscriber Jim Jaffe describes the strengths and weaknesses of the program:

Allowing America’s uninsured access to the health plans offered Members of Congress—along with everyone else on the Federal payroll–could help those who could afford it although many would probably find the premiums beyond their reach, to say nothing of the subsequent deductible and copay requirements. 

But such a step would do little to reform the nation’s healthcare system because the Federal Employees Health Benefit Plans differ little from insurance plans offered by other large employers.

Federal workers and retirees may select a  plan at a cost ranging from just under $100 monthly for the cheapest individual plan to better than $500 for the most expensive family plan.  In each case, the government pays a significantly larger amount, generally about 70 percent of the total premium. 

The Federal plans–including point-of-service, HMOs and consumer-driven options–mirror those offered by large private employers via the usual insurers. Like a large employer, the federal government has the bargaining power to impose some restraint on premium increases and to assure that human resources personnel negotiating the contracts have included basic benefits. 

The FEHP program requires coverage of pre-existing conditions, caps out-of-pocket expenses, and offers subscribers clear information to help them do comparison shopping. On the other hand, Jaffe writes, the plans “are not particularlyuser friendly or structured for efficiency,” with enrollees facing many of the same complications and obstacles they would find with private insurance.  Jaffe concludes:

Granted from the perspective of an uninsured consumer having access to the federal plan would be far better than no insurance—if you can afford it.   But the FEHBP plans are clearly part of the old, flawed system that reformers talk about changing.  From an economic perspective, they are more problem than solution.  Premiums regularly rise at a rate double inflation.

TOMORROW ON UNSILENT GENERATION: Health care “co-ops”–the latest tepid version of a public option.

Will Obama Fall for the Health Care Industry’s PR Stunt?

In a much-anticipated statement today, Barack Obama announced what is largely a public relations end-run by the health care industry, designed to trim a few scraps off of the nation’s porcine health care budget, while preserving its basic system of medicine for profit.

In a letter to Obama that was released over the weekend, executives from the Advanced Medical Technology Association (the medical device manufacturers lobbying group), the American Hospital Association, the American Medical Association, America’s Health Insurance Plans, and the Pharmaceutical Research and Manufacturers of America, as well as the Service Employees International Union, pleged to “do our part” to reduce health care costs. Their vague, pie-in-the sky promise amounts to just a 1.5 percent reduction in the growth rate of health care spending. Such is the explosion in health care costs that even this miniscule reduction represents a potential $2 trillion saving over 10 years. But there’s no guarantee this figure will be achieved. As the Washington Post points out:

The groups did not spell out yesterday how they plan to reach such a target, and…they offer only a broad pledge, not an outright commitment….In addition, White House officials said, there is no mechanism to ensure that the groups live up to their offer, only the implicit threat of public embarrassment.

“Public embarrassment”? By Big Pharma and the health insurance companies–two of the most shameless industries in the history of corporate capitalism? In any case, even if the $2 trillion reduction is achieved, it clearly won’t come out of industry profits. The Post reports:

Signers of the letter said that large amounts could be saved by aggressive efforts to prevent obesity, coordinate care, manage chronic illnesses and curtail unnecessary tests and procedures; by standardizing insurance claim forms; and by increasing the use of information technology, like electronic medical records.

So let’s get this straight: Saving all this money depends on getting Americans to eat less? Good luck with that one. And the other brilliant cost-saving measures involve getting doctors to create computer records of all the overpriced drugs they prescribe to patients, and giving patients easier forms to fill out before they get turned down six times by their private insurance companies?

Do you see a pattern here? None of these changes would make a dent in the industry’s bottom line–and what’s more, they could even enhance profits, by encouraging government-funded programs to help private companies streamline their bloated bureaucracy (much of which would instantly become superfluous under a public, single-payer system). The letter to Obama suggested this when it said: “We are committed to taking action in private-public partnership to create a more stable and sustainable health care system.” As we all know by now, “private-public partnership” usually means public investment for private profit.

It all adds up to a brilliant move, when you think about it. It makes the private health care companies look cooperative and proactive, rather than like the greedy obstructionists they really are. It gets these companies on the inside track with the administration, and creates common cause with the unions. In particular, it establishes a solid place at the table for the health insurance industry, the blood-sucking middlemen who ought to be kicked out of the health care system altogether. 

And what might the industry get in return for this generous “cooperation”? The Kaiser Daily Health Policy report today rounded up the possibilities:

The [Wall Street] Journal reports that although the groups did not ask for anything in return for the pledge, many of the factions are looking to prevent regulations that could “pose new burdens” or affect their profitability. For example, the health insurance industry is seeking to offset any reductions to their payments by obtaining new rules that would require all U.S. residents to have health coverage, according to the  Journal. The Journal reports that health insurers have made several concessions intended to prevent a public option — which they fear could affect their profitability — as part of reform legislation (Wall Street Journal, 5/11). According to the AP/Philadelphia Inquirer, drugmakers are hoping to avoid a requirement that new drugs pass a cost-benefit test before receiving regulatory approval. In addition, hospitals and physicians are looking to avoid a system in which the government would dictate their payments for all patients, not just those under Medicare or Medicaid (Alonso-Zaldivar, AP/Philadelphia Inquirer, 5/11).

In other words, the underlying purpose of this PR stunt is to slow or block any meaningful health care reform, which could actually improve care while reducing the price tag by a lot more than 1.5 percent. These include regulating the cost of pharmaceuticals and medical devices, curtailing or eliminating the role of the insurance companies, or introducing single-payer, which allows other developed countries to deliver superior health care for 20 to 40 percent less–all of which make $2 trillion in weight-loss programs and paperwork reduction measures look pretty pitiful by comparison.

All we can hope for is the possibility, remote as it may be, that Obama himself is also playing a PR game–making nice with the industry shills while planning some kind of genuine reform that will hit them in the only place it counts, and the only place where really meaningful savings reside: their profit margins.