Cantwell Amendment Another Handoff to States

As the Senate Finance Committee concludes its mark-up of health care reform legislation an interesting dynamic is emerging: Senators are increasingly turning to the states to address some of the more pressing challenges the reform effort is designed to address.

Yesterday I wrote about a compromise being circulated by moderate Senator Tom Carper. The Carper Compromise would allow states to create government-run insurance programs, networks of co-ops or the like. That proposal has yet to be brought to the Senate Finance Committee and may not be. Instead, it could be offered later in the process as the Senate seeks to bridge the gap between the Finance Committee’s bill and legislation passed by the Senate Health, Education, Labor and Pensions Committee – which calls for a robust government-run plan.

Meanwhile, the Senate Finance Committee has adopted a proposal offered by Senator Maria Cantwell. which gives states the option “to negotiate with insurance companies for lower rates on health coverage policies for those living barely above the poverty line and provides federal dollars to pay for it,” according to the McClatchy news service. The Cantwell Amendment is modeled after a program currently in operation in Senator Cantwell’s home state of Washington and would benefit families between 133 percent and 200 percent of the Federal Poverty Level (up to $21,660 for individuals and $44,100 for a family of four). Senator Cantwell staff claims such plans could cover up to 30 million of the nation’s uninsured according to the Associated Press. This, of course, assumes that state’s out-reach efforts are successful in bringing those eligible for such a program into the system. There are millions of individuals eligible for existing programs like Medicaid and children health programs who remain unenrolled across the country.

Senator Cantwell’s amendment is not an alternative to the public option, the issue most dramatically dividing Democratic liberals from their moderate and conservative colleagues in Congress. Bridging that gap will require something along the lines of the Carper Compromise. (This doesn’t mean Senator Cantwell’s proposal wasn’t controversial. It was adopted on a 12-11 vote with Democrat Blanche Lincoln joining all 10 Republican members of the panel in voting against it).  What inclusion of the Cantwell Amendment in the Senate Finance Committee’s legislation does underscore is the likelihood Congress will be giving states a central role to play in making health care reform real.

The benefits of this approach include keeping health care decisions closer to consumers and allowing for different approaches to meet the differing needs of the states. One of the downsides to relying on states, however, is that it eliminates savings that might have been achieved by more uniform, national standards and regulations.

Another outcome of shifting responsibility and power to the states under health care reform: even after Congress completes its work, intense legislative battles will remain. Only the venue will move from Washington, D.C. to a state capital near you.

8 thoughts on “Cantwell Amendment Another Handoff to States

  1. I don’t hear anyone saying anything about Torte Reform. Health Insurance premiums are driven up to a great extent by Hospitals and Doctors spending sometimes as much as $100,000 per year on malpractice insurance. Also, doctors feel a need to practice defensive medicine which pushes up costs for unnecessary medical testing.

    In yet another quadrant, our government is doing next to nothing to stop billions in Medicare/Medicaid Fraud and corruption. In the State of New York alone there is something like $29 Billion in Fraud. In Florida, 5 pizza parlors are registered as Kidney Dialysis Centers. Cost shifting from this arena adds approximately $1780 per year to every families insurance premiums!

    • Al,

      You are so correct. As an agent that helps seniors with their Medicare, it is obvious of the fraud in Medicare. Durable Medical Equimpment centers are probably the biggest fraudsters. This pizza parlor/kidney dialisis issue is happing all over the country.

      Why doesn’t washington show us they can make the current entitlement/goverenment health care programs work, before enacting Medicare for all. This country simply can’t afford something like that, and we don’t need it or want it.

  2. I would think that while a network of co-ops would bring the decisions being made closer to the people that they affect has some merits the fact that it would be creating a number of individual systems would dilute any negotiating power. I feel that this power is at its most effective under one umbrella.

  3. While they’re at it, why not have the states negotiate insurance premiums on the behalf of small businesses and the self-employed? That could have a dramatic economic impact as well, something sorely needed to help jump-start the economy out of the doldrums.

    • Nosedoc, I’m afraid that sounds better on paper than in practice. California tried something similar as part of our small group reforms (AB 1672) in the mid-90’s. The state created the Health Insurance Plan of California (the “HIPC”). The state agency charged with managing the HIPC defined the benefits and negotiated rates. Most, although not all, of the state’s largest carriers and several regional players participated. I believe the plan peaked at about 150,000 members — which may sound like a lot, but in a state the size of California it wasn’t much of a factor. The problems they had were:

      1. Although they eventually changed their approach, initially the HIPC was less than welcoming to brokers — it didn’t exclude them, it was just less than welcoming. Brokers consequently distrusted the HIPC and while they sold the vast majority of business the HIPC received, never fully embraced it.
      2. State agencies are hamstrung by laws and regulations that make it difficult for them to address changing economic and market realities. The people managing the HIPC were bright, but they could not be quick. As a result while private carriers were able to design and introduce plans appealing to the market, the HIPC’s offerings were not as appealing.
      3. Their approach to the market led them to make decisions that were consistent with their principles, but turned out to put them at a disadvantage. For example, private carriers were able to adjust rates based on the group’s risk by 20% up or down from their standard premiums. The HIPC could have done this, but chose not to. The HIPC’s block of business had higher claims (as a percentage of premium) than other carriers.
      4. They weren’t able to negotiate rates that made them especially competitive for two reasons. First, they didn’t have much bargaining clout. Many of the carriers already insured hundreds of thousands of small business’ workers. The HIPC was spreading 150,000 insureds among 10 carriers. That’s not enough to drive a bargain.
      5. But the major reason the HIPC was unable to negotiate better prices was that they were negotiating with the wrong players. As we’ve discussed a lot on this blog, premiums reflect medical costs. The carriers couldn’t agree to prices below the claims they were incurring, plus enough to cover administration, regulatory compliance, profits and the like.

      Administration of the HIPC was eventually turned over to a non-profit, non-state entity (as required by AB 1672). The new administrator, the Pacific Buying Group on Health changed the name to Pac-Advantage. They operated it as a non-profit for several years, but eventually Pac-Advantage went out of business.

      Hope this was informative.

      • Thank you for the frank yet depressing history lesson. Now, allow me to give you a “close to home” example. My partners and I just received our renewal numbers for our PPO through the largest insurer (by far) in our state, which also administers the health plan for our state’s employees (and the largest Medicaid HMO to boot). Our PPO’s family premiums, with $30 in-network office copays, $1000 out-of-network deductible and $10/30/50 prescription plan is going from just over $21K per year to $26.7K for the coming year. No, I don’t consider this a “Cadillac Plan,” especially when you look at the state employees’ benefits. A municipal employee I know has the same PPO via the state with $15 in-network office copays, $100 individual out-of-network deductible and drug copays at $5/15/30. I cannot imagine that the state is paying a “Cadillac” price for its employees, even if it is self-insuring, with the insurance company merely acting as an administrator.

        I find it very hard to reconcile that the state is powerless to intervene on the behalf of its small business men and women, especially since we do not have 10 carriers with appreciable market share (maybe 5, with a big disparity between numbers one and five). Any additional commentary is appreciated as always.

  4. Re:Senator Maria Cantwell’s Recommendation to involve the citizens in fair and clearly difined negotiations with the insurance industry,and government agreeing to a process that responds equally to the concerns of each party. I am impressed with the potential of this recommendation conceptually. It suggests a level of cooperation that can be workable and beneficial for the all the citizens of our nation. Here is a possibility that a well designed procedure for these negotiations could allow a unique mutually agreeable citizen sensitive government, industry local and health consumer collaboration. It seems to me that the process will accomplish what every body is concerned about, equity and fairness in health care decision making.

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