De-Sweetening Health Care Reform

The health care reform package being finalized by Congressional Democrats and the White House is chock full of benefits for specific states and interest groups. Some of that is inevitable in any legislation, regardless of the party in power. But the health care reform bill is widely viewed as an extreme example – we’re talking cotton candy level on the sweetness scale.

Now a Democratic Senator is trying to tone down the glucose level of the health care reform bill. Senator Russ Feingold has sent a letter to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi requesting that “sweeteners” be removed from the final health care bill, January 14, 2010 “originally inserted to win over the support of certain members of Congress.” In the letter, Senator Feingold recognizes that there are “valid policy or fairness reasons why certain states or interests may receive seemingly different treatment.” However, he specifically cites “unmerited Medicaid assistance to certain states and carve-outs to avoid cuts to certain Medicare Advantage plans” he describes as “indefensible.” These provisions, he charges, “are intended to provide an undeserved windfall to specific states” and should be removed from the health reform bill.

Senator Feingold is right, both from a public policy perspective and from a political view. Both Democrats and Republicans engage in the practice of securing votes by inserting provisions into bills aimed at benefiting a specific Senator’s home state. That’s the American way. Really, it is.

But health care reform is complicated, controversial and sensitive. Hyper-sensitive. This is an issue that has generated charges of the American government threatening to kill old people, death threats against members of Congress, and outrageous hyperbole that only the CFO’s at Fox News and MSNBC could love. More significantly, this legislation is also going to impact every American in a highly personal way and significantly impact one-sixth of the nation’s economy. An issue like this should not be subjected to politics as usual. Removing the sweeteners makes sense.

Not that anyone asked, but I don’t think the deal struck yesterday with the unions yesterday falls into the sweetener category (at least not what we know so far. Apparently the deal postpones a tax on rich health plans until 2018, but only for coverage required by labor agreements and for state and local government workers. The compromise also removes vision and dental plans from the calculation of the value of a plan and raises the threshold for taxation from $23,000 for family coverage to $24,000. There are also adjustments for older workers and women.

The reason why I don’t view this deal as a pay-off for union support is because the nature of union agreements means a transition period make sense. Collective bargaining agreements have been made pursuant to the rules in effect today. These rules encourage unions to trade-off wage increases for enhanced (and more expensive) health benefits. To now change the rules without allowing time for new negotiations seems a bit unfair. Whether five years is needed for the transition or a shorter period of time would be sufficient is a level of detail I can’t address.

The same logic should apply to whatever mandated medical loss ratios wind up in the final bill. Health care reform is likely to require health plans to spend a minimum of 80 percent (for individual and small group coverage; 85 percent for large group plans) on claims payments. The legislation passed by the Senate would impose this requirement effective January 1, 2011. yet health plans have contracts in place with brokers, vendors and others that were made under the old rules. To now change those rules and impose spending requirements is both unfair and impractical. The disruption and pain resulting from failing to provide an adequate transition to mandated medical loss ratios will be felt not just by brokers and insurers, but by consumers and voters as well.

Should President Obama, Senator Reid and Speaker Pelosi eliminate the political sweeteners in the health care reform legislation they’re writing? Yes. Should they eliminate transition periods that ease the transition to the new world they’re creating? Yes. And those transition period should be offered to unions and health plans.

ObamaCare for Real This Time

President Barack Obama has been frequently criticized over the past several months for failing to get personally and deeply engaged in the health care reform process. While he avoided the political blunder of the Clinton Administration during it’s reform effort (developing a complex bill and, in essence, telling Congress to take it or leave it) the Obama Administration’s approach had it’s own problems.

President Obama was never truly out of the reform process. His aides were always deeply involved in negotiations. He made personal phone calls to lawmakers in both parties, led meetings in the White House with key Congressional players. But there’s a difference between talking about health care reform and negotiating health care reform. And it appears President Obama was rarely engaged in detailed negotiations. The result: President Obama was blamed for ideas and provisions (think pork) included in the reform bills Congress passed which he may never have supported.

Back in October I wrote that President Obama needed to get personally engaged in reconciling the various committee bills into a House and Senate version of health care reform (the manager marks developed by Speaker Nancy Pelosi and Senate Majority Leader Harry Reid). My point was that the chances of reform improved “if Congress – and the public – have a clear understanding of the Administration’s legislative ambitions.” The post went on to say “President Obama wanted Congress to participate in the reform process. They have. Now it’s his turn.”

Again, I’m not saying President Obama and his Administration was disengaged. But they also were not defining the legislation either.

This is no longer the case. According to the Associated Press “House and Senate negotiators resumed marathon talks with Obama at the White House around 9 p.m. Thursday. The president left the Cabinet Room meeting shortly after 1 a.m. Friday and the session ended about 25 minutes later. The Washington Post reports on President Obama’s personal involvement in working out a critical compromise with labor leaders. (The compromise, according to the Post, exempt union members from a proposed surtax on expensive insurance plans until 2018, five years after the legislation would take effect. This was not the President’s first “marathon” negotiating session with legislative leaders. Nor was it the first time he negotiated with interest groups. But it’s clear President Obama is now deeply engaged in fashioning health care reform legislation.

While Presidents usually do not get personally involved in drafting legislation, health care reform is far from typical legislation. We’re talking about impacting one-sixth of the nation’s economy and a legislative effort decades in the making. The chances of President Obama simply accepting whatever health care reforms Congress came up with was nil. Earlier involvement might have saved lawmakers a lot of pain – what will be the political cost for House Democrats who voted for a government-run health plan running for re-election in moderate districts? – but there was no doubt he would be actively at the table before the bill was finalized.

Health care reform will move quickly now. The Associated Press, in the story cited above, says it’s only a matter of days, if not hours. President Obama would like to have the health care reform bill signed into law prior to his state of the union address later this month or early February. Since Democratic leaders have pledged to put the legislation online for at least 72 hours before a vote is taken, that doesn’t leave a lot of time.

But there’s another motivation driving the midnight meetings: fear that Republicans could actually win the special election in Massachusetts to fill the vacancy created by the passing of Senator Edward Kennedy. Democrats are so concerned about the potential for an upset, they featured President Obama in a video email to Democratic voters in the state warning that the fate of health care reform depends on the outcome of the election. If the Republican long-shot effort succeeds, Democrats will need to pass health care reform before the Senator-elect can be sworn in. While they can challenge the results of a close race for awhile (and thereby delay certification of the election) the longer they resort to that tactic the greater the political danger.

Regardless of the motivation, President Obama’s personal engagement in negotiating the health care reform bill that Congress passes means he will own the result. The legislation will not reflect everything President Obama wants (or doesn’t want) concerning health care reform, but it will embody what the Administration could accomplish concerning health care reform.

The term “ObamaCare” has been tossed around loosely. Virtually every version of reform legislation considered by Congress was described as such. This was inaccurate. Those bill’s belonged to Congress, not President Obama.

The health care bill that will emerge in the next few days, the bill likely to arrive on his desk in the next couple of weeks, that is the legislation that will be a part of President Obama’s, that will be “ObamaCare” – for better or worse.

Health Care Reform Not Inevitable, But Still Likely

Passing major health care reform was never going to be easy. The issues are hard. Partisanship in Washington has rarely been greater. The status quo may be a road to disaster, but it’s a familiar road. Moving America’s health care system in a new direction is a Herculean task. Yet for the past year or more, most observers considered passage of some legislation a better than 50/50 proposition. Now, with negotiations over reconciling differences between the Senate and House versions of reform bills comes down to the wire, what are the chances of Congress passing a bill President Barack Obama will sign into law?

According to the Associated Press, House Republican leader John Boehner is claiming that Speaker Nancy Pelosi may not be able to push health care reform through their chamber. He maintains that “dozens” of Democrats who supported the bill passed by the House in November could turn against the final bill, especially if the there are significant changes to provisions dealing with abortion, aid to the states to pay for Medicaid expansion and Medicare cuts.

The outcome of the Massachusetts Senate race to replace the late Senator Edward Kennedy could also result in some Democrats reconsidering their willingness to go along with this version of reform. Not long ago the conventional wisdom was that winning the Democratic primary in Massachusetts was tantamount to election. However, recent polls show the the Democratic nominee, the state’s Attorney General, Martha Coakley, in a dead heat against Republican State Senator Scott Brown within two percentage points of the Democrat. Special elections are always difficult to predict because turnout is usually so low. Were Senator Brown to win the election on January 19th it would not only deny the Senate Democratic caucus the 60 votes they need to push health care reform through the upper house, but it would make moderate Democrats in Congress recalculate the political price of supporting the current version of reform.

Senator Brown doesn’t need to win the seat to scare Democrats. The race has been described by the media as a proxy on health care reform. Republicans are pointing to the Massachusetts Senate race  to bolster their argument that they can retake Congress in the upcoming elections. While that might be wishful thinking, it certainly would make obvious the political reality that Democratic majorities in Congress will be smaller next year than they are this year.

All of this is some evidence that health care reform could be in trouble. My opinion: passage of health care reform is more likely now than it was in December. Here’s why:

First, Senate Majority Leader Harry Reid, Speaker Pelosi and President Obama are closer than ever to an agreement. "’Prospects of reaching agreement between the Senate and the House are better than they were 24 hours ago. We’re getting close,’ the Associated Press reports House Majority Leader Steny Hoyer saying on Tuesday. Finding a compromise that will earn 218 votes in the House and 60 in the Senate is not inevitable, but it’s doable. And with President Obama more personally involved in the health care reform negotiations now than he has been in the past year, the chances of finding that combination of trade-offs is closer than ever.

Second, by emphasizing what’s at stake in the Massachusetts Senate race, Republicans have mobilized Democrat voters in the state. That’s the point made by E.J. Dionne in a Washington Post blog. Instead of staying home next Tuesday, counting on the inevitability of Attorney General Coakley’s pre-ordained victory, Massachusetts Democrats know they have to get to the polls. And they are likely to do so.

There are other tea leaves increasing the likelihood of a health care reform bill becoming law in the next few weeks. Senator Reid made some fairly obvious deals to get the 60 votes he needed to move health care reform out of the Senate. The most egregious was promising to pay Nebraska’s increased Medicaid costs in perpetuity at the request of Senator Ben Nelson. Republicans jumped all over that deal. Even the Republican Governor of Nebraska attacked the deal.

Well, fine. Senator Nelson can now head back to Nebraska and show he fought hard for the state, but Governor Dave Heineman killed the deal. (At the moment, Senator Nelson is calling for all states to get the same Medicaid relief as he negotiated for his own state). Yet Senator Nelson is still likely to support whatever health care reform bill emerges from the current negotiations, unless the abortion language is significantly weakened. What else can he do, proclaim that unless Nebraska gets a windfall he’ll torpedo reform for the rest of the country? So what’s likely to happen is that the GOP will likely to embarrass Democrats into eliminating the most glaringly unjustified deals, but not strip away any votes as a result. Meaning the bill will be “better” (for containing less pork), but will still keep the votes recruited by the eliminated pork.

Another reason health care reform is likely to pass is that Democrats can’t afford to have it defeated. The Democratic Congress has actually accomplished a significant amount in the past year (you may not agree with what they’ve done, but they’ve done a lot). That’s the argument made by Newsweek columnist Jonathan Alter. But in the public’s mind, Congress will be judged by what they do on health care reform. Their constituents, both at home and in the political arena, are demanding results. If they pass something now they will have 10 months to convince voters their fix is better than the status quo. If they fail, they will demonstrate they’re a do-nothing Congress. In these circumstances, something is better than nothing.

Painting a scenario in which health care reform goes down in flames is easy. And I’m not saying health care reform is inevitable. But this Congress and this President have gotten closer to passing health care reform than any lawmakers since the push for comprehensive reform began in the 1940s. President Obama and Democrats in Congress have bet their political credibility on producing a bill. They’re close to the finish line. Odds are, they cross it.

Of course, signing health care reform legislation into law is only the beginning. But that’s a topic for a future post.

Bypassing Health Care Reform Conference Committee Comes at a Cost

With the political decision made to skip a conference committee and use another, faster Congressional procedure, health care reform is moving along quickly. Congressional leaders, their staffs, and members of the Obama Administration have spent hours considering the differences between the versions of reform passed by the House and the Senate. According to Reuters, House Speaker Nancy Pelosi is claiming “Democrats were close to agreement … but still faced challenges in blending the two approaches.”

The streamlined approach being taken by Legislative leaders bypasses the more common approach to blending differing House and Senate bills: the conference committee. Instead of convening a group of Democrats and Republicans to hash out a single bill, the so-called “ping-pong” approach leaves negotiating a compromise in the hands of Legislative leaders (and/or their designees). While far less

The problem Democratic leaders have with the conference committee approach is the many opportunities it provides Republicans to score political points and delay the process – a political strategy GOP leaders have pledged to pursue. By using a procedure known as “messages between the Houses,” however, Democratic leaders can thwart the Republican strategy of delay. However, the procedural victory trades one set of political headaches for another. Republicans will claim that Democrats are ramming through partisan reforms without listening to the people (with “people” being defined as those who agree with the GOP and/or disagree with the Democrats). In that polls show a majority of Americans oppose a description of the Democratic health care reforms, that’s a lot of people.

Blogger Keith Hennessey does a great job of explaining the messages between the Houses procedure and the mechanics are pretty straightforward. Put simply: the Senate bill will be brought up on the floor of the House, considers and passes amendments on a majority vote. (The assumption being that Speaker Pelosi will only bring to the floor a version of the health care reform legislation she knows can pass). The legislation returns to the Senate where the amended version will be voted upon. Assuming Senate Majority Leader Harry Reid can keep his 60 votes together to end the expected Republican filibuster, the Senate then votes on the bill. With both chambers having passed identical bills, the legislation is sent to President Barack Obama for his signature.

In a conference committee, Republicans are in the room. So are other lawmakers the legislative leaders believe are necessary to work through controversial issues or who can help deliver the needed votes. The reality is that Republicans have already stated their position in absolute terms: they oppose the bill and will do everything in their power to defeat it. This is not the kind of negotiating posture that gets one invited to too many parties. So in one sense the Democrats are simply acknowledging reality: Republicans don’t want to talk about compromises, they want to kill the bill. Instead of having GOP lawmakers watch Democrats talk about reform, the Democrats will simply talk among themselves and those they feel need to be included to build the required majorities.

Bypassing Republicans undermines the pledges then Senator Obama made during the presidential campaign to make laws in a transparent, bi-partisan manner. Closed doors, by definition, are not transparent. And the resulting legislation is unlikely to garner a single Republican vote. Both of these outcomes are negative for Democrats. However, they seem to have made the political calculation that: 1) the harm from failing to pass health care reform is far greater; and 2) few will remember, and fewer will care about, the process once health care reform is signed into law. They may be right.

The reality is the legislation emerging from the ping pong procedure is highly likely to be the same as what would have emerged from the conference committee process. The debate over how the legislation is written will be noisy, but in the long run it is of secondary importance. What really matters is what health care reform does.

For Better or Worse, Senate Makes Health Care Reform History

What ultimately prevailed was the realization it was now or never. The Senate passed health care reform legislation – a package that few considered ideal, but that Democrats determined was better than the status quo. This was a historical vote – the first time both the House and Senate have passed comprehensive, near-universal health care reform bill. Nonetheless,  Senator Majority Leader Harry Reid summed up the meaning of the event saying “This morning isn’t the end of the process, it’s merely the beginning. We’ll continue to build on this success to improve our health system even more. But the process cannot begin unless we start today … there may not be a next time.”

The legislation has come a long way since earlier in the year when the Senate Health, Education, Labor and Pensions Committee approved far more liberal legislation. As anticipated, moderate Democrats forced a host of changes to the health care reform bill, much to the chagrin of liberals. Now a conference committee will be tasked with merging the Senate version of reform with legislation passed by the House in November.

While the House and Senate bills have much in commons, there are some controversial differences. (For those seeking a more thorough comparison of the two bills I recommend the Kaiser Family Foundation Side-by-Side Comparison).  Given that these differences touch on issues such as taxes, abortion and a government-run health plan, there will be plenty of fodder the cable news networks can use to prevent their commercials from jamming together.

Whatever health care reform bill ultimately emerges from the conference committee it will a product of the Democratic party. Republicans were unanimous in their opposition to HR 3590, the Patient Protection and Affordable Care Act. That is unlikely to change moving forward. This reflects both ideology and a political calculation. While Democrats reached the high water mark of their majority in the 2008 election (meaning they were going to lose seats in 2010 regardless of what happened with health care reform), whether the GOP’s political calculation pays off in the long run will be determined by how independent, moderate voters perceive the health care reform package not in 2010, but in 2012 and beyond. For that verdict we’ll have to wait. In the meantime, for better or for worse, history was made this morning in the United States Senate.

Countdown to the Real Work on Health Care Reform

With a commitment of 60 votes, Senate Majority Leader Harry Reid unveiled the manager’s mark of the Patient Protection and Affordable Care Act or, as it is better known, the Senate’s health care reform bill. After day long negotiations over abortion and other issues, Senator Ben Nelson agreed to vote in favor of bringing the bill to the Senate floor.

The manager’s mark of HR 3590 identifies the changes made to the  original Senate health care reform legislation (in other words, if you want to read the bill you have to read both the original and the most recent document). As has been widely reported, there are some provisions of the legislation specifically aimed at securing the support of Senator Ben Nelson of Nebraska. For example, the health care reform bill will increase state spending on Medicaid. The Senate bill reimburses states for this extra cost until 2017 at which time the federal matching funds are phased out. Except for Nebraska where the federal government would pay for Medicaid expansion forever. (Or, to be realistic, until Congress takes the subsidy away).

There’s a host of other provisions of interest. A government-run health plan is out of the bill, much to the frustration and dismay of liberals. Carriers would be required to maintain a medical loss ratio of 80 percent for small group and individual products while meeting a minimum 85 percent MLR for their large group block of business. Rating differences based on age would be limited to a 3-to-1 ratio. However, states could increase the minimum medical loss ratios or narrow the age-based rating difference. There’s new language concerning abortions, one of the inducements to get Senator Nelson’s vote, although this language is apparently not strong enough for anti-abortion Democrats in the House.

The Office of Personnel Management would create a copy of the Federal Employee Health Benefit Plan featuring private carriers. (It appears both for-profit and non-profit plans could participate in this new program, but I may be reading it wrong and only non-profits are permitted). There’s a host of preventive/wellness programs, pilot projects and other provisions aimed at addressing costs. And it would allow carriers meeting certain federal standards to offer coverage in other states through state exchanges.

(I received an email from a conservative broker blasting this provision as removing the ability for “the Citizens of a State having a say on State Laws and Mandates!” Which is pretty funny considering it’s at the center of Republican reform proposals, was a part of Senator John McCain’s health care reform platform when he ran for president, and is not much different than the Associated Health Plans advocated by conservatives for over a decade. Sometimes it seems to be less about the underlying public policy and more about who makes a proposal that drives the reaction.)

The bottom line is that Senator Reid did what he needed to do to cobble together 60 votes in the Senate. What, in the words of former Majority Leader Tom Daschle, is the equivalent of shoveling 60 frogs into a wheelbarrow.)  As a result, the Senate will pass health care reform.

And that’s when the fun begins. There are substantial differences between the House and Senate versions of health care reform. Perhaps Speaker Nancy Pelosi, recognizing the greater challenge Senator Reid has in rounding up votes, will instruct House negotiators to quickly adopt the Senate version of health care reform. This could result in a bill passing Congress in very early January.

More likely, however, House and Senate negotiators will struggle to refine the legislation. The result will be closer to the Senate version than what passed the House, but it would not be the same HR 3590 that will pass the Senate. This process will take significantly longer, perhaps most of January. While unlikely, the conference committee has the power to start with a blank piece of paper and write a brand new bill.

My guess is Speaker Pelosi will focus on a few key modifications to the Senate bill. So long as it doesn’t cause one of Senator Reid’s frogs to jump out of the wheelbarrow these will be accepted. The result will a relatively short conference committee leading to a final vote on health care reform by mid-January.

What’s significant is that the playoff season is almost over. The World Series (that would be the conference committee) is about to begin. Which means the real work of writing health care reform legislation is about to begin.

Added December 21, 2009: Memorandum from the Congressional Budget Office to Senator Harry Reid summarizing their analysis of the Patient Protection and Affordable Care Act and to a blog posting by CBO Director  Douglas Elmendorf concerning a correction to the calculation of federal reductions beyond 2019.

Devil Dwells in the Details of Health Care Reform Compromise

A critical health care reform compromise seems to have emerged from negotiations between five liberal and five moderate Democratic Senators (the so-called “Gang of 10”). They are putting forward a compromise that eliminates (or at least postpones) the creation of a government-run health plan while allowing Americans 55 through 64 years of age to purchase Medicare and tasking the Office of Personnel management to administer a program offering coverage through non-profit, private health plans. Of course, as with anything as complicated as health care reform, a solution or compromise on one issue creates new ones elsewhere – think of trying to flatten a partially inflated balloon. Push down on one part and the air pops up in another.

As I noted the other day, expanding Medicare is an idea that appeals to both liberals and conservative Democrats. For example, former Governor Howard Dean, a leading and vocal advocate for a government-run health plan called the compromise “a positive step forward” on the CBS’ “The Early Show.” Meanwhile, Senator Joe Lieberman, who had threatened to support a filibuster of any health care reform plan containing a public option signaled the compromise might be acceptable. According to MSNBC Senator Lieberman said he was “’open- minded’ about the deal” and indicated he was encouraged by what he’s heard so far about the compromise. In other words, he’s pretty much on board.

Senator Reid will be submitting the Gang of 10’s compromise to the Congressional Budget Office where its financial impact will be determined. In the interim, it’s worthwhile asking some questions about the impact of elements of the health care reform compromise as it is in the details that the devil likes to linger.

For example, how will allowing 55 through 64 years old enroll in Medicare impact private health insurance premiums?  It is widely accepted that Medicare often pays doctors, hospitals and other providers less than the actual cost of the care they provide. For example, “payment levels for hospital services under Medicare are equal to only about 71 percent of what is paid by private health plans for the same service,” according to a study by the Lewin Group. Medical care providers make up for the Medicare reimbursement shortfall by charging more to their insured patients. This cost shifting is reflected in higher health insurance premiums.

To the extent the 55-through-64 year olds signing up for Medicare previously were insured by private carriers the amount of dollars being shifted to private insurance will increase and the number of privately insured consumers absorbing this cost will decrease. The result, upward pressure on health insurance premiums.

However, to the extent that these new enrollees were previously uninsured it will reduce the cost of private coverage. Right now virtually all the costs incurred by the uninsured are shifted to private carriers. If Medicare pays for 71 percent of these expenses that’s 71 percent less in losses providers need to shift to their insured patients. How these two consequences balance out is as yet unknown – and may not be knowable until after the fact. But lawmakers should be aware of these consequences.

There’s another detail of the compromise potentially offering affordable housing to the devil.  Alison, a regular reader of this blog, pointed out a provision that would require private carriers to spend at least 90 percent of premiums on medical care. Forcing carriers to spend a high percentage of premiums on medical costs is one of those proposals that: 1) sounds great; and 2) emerges with the regularity of ground hogs in Pennsylvania in February. And it’s a seriously flawed proposal.

Consider: requiring carriers to maintain a specified medical loss ratio (as the percentage of premium spent on claims is called) could reduce the availability of low cost plans. It costs just as much to process claims for a plan costing $300 per month as it does for one with a monthly cost of $100. If these fixed costs amount to $15, they represent 15 percent of the lower cost plan’s premium, but only 5 percent of the premiums for the more expensive plan. Need to get your medical loss ratio (as the percentage of premium spent on claims is called) to 10 percent? Raise your premiums. It’s counter-intuitive, but do the math and you’ll see the danger.

There are several other potential dangers from requiring a high and specific medical loss ratio. Economic swings or flu outbreaks (or the lack of expected flue outbreaks) can greatly alter the percentage spent on claims. So can government-imposed mandates to cover certain conditions. Private carriers pay taxes and need lawyers to deal with government regulation. These costs are beyond their control, but they tend not to increase over time (taxes and regulations have a nasty habit of piling up), meaning these uncontrollable costs are likely to absorb funds needed for truly administrative costs – like answering the phone. Answering the phone, of course, speaks to customer service, a likely victim of mandated loss ratios.

And setting the medical loss ratio at 90 percent would certainly eliminate broker commissions. Brokers would either need to charge fees directly to clients (if that’s permitted) or go away, leaving consumers bereft of independent advocates and counselors.

The good news is that just because a provision is in the compromise doesn’t mean it will be part of the final legislation. Or that it can’t be improved upon before reaching President Obama’s desk. When California Governor Arnold Schwarzenegger proposed an 85 percent medical loss ratio in his 1997 health care reform plan, lawmakers recognized the potential pitfalls. The provision was amended to make clear, for example, that taxes and disease management programs would be part of the claims side of the ledger. Eventually a workable compromise was was reached. (The bill did not pass the Legislature, however).

Of course, fixing California’s version of a mandated medical loss ratio didn’t happen of its own accord. Many interested parties, including the California Association of Health Underwriters, expended considerable effort to educate lawmakers about the implications of this provision. An effort of similar magnitude will be required to make sure that the devil is unable to take up residence in the details of the health care reform compromise shaping up in Washington.

Senate Health Care Reform Still Alive, But Likely to Change

The Senate has just spent most of today (Saturday) engaging in a debate on whether to allow a debate on comprehensive health care reform. Later this evening 58 Democrats and 2 Independents will vote to allow Majority Leader Harry Reid’s health care reform bill come to floor for debate and consideration of amendments. 40 Republican Senators will vote unanimously against allowing this to happen. Senator Reid’s Patient Protection and Affordable Care Act is still alive. It is unlikely to survive in its current form for long, however.

Don’t get me wrong. Tonight’s vote is significant, very significant.  The vote is a test of President Barack Obama’s and Senator Reid’s ability to line up enough votes to keep the bill alive.  The debate leading up to the vote has been an opportunity for Republican Senators to present their opposition to HR 3590. (Yes, the Senate has taken a bill passed by the House and moved to the Senate, gutted that language and substituted their health care reform package. Consequently, the Senate legislation has a House bill number.) And the vote to allow debate has served as an action forcing event, sort of, for Democratic moderates.

Those moderates could have sided with the Republicans killing the bill before it could be brought to the floor. Instead, they joined with their liberal colleagues and kept health care reform alive. While there are 18 moderate Democratic Senators (including Senator Joe Lieberman, who is an Independent), it eventually came down to three:  Senators Mary Landrieu, Blanche Lincoln and Ben Nelson. All three made clear they would seek amendments to the bill before voting for it. And all three are among those moderates making it clear further changes to the Patient Protection and Affordable Care Act is necessary before they’ll commit to voting for it.

We’ll learn more about the changes moderates will demand over the several weeks before a final vote on health care reform is held in the Senate.  Democratic leaders are hoping to hold that vote before the end of the year. The legislation would then move on to a conference committee that will attempt to reconcile it with legislation the House passed earlier this month.  More importantly, that conference committee, made up of an equal number of Senators and House members, will seek to fashion legislation they hope will earn the support of a majority of House members and 60% of Senators. As I’ve noted before, passage of legislation by the Senate is merely the final playoff game. The World Series — the conference committee — is yet to come.

Uniting the Democrats to allow debate on health care reform is a victory for the Obama Administration and for Senator Reid personally. That it took this much effort, however, demonstrates the challenges they yet face. Republicans appear to be uniting in opposition to the legislation. Even Senator Olympia Snowe, who voted for a health care reform bill in the Senate Finance Committee, is expected to vote against bringing HR 3590 to the floor.

I’ve written before about the power moderates have to determine if health care reform legislation will pass Congress and what the final bill will contain.  Now we’ll see that power put forward. Some of what they’ll ask for will be parochial. (That there’s a provision in Senator Reid’s bill that would send additional Medicaid money to Senator Landrieu’s state of Louisiana is neither a coincidence or accidental). But most of their demands wil concern public policy issues. Moderate Democrats tend to be more fiscally cautious than their more liberal colleagues, giving them pause to legislation that greatly expands governmental powers,  spends nearly a trillion dollars over the next decade and taxes corporations and individuals to pay for it. These are the issues on which they will focus.

Republicans will have their own pet issues, but those are unlikely to influence the outcome. Having already declared their unmoving opposition to any health care reform Democrats could claim keeps their campaign promises, the GOP has removed themselves from negotiations. (A couple of the Republicans, most notably Senator Snowe and her colleague from Maine, Susan Collins, might vote what moderate Democrats fashion. But whether they’ll be able to insert provisions without committing to voting for the bill if their amendments are accepted is unlikely. 

We don’t know yet what changes to HR 3950 moderate Democrats will demand, but the possibilities are extensive. They could eliminate a public option — or at least postpone its implementation until after other reforms have had a chance to take effect. They could  demand additional cost containment provisions. They could strengthen — or weaken — the requirement that all consumers obtain coverage. Certainly they will modify what taxes and fees are imposed to pay for health care reform.

What’s important to remember is that moderate Senators will have two shots at the bill. They’ll extract as much as they can during the current Senate debate. Then at least two or three of them are likely to agree to vote for the bill “in order to keep the process moving forward.” However, they’ll also make clear they want significant changes made to the legislation by the conference committee before they’ll commit to a vote that would place the legislation on the president’s desk. Liberals will insist they have compromised all they can, but in reality, the moderates (and the liberals) know that the progressives are likely to accept any legislation that can be called “health care reform” with a straight face. And as politicians, they have great skill in passing the straight face test.

Yes, Democrats have won the debate on whether to debate health care reform. What legislation eventually emerges from the Senate, if any, is still uncertain.

Health Care Reform’s Likely Outcome: Worse Than Promised; Not as Bad as Feared

As the Senate begins their effort to pass health care reform anxiety levels are, quite naturally and rightly rising. Health care is highly personal. For those of us working within the current framework, having politicians mess with our livelihood is a stressful to say the least. That these politicians (both Democrats and Republicans) seem to care less about the substance of the reform and more about how they appeal to their electoral base does nothing to reduce that stress.

Of course, what we’re reacting to at this stage is not the final reform legislation. The House and Senate proposals foreshadow what Congress will eventually pass (if it passes anything). The actual legislation is still to come. Put another way, we know the basic outline, but the devil resides in a suburb of the details. As I pointed out in my previous post, however, the real drafting of health care reform legislation hasn’t started yet. With the Senate taking up the issue we’re seeing the end of the legislative phase in which the parameters are defined. It’s in the upcoming conference committee that will define health care reform 2009-style (or, more likely, early 2010).

Concerning that prior post, Ron Masters, a friend and frequent reader/commenter of this blog, took me to task for writing too kindly about the current House and Senate versions of health care reform. “I’m surprised that you seem to feel that either of these bills are any good,” he write. This after a litany of shortcomings concerning the current administration, the ability of government to deliver much of anything, and the foolishness of imposing taxes and creating new entitlements in the midst of the current economic mess. And he makes some fair points.

He’s not alone. I’ve heard from a lot of brokers, readers and others who are convinced the coming health care reform will be a disaster leading to ruin and damnation for the country. I disagree. Here’s why.

As any reader of this blog knows, I don’t buy into the premises of those at the extreme. Not all government programs are good, but some are. Not all taxes are bad, but some are. Change is important, but getting change right is more important. Defending the status quo just because it is the status quo is indefensible. In other words, I’m comfortable with the gray shades of reality and uncomfortable with the black-and-whites of true believers.

I’m also comfortable with the government doing stupid things now and then. No party and no administration has a monopoly on such foolishness. (Nor has any party or administration failed to achieve some truly noble accomplishments). What’s more, no administration lasts forever. Whatever health care reform passes in the next few months will be administered by a parade of future administrations and modified by Congresses yet to-be-elected. Many people have a tendency to believe whatever Congress passes and how the current administration implements it will remain unchanged forever. It won’t. Medicare was vilified as socialistic and a fast slide toward America’s ruin when it was being created. Things didn’t work out that way. The program has survived for nearly 45 years under the administrations of Presidents Johnson, Nixon, Ford, Carter, Reagan, Bush-the-first, Clinton and Bush-the-second. Yes, it is a far from perfect program and faces significant challenges. Still, it works, it’s evolved and it will continue to do so. And the country has survived.

Another reason I’m not outright opposed to health care reform is because I believe expanding access to health insurance is critically important. It is well understood that everyone in America has access to health care. But it is also well documented that people with health insurance live healthier, longer lives. A recent study by researchers at Harvard Medical School confirmed an earlier study from the 1980’s that “uninsurance is associated with mortality.” That’s an awkward way of stating a well-accepted truism: being uninsured can be hazardous to your health.

Expanding coverage, however, is expensive. The more people who have coverage the more people who will incur medical expenses. That is after all, the whole idea and a desirable outcome. It’s also an expensive outcome. In my mind, it’s a price worth paying. Especially considering the potential return on this investment.

Those with insurance are already making heavy payments to pay for care received by the uninsured according to a study by Families USA. In 2008, the study reports, nearly $43 billion of health care the uninsured received from hospitals, doctors and other providers went unpaid. This uncompensated care results in higher premiums for those with coverage. In 2008 this hidden tax increased premiums $368 for single coverage and $1,017 for family coverage. Given the recession, this amount has no doubt gone up. Increasing the number of Americans with insurance should reduce this burden.

Early identification of potential health conditions before they blossom into serious diseases can generate tremendous economic benefits, although these savings are rarely considered in a cost-benefit analysis. Every dollar invested in preventing and treating heart attacks generates $7 in increased productivity, according to a study by United BioSource Corporation.

In other words, it’s not just the reform bills being considered in Washington that are expensive. So is the status quo. Health care costs are crippling businesses, bankrupting families and state governments, enabling fraud and abuse, increasing taxes, and failing to deliver on many of its promises. Change is inevitable – and it’s coming.

Too many in Washington believe (or at least claim to believe) that reforming the health insurance industry will reduce the cost of coverage. Far from it. The bills being considered in Congress will cause premiums to increase. Until Congress tackles the underlying causes of skyrocketing medical costs, health insurance coverage will become increasingly unaffordable. The House and Senate health care reform bills do have more cost containment provisions than is generally acknowledged. Could they be stronger and more ambitious? Yes. Are obvious cost containment opportunities missing (e.g., malpractice reform?) Yes. But they’re there. And future efforts to restrain medical costs will benefit from the seeds planted in the current reform debate.

Which brings us, I suppose, to the key question: are the House and Senate health care reform bills good? No, not really. They’re too heavy handed, using an axe when a scalpel is required. As noted, their cost containment provisions are weaker than the American people deserve. The bills reflect a misunderstanding of how health insurance works and about what drives premiums. The costs for the program are no doubt understated (few initiatives of this magnitude, whether attempted by government or business, come in under budget).

If either the House or Senate bills were the final legislation I’d be more concerned than I am now (and, for the record, I am concerned). But neither HR 3962 nor Senate Majority Leader Harry Reid’s proposal are going to be enacted, not as currently written. I believe the conference committee will need to make significant changes in order to get the votes needed for passage – if that’s even possible.

There are plenty of substantive problems with these health care reform proposals. To make matters worse, their backers and opponents are knowingly overpromising or attempting to frighten the public. Democrats claim their reforms will reduce overall health care costs, lower premiums and reduce the deficit. Wrong on all counts. Republicans claim it will destroy American businesses, annihilate Medicare, create death panels and bankrupt the country. Just as wrong.

We’ve seen this script before concerning Medicare, Iraq, and a host of other issues. Partisans on one side over promise, their opponents dredge up scenarios of doom. That both sides are equally guilty makes it no more acceptable or welcome. But it is what it is.

The main point of my previous post, and of this one, is that if reform passes, it will not be as bad as feared nor as good as promised. It will be refined sooner (by regulation) and later (by future legislation). The fight for a better health care system will continue. Only the status quo will have changed. The need to improve on it will remain.

House and Senate Health Care Reform Bills Mark the Beginning of the Endgame

Senate Majority Leader Harry Reid is unveiling his health care reform plan after it received passing grades from the Congressional Budget Office. Whether he has the 60 votes he needs to bring the bill to the floor is still an open question, but odds are he’ll have the votes when he needs it, perhaps by this weekend.

Then the fun begins. Senators will debate the bill, offer amendments, vote on those changes, and finally craft a bill. If Senator Reid and his allies play their cards well, they’ll have the 60 votes needed to allow a vote on the legislation. (Yes, before there’s a vote there’s a vote on whether to have a vote – you’ve gotta love democracy). Only then will the Senate make history and pass health care reform.

Of course, what the Senate passes and what becomes law are two different things. Just as passage by the House of Representatives of HR 3962 was only a prelude to what will be the act of drafting the “real” health care reform bill.

Many have tried, but only President Barack Obama, Speaker Nancy Pelosi and Senate Majority Leader Harry Reid have gotten this far with health care reform. What they’ve accomplished is historic and Herculean. Whether you support or oppose their bills, respect for their accomplishment is appropriate. But getting this far is not the end. Well, it’s the end of the beginning. And it brings us closer to the beginning of the endgame.

The legislative process involves several stages. In the beginning there’s a lot of sincere questions being asked as lawmakers seek information, float trial balloons, and generally get a lay of the political landscape and the issues. During this phase there are a lot of options on the tables, including the most extreme positions (e.g., do nothing or enact a single payer system).

This phase was also when it became clear that, for the most part, Republicans were as interested in defeating “Obamacare” as they were in reforming the health care system. By publicly declaring so early in the process they would oppose any legislation containing provisions dear to the Democrats, the GOP effectively removed themselves from the deliberations. Why, after all, would Democrats negotiate with a party that had made clear they would oppose anything other than their own proposals?

Of course, Republicans could ask the same question of the Democrats (and do). The difference is that Democrats are in the majority in Congress. So if the two parties go their separate ways, the Democrats could still, under the right circumstances, pass a bill. In other words, it’s their bat and ball, so if the Republicans stalk off the field, the game continues.

In the second legislative phase the House and Senate committees with jurisdiction on health care weighed in. General concepts became legislative language. Lawmaker’s inclinations became public votes. Options feel by the wayside. (This is the phase in which the possibility of enacting a single payer system was formally laid to rest).

What the committees produced generated a lot of concern, anger and raucous  objections. Apparently some folks thought someone in Washington really thought these bills would become law. Nope. What the committees were producing were negotiating positions, not laws. Everyone had their eye on the main battle to come in the fourth phase. They were setting up their arguments, gathering their support for the real showdown.

Before the showdown, however, we have to get through the current phase, phase three. In this portion of our program, ideology and public policy take a back seat to a very practical concern: what needs to be in the bill – and what needs to stay out of the legislation – in order to get enough votes to pass it.

Senate Majority Leader Tom Daschle describes this process as shoveling frogs into a wheelbarrow. Speaker Nancy Pelosi’s job: craft a bill that could get 218 members of the House into her wheelbarrow. She succeeded by cobbling together legislation that is an abomination to many of the House Members who voted for it.

Senator Reid’s task: to get 60 Senators into his wheelbarrow. To do that he’s pared back provisions (such as on a government-run plan) in ways that only three weeks ago liberals would have labeled a betrayal (and some still do. Of course, those progressives complaining about the compromises Senator Reid has made tend not be in the Senate. Because liberal Senators understand the process. If they need to accept a weakened public insurance program to help Senator Reid keep 60 frogs in the wheelbarrow, so be it.

Why do liberal House members vote for a bill they consider an abomination and progressive Senators accept compromises that were absolutely unacceptable a few weeks ago? Because this is the phase where it’s about getting something passed, not public policy.

If the Senate passes Senator Reid’s health care reform legislation, the fourth phase begins. A conference committee will be created made up of members of the House and Senate. Their task: to meld together the House and Senate proposals into a single bill for which Speaker Pelosi and Senator Reid can shovel enough frogs into their respective wheelbarrows to pass.

Think about that challenge. A single bill that can get majorities in both chambers. That won’t be easy. The process won’t be pretty. Decisions will be made based on factors outside of health care reform.

Take Senator Joe Lieberman. He’s on record declaring his opposition to a government-run health plan is a matter of conscience. His history makes clear he loves being Chair of the Senate Homeland Security and Governmental Affairs Committee. Keeping the chairmanship he loves may require him to bend his conscience a bit. Yes, who chairs a particular committee has nothing to do with the substance of health care reform. But it has everything to do with the politics of health care reform.

(By the way, I’m not saying Senator Lieberman has been threatened with losing his chairmanship unless he agrees to let health care reform come to a vote in the Senate. But if it turns out he was, no one should be surprised. Hardball is a sport played by both parties. And  the higher the stakes, the harder the ball.)

Given the nature of the issue and the politics, the conference committee will forgo public policy debates and focus on fashioning a compromise that majorities of the frogs – I mean, lawmakers – in each chamber can support. This means what the House passed and what the Senate may pass are now the extremes in the health care reform debate. Compromises, after all, tend to wind up in the middle of two poles. The Congressional leaders making up the conference committee will try to establish a middle ground on which their needed majorities can stand. Their building blocks will be what it takes to get the bill passed. That the result may be messy, perhaps even unworkable is of less concern. There will be time enough to fix those problems.

Getting reform right was for an earlier phase in the process. And by eliminating some of the more extreme ideas, by establishing the boundaries of reform, those phases assured that public policy considerations would have an impact on the final legislation. But that was then. In this final phase of the legislative process it’s is about getting reform. Period.

In short, the health care reform process to date has been fascinating and important, but it’s main purpose has been to define negotiating positions. We’ll see the end of the beginning of health care reform if and when the Senate enacts its version of reform.

Only when the conference committee convenes, however, do we move into the beginning of the endgame, the point where the drafting process of health care reform begins in earnest.