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.

New Elements Added to Health Care Reform Debate

I haven’t been writing much of late. The Senate debate has simply been too predictable to merit much comment. The partisan attacks could have been scripted months ago. The votes unsurprising, and the difficulty Democratic Leaders face in fashioning a 60-vote majority is to be expected.

Consider: Republicans charge the Democrats will destroy Medicare. The fact that not long ago it was the GOP wanting to eliminate waste and abuse from the program seems to be forgotten. Democrats, meanwhile, seem incapable of understanding the relationship between medical costs and insurance costs. Listening to their claims that cracking down on evil insurance companies will lower health care spending is disappointing. It would be nice if now and then a Senator would acknowledge that medical costs drives up premiums and not vice versa – a wish not likely to be realized any time soon.  I heard on the radio last week (sorry, not sure what station) a lawmaker complaining that health insurance companies use actuaries, an unfair advantage they wield to the detriment of consumers.

But in the past few days some ideas seem to be gaining traction that could mix things up considerably. One proposal is to allow 55 through 64 year olds to buy into Medicare. The Washington Post’s Ezra Klein seems to be the first blogger to report the Medicare buy-in proposal is “attracting the most interest” as an alternative to creating a new government-run health plan to compete with private carriers. The under 65 cohort would not get basic Medicare coverage for free nor does it look like this approach includes subsidies not already on the table. It simply is a way to create access for some Americans to a public health plan without creating a new public health plan. And as with the public option, participation by 55 year olds would be voluntary.

That the idea of a Medicare buy-in option is gaining traction would seem to indicate that chances for a “true public option” are diminishing. Even liberal bloggers like AntonRobb at Benzinga.com are reaching this conclusion. “… proponents of the public option may be compelled to get behind this plan as an alternative. The severeley (sic) comprised … versions of the public option that have any chance of passing … would probably be worthless and probably do more damage politically to the Dems than good,” he writes.

The other interesting idea to emerge is to, as CBS News describes it, “establish national health insurance options, which would be administered by the Office of Personnel Management (OPM) but operated by private, nonprofit insurers ….” Since the OPM already administers the Federal Employees Health Benefit Program (FEHBP), which insures members of Congress and their staffs among others, this alternative to a public option is being viewed as the equivalent of opening up the FEHBP to non-government workers. (Incidentally, although the CBS reports implies the plans would be administered only by nonprofit carriers, this is far from certain. None of the other news reports mentioned this restriction – and there are for-profit carriers participating in the FEHBP.)

The “what’s good for Congress is good for the public” approach seems to appeal to moderate and conservative Democrats who have been objecting to the creation of a new government-run health plan run by the Department of Health and Human Services. As CBS notes, Senators like Ben Nelson describes this proposal as an alternative to, not a version of, a public option.

The import of these proposals go beyond the fact that new ideas are on the table. It also shows the influence likely to be wielded by the “gang of 10” Senators formed over the weekend. These 10 Senators, five liberals and five moderates, are charged with hammering out a compromise on the public option, according to MSNBC. While focused on the public option, it is likely this group of lawmakers will be called on to bridge the chasm that separates liberal Democratic Senators from their moderate and conservative colleagues. Remember, liberals have long claimed that health care reform without a public option is no reform at all. So if the gang of 10 manages to find a way to remove a government-run health plan from the legislation while still keeping liberals on board, they will position themselves to fashion compromises on other divisive issues as well.

(For those interested, the gang of 10 is comprised of Senators Sherrod Brown, Russ Feingold, Tom Harkin, Jay Rockefeller, and Charles Schumer from the liberal wing of the party and moderate Democratic Senators Tom Carper, Mary Landrieu, Blanche Lincoln, Ben Nelson and Mark Pryor).

As noted above, the momentum building behind the Medicare buy-in and an FEHBP-type proposal is that the public option is not going to make it into the Senate bill. Not with a trigger. Not with an opt-out. Instead it appears the public option won’t be in the legislation at all. This should mollify Senator Joe Lieberman who has promised to vote with Republicans against bringing a health care reform bill to the floor if it contains a public option.

All of this also makes clear the strong desire of Democrats, regardless of their ideology, to pass health care reform. The New York Times reports on various lawmakers’ description of President Barack Obama’s message to Senate Democrats on Sunday. “He reminded us why we are here. He reminded us why we run for office. And he reminded us how many people are counting on us to come through.” “Decades from now this will be the kind of vote you remember. It will be written in the faces of children and families who are relieved of the burden of anxiety and sorrow.”

Democrats consider this a historic moment. While grasping it carries political risk in the upcoming 2010 elections, failing to seize the opportunity poses even greater dangers. And the crushing of a dream many of these lawmakers have held for decades.

There are still controversies that could scuttle health care reform. And there will enough political charges and counter-charges bandied about to satiate even the most verbose pundits. But Senators are serious about finding a path to passage and it is increasingly likely they will pass some version of health care reform before years-end. Of course, this will only set the stage for the real work to begin: the House-Senate Conference Committee likely to convene shortly after New Year’s Day.