Category Archives: Jon Cohn

fountain-pen

View: About that McKinsey report… The critics were right

Share

By Jonathan Cohn, Senior Editor of The New Republic

Jon Cohn

McKinsey and Company has finally released the details of its controversial paper on the likely effects of health care reform. And it looks like the paper’s critics (including yours truly) were right to raise questions about it.

Based on what the company has said, the paper offers no new reason to think Americans with employer-sponsored insurance will lose that coverage because of the Affordable Care Act.

Politically, that’s good news for President Barack Obama, since he told insured Americans that the law wouldn’t take away the coverage they already had.

But what does it mean in terms of policy? Should we be happy that health care reform is unlikely to reduce substantially the current system’s dependence on employer-based insurance? That’s another, much more complicated question.

Let’s start by looking closely at the paper, which suggested that as many as half of all employers would seriously readjust their employee benefits and as many as a third would drop coverage altogether once the health law took full effect in 2014.

The theory behind the claim was that employers would find it financially advantageous to stop offering insurance because workers could instead get subsidized coverage through the new insurance exchanges.

A quarter of respondents didn’t know the salary breakdowns of their companies.

In other words, workers would happily take salaries — instead of insurance — from their employers.

Even though firms that employ more than 50 employees — which account the majority of American jobs — would have to pay a penalty for failing to offer health benefits, the McKinsey consultants said, the financial advantages of dropping coverage would more than offset that cost.

But the basis for that prediction was a survey of high-ranking corporate officials. And it turns out the survey had a few weaknesses.

For one thing, a quarter of respondents didn’t know the salary breakdowns of their companies — in other words, how many workers were making high salaries and how many were making low salaries.

In addition, more than half of respondents weren’t even aware of what their companies spent on health benefits.

The survey didn’t ask respondents about the ages of their employees. Were they relatively old? Young? A mix of the two?

And when survey administrators “educated” respondents about the health law, they didn’t remind them about the effects of the employer tax exclusion, which makes job-based health insurance worth a lot more to employees.

Surveys asking employers to predict behavior are never that reliable. But these issues make the McKinsey study a particularly poor forecasting tool. In general, younger and poorer workers might be better off getting insurance through the new exchanges, because they will get bigger subsidies from the government and because they benefit less from the tax exclusion. It is a different story for older and richer workers.

More than half of respondents weren’t even aware of what their companies spent on health benefits.

More sophisticated studies of employer behavior account for these and other variables, typically by creating “synthetic” firms and predicting how employers will act, based on data on past employer behavior.

Sure enough, these studies have consistently shown a very different result: that the majority of employers will continue to offer health insurance, even after health care reform.

In fact, just this week, new analyses by Avalere Consulting and the Robert Wood Johnson Foundation came to the same conclusion. (The basis for the Robert Wood Johnson prediction was another projection from the Urban Institute’s model.)

While these predictions could be wrong, obviously, their findings are consistent with what happened in Massachusetts, where a similar coverage scheme actually bolstered employer-sponsored insurance.

Indeed, even McKinsey itself now acknowledges that its study couldn’t make projections as reliably as these other efforts. In its official June 20 press release, it stated flatly that its prediction was “not comparable to the health care research and analysis conducted by others such as the Congressional Budget Office, RAND and the Urban Institute.”

In the long run, though, workplace-based insurance is probably not an arrangement worth preserving.

But here’s the irony: Most people like the insurance they get from their employers, which is why you hear politicians from both parties constantly promising to keep that coverage in place. In the long run, though, workplace-based insurance is probably not an arrangement worth preserving.

Private, employer-based coverage became the norm in the U.S. in the 1940s and 1950s because the arithmetic of health insurance works only with large groups of relatively randomly selected people, and large businesses naturally create such groups.

But employer-based coverage makes workers too dependent on their bosses while saddling employers with a financial liability over which they have only partial control. More importantly, it leaves out people who don’t have steady, full-time work.

An ideal health care system would not merely include everybody. It would also give everybody access to the same set of coverage arrangements, regardless of their place of employment (or lack thereof).

It would also liberate employers from the responsibility of administering health benefits for workers, allowing them to concentrate on other, more productive activities.

Let the car companies make cars and the grocery stores sell groceries and the software firms design software. They don’t need to be running health insurance plans, too.

A single-payer system, with a combination of basic government insurance and private supplemental coverage, would be a much better alternative.

So would a “competition” system that looks like what is currently in place in the Netherlands or Switzerland, or what Sen. Ron Wyden, D-Ore., first proposed back in 2007.

The Affordable Care Act could evolve into such a system, particularly if the new insurance exchanges work well and workers feel comfortable the insurance available there is as good as what they’d get from employers.

But that transition would probably take a lot of time, no matter what corporate officials were telling the survey-takers at McKinsey.

Jonathan Cohn is a senior editor at The New Republic .


This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Rep. Ryan

View: Ryan Plan–an attempt to reduce health care spending, but at a high cost

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

For the better part of two years, the debate over how to control health care costs had a certain one-sided quality to it, because the Democrats had a plan and their critics did not. Democrats were forced to put their ideas on paper, with specifics, and subject them to nonpartisan accounting. All the critics had to do was attack.

Rep. Paul Ryan

And attack they did. Sometimes they said the Democrats’ plan, which eventually became the Affordable Care Act, did too little. (It’ll blow up the deficit! It’ll bankrupt the government!) Sometimes they said it did too much. (It’ll stop innovation! It’ll create death panels!) Sometimes they even said the two things simultaneously, which is the kind of neat rhetorical trick politicians can pull off only when they have no plans of their own.

All of that changed this month, when House Budget Committee Chairman Paul Ryan, R-Wis., released his budget proposal and included within it radically conservative reforms of the nation’s major health care programs.

Ryan would repeal altogether the coverage expansions of the health law. He also would increase the eligibility age for Medicare and then turn it into what most of us would call a “voucher scheme,” eliminating in 2022 the traditional government-run insurance plan for everybody who retires in that year and replacing it with a fixed financial subsidy that seniors can apply toward the cost of regulated private insurance policies.

Last but not least, Ryan would transform Medicaid into a block grant. Instead of guaranteeing federal funds to cover everyone that becomes eligible for the program, Washington would simply give the states a pre-determined, lump sum of money — and let states figure out how best to use it.

On paper, the Ryan plan saves the government a lot of money, at least in the long run. But upon closer inspection, the savings turn out to be illusory, cruel or some combination of the two. In fact, far from proving the superiority of conservative health reforms, Ryan’s plan validates what his political adversaries have said all along.

The Affordable Care Act represents a serious and realistic approach to controlling the cost of medicine — one that would be even more serious and realistic if the long-term budget changes President Barack Obama just recommended become law.

Although privatization has its own ideological appeal to conservatives, the real reason Ryan’s program would reduce government spending and deficits dramatically, at least over the long term, is that it substantially reduces the amount of insurance people would get. Repealing the health law would deprive more than 30 million people of insurance and leave others with more limited benefits.’

Meanwhile, the fixed formula Ryan would use to calculate the Medicaid block grants and Medicare vouchers would cause the value of each to rise far more slowly than the cost of health care. States would end up reducing enrollment or scaling back benefits or both. And, according to the Congressional Budget Office, seniors would end up individually responsible for more than two-thirds of their medical costs.

The theory behind this effort is that, by making individuals more conscious of the cost of health care, they will act more like consumers — thinking twice before getting extra treatments and shopping around for insurance policies that provide better value at lower costs.

But Republicans take this argument, which has some truth, way too far. The Medicare Advantage program, which already offers seniors the option to enroll in private insurance, hasn’t produced vast savings. Experiments with high-deductible coverage suggest it causes beneficiaries to skimp on useful care, including preventive treatments that prevent most costly, acute episodes later on. As Len Nichols, an economist at George Mason University, puts it, Ryan and his allies are “substituting algebra for health care policy.”

And that’s to say nothing of the political perils in Ryan’s strategy. As presently structured, his plan envisions a seismic shift away from traditional Medicare to a voucher worth considerably less money. Older voters are famously sensitive to even modest alterations in government benefit programs for the elderly. The idea that lawmakers would stand behind such an abrupt change, and then let it evolve in a way that so drastically reduces the federal contribution toward retiree health care, is difficult to accept.

The alternative is to control health care costs a bit more gradually, which is what the federal health overhaul does. Like Ryan’s plan, the Affordable Care Act attempts to restrict the federal government’s contribution toward health care expenses, via constraints limiting the growth in Medicare (although not Medicaid) costs as well as the tax subsidy working-age Americans get for employer-sponsored insurance. But the constraints are looser.

For example, unlike Ryan’s plan, which uses a fixed-value voucher to set Medicare spending, the health law sets less restrictive growth targets (which the president’s debt plan would further tighten) and then calls upon an independent commission — the Independent Payment Advisory Board — to recommend reforms when Medicare costs exceed those targets. IPAB’s recommendations can change what Medicare pays the providers of care, but the board, by law, cannot alter Medicare benefits or eligibility.

In addition, the health law’s formula doesn’t attempt to reduce spending by focusing exclusively on direct cuts to individual beneficiaries. On the contrary, the law distributes spending reductions across the health care system, affecting virtually everybody — whether it’s reducing Medicare payments to hospitals, eliminating extra subsidies for private Medicare Advantage plans or demanding greater rebates from pharmaceutical companies that contract with government insurance programs.

Most important, the Affordable Care Act doesn’t merely limit health care spending, in the faint hope that consumers, on their own, will produce a more efficient market. The law also introduces reforms that will put in place technological infrastructure and financial incentives to promote higher quality care. To some extent, that means sweeping, system-wide changes like the introduction of electronic medical records or the creation of an institute that will determine which treatments work better than others. But it also means dozens of more narrowly focused efforts, like a new public-private partnership to promote patient safety or pilot programs in “smart malpractice reform.” The idea is to experiment with virtually every payment reform experts have tried successfully on a small scale, in the hopes of replicating the successful ones across the country.

In short, the Republican vision for health care reform, as expressed by Ryan, is to limit federal spending on medical care, at levels far below what we spend today, and then let individuals make the best of the situation. By contrast, the health law calls for more gradual, more shared sacrifice by everybody involved with health care — with a focus on promoting efficiency so that lower spending needn’t result in lesser care. That’s not only a more realistic approach to controlling costs. It’s also a more humane one.

Jonathan Cohn is a senior editor at The New Republic .

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jon Cohn

View: GOP’s attacks on health law, confusing and incompatible

Share

Attacking The Health Law: The GOP’s Confusing And Incompatible Arguments

This column is a collaboration between KHN and The New Republic .

Suppose I told you one of the political parties was determined to increase wasteful government spending by hundreds of billions of dollars, to pay the salaries of countless extra bureaucrats and to degrade the quality of medicine in the U.S.

If you’ve been paying attention to politics for the last few months, you’d probably assume I was talking about the Democrats.

Apparently government-run health care is awful, except, um, when it isn’t.

Not so. I’d actually be talking about the Republicans who want to repeal health care reform.

Confused? Well, don’t blame yourself. The Republicans and their allies have spent a lot of time — and a lot of money — attacking the Affordable Care Act and promising to undo it.

And they have done so with such a fury that almost nobody seemed to notice they are making a pair of arguments that are fundamentally incompatible.

The Republicans start their calls for repeal with a familiar, thematic critique of government. The new health law, in this telling, represents an unconscionable government intrusion into the private sector and, ultimately, an encroachment on individual liberty. The federal government will be dictating everything from how employers conduct their businesses to how doctors treat their patients.

And, oh yes, the government will be spending a ton of money it does not now have, increasing the deficit and/or laying new burdens on the taxpayers.

The argument is hyperbolic and, in places, downright inaccurate. But, at least, it is consistent with longtime conservative principles about the role and size of government.

To be fair, the Republican argument makes perfect sense if you think like a campaign operative.But that’s not all the Republicans have been arguing. They’ve also been attacking the health overhaul for what it will do to Medicare. And instead of accusing Democrats of trying to dump more money into a government program, as Republicans would typically do, they’ve attacked Democrats for doing the very opposite — noting that the Affordable Care Act will reduce spending on Medicare somewhere around $400 billion over the next ten years.

Apparently government-run health care is awful, except, um, when it isn’t.

To be fair, the Republican argument makes perfect sense if you think like a campaign operative. Senior citizens are, at the moment, the most conservative age group in the electorate. They were least likely to support President Obama in 2008 and, during the health care fight, were most likely to oppose enactment.

Republicans seized on that fact and have gleefully proclaimed themselves champions of Medicare, despite a long history of opposing it and, as Newt Gingrich once put it, letting this universal social insurance program “wither on the vine.”

Seniors are playing along, since they figure reform means taking money once targeted for Medicare and diverting it to help people under-65 pay for their medical care.

But here’s where things could get complicated for the advocates of repeal. Consider what undoing the cuts in Medicare would entail.

It would start, first of all, with restoring higher payments to the insurers that provide private coverage for people in Medicare, through what’s known as the Medicare Advantage plans.

There’s a reason the health law reduces those payments: Repeated independent studies, including those by the well-respected Medicare Payment Advisory Commission, determined that the government was paying the insurers too much.

Restore those payments, and you’re wasting taxpayer dollars. And a lot of those wasted dollars will go to hiring new people to work at insurance companies. They won’t be government bureaucrats, obviously. They’ll be insurance company bureaucrats.

But is that really better? Is the Tea Party in favor of waste as long as its lines the pockets of insurance executives rather than Uncle Sam?

Meanwhile, restoring the other cuts to Medicare would mean rescinding payment reductions designed to make the program more efficient.

Remember, a major goal of the health reform measure is to push against higher spending while simultaneously promoting higher quality care.

In the case of Medicare, that means slowing down payment increases to providers and penalizing those that provide substandard treatment; while, at the same time, boosting payments to primary care doctors and providing bonuses for those who actually treat patients better.

Reasonable people can argue how well these efforts will work. But allowing Medicare to continue going along as it has been for the last ten to twenty years — which is what repealing the new health law would do — would almost surely force a choice between much higher taxes or much worse access to care.

If you don’t believe me, just look at the plan proposed by Republican Representative Paul Ryan, who is forthright enough to admit that the GOP alternative to the Democrats’ approach to Medicare is to reduce radically its guaranteed benefits.

Of course, the Republican Party’s leadership hasn’t embraced Ryan’s plan in any specificity.

And, at least for the short term, it seems unlikely they’ll advocate such a path, lest they scare off the seniors that just handed them control of the House of Representatives.

But that means Republicans are now on the side of wasting taxpayer dollars on a government program that, in fact, needs some reform. I wonder how long it will be until the Tea Party figures that out.

Jonathan Cohn is a senior editor at The New Republic


This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
GOP Logo

View: GOP ‘repeal and replace’ strategy lacks merit

Share

This column is a collaboration between KHN and The New Republic .

It will force a lot of people to pay higher premiums. It will lavish subsidies on the private insurance industry. It will put life-and-death decisions in the hands of bureaucrats. And it will add hundreds of billions of dollars to the federal debt.

No, I am not talking about the health care reform law. I’m talking about the Republican proposals to repeal it.

Since even before the Patient Protection and Affordable Care Act became law, Republicans have been vowing to get rid of it and to pass their own reforms instead.

It makes a lot of sense politically. The voters are angry at Washington. The voters are also worried about their access to health care.

By promising to “repeal and replace,” as the slogan goes, Republicans sound like they’re giving the voters exactly what they want.

Repeal reform and the deficits go back up — by more than $100 billion over ten years.

But would the Republican plan make health care better — or worse? Consider, for starters, that the health overhaul will, starting in 2014, expand Medicaid and make subsidies available to lower- and middle-income Americans who buy private insurance.

Multiple estimates, including those from the Congressional Budget Office, suggest that that an additional 30 million people will get insurance because of these changes.

Jon Cohn

The Republicans say they have their own mechanisms for expanding insurance coverage. On the official website for congressional Republicans, party leaders propose such measures as allowing the purchase of coverage across state lines and creating special insurance plans for people with pre-existing conditions.

But studies have repeatedly shown that proposals like these would, at best, bring coverage to just a few million Americans. So if the Republicans succeed in taking the recently enacted reforms off the books, that means they are taking insurance away from a whole lot of people.

. . . most experts believe the mainstream Republican proposals won’t significantly bend the cost curve.

Of course, advocates of repeal have made pretty clear that expanding coverage isn’t that big a deal to them. Their primary concern, they say, is with making health care cheaper for people who already have it.

But it’s hard to see how getting rid of health care reform would accomplish that goal, either. The new law includes a bunch of measures designed to reduce the overall cost of care — first by a little bit, and then by a lot.

It would also establish an insurance exchange that gives individuals and small businesses access to the kind of group policies large employers now have — complete with those subsidies, which will offset some or most of the cost for people who would otherwise struggle to pay the premiums on their own.

Although the effect of these changes on individual premiums will vary a lot from person to person, the CBO concluded that, once you account for the subsidies, reform will mean lower average premiums for people with private insurance.

Repeal reform and these people are stuck paying more (unless Republicans are willing to let benefits get a lot more skimpy).

The official projections also suggest that, ten years from now, government spending on health care will be lower than it might otherwise be.

Repeal reform and the deficits go back up — by more than $100 billion over ten years. And while the nation as a whole will pay slightly more for health care over the next ten years, the rate of growth — which is the figure we care about most — will be lower. Take away reform and, according to the projections, health care costs will rise at a higher rate.

Again, the Republicans have their own ideas about reducing costs. A few of them have merit. (In principle, for example, malpractice reform makes sense, if done right.)

But most experts believe the mainstream Republican proposals won’t significantly bend the cost curve.

If you take away health reform . . . consumers will be more vulnerable to the whims of faceless insurance company bureaucrats, whose goal may be to maximize profits rather than public health.

Rep. Paul Ryan, R-Wis., has famously put forward a more radical plan, to transform Medicare into a voucher system. But the Republican leadership had refused to back up that idea, perhaps because it would control costs only by dramatically reducing the insurance coverage that seniors get.

But wait a minute — wouldn’t that all be worthwhile in order to get the government out of medical care? Given all the stories of “socialized medicine” and “death panels,” it might seem that way.

But those things exist only in the imagination of dishonest and hysterical critics. On the other hand, the health overhaul does include a bunch of consumer protections, many of which are already taking effect.

There are or will be standard benefits that all insurers will have to cover, requirements for more disclosure so that consumers will be able to shop intelligently and find the best plans, and guarantees of the right to appeal treatment denials.

If you take away health reform, all of those protections go away — and consumers will be more vulnerable to the whims of faceless insurance company bureaucrats, whose goal may be to maximize profits rather than public health.

The health law is far from perfect. Critics on the left and right can find plenty to criticize legitimately. But reform also promises a lot of benefits — to individuals and to the country as a whole.

Can Republicans make the case that Americans would be better off without these benefits?

It’s about time somebody forced them to answer that question.

Jonathan Cohn is a senior editor at The New Republic .

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jon Cohn

When Medicaid drops patients–Cohn answers Goodman

Share

Medicaid cutbacks not the same as private insurance rescission

Jonathan Cohn, Senior Editor of The New Republic responds to John Goodman’s earlier column: Medicaid Rescissions Worse than Private Insurers

This column is a collaboration between KHN and The New Republic .

Everywhere you look, Medicaid seems to be in jeopardy. The program provides health insurance for the very poor, but depends on state funding and, right now, the states don’t have any to spare.

Last week, President Barack Obama signed a law that will give the states additional money, enough to avoid the worst cuts. But when that money runs out, in the middle of 2011, those cuts could be back on the agenda.

Cutting Medicaid during a recession is terrible economics, since it takes money out of the economy at precisely the moment when we should be putting more into it.

It’s also cruel. The Medicaid population includes some of the country’s most economically and medically vulnerable residents. Without Medicaid coverage, these people become even more vulnerable.

“Rescission is the product of insurers trying to make money at the expense of people in need. Medicaid cuts are the product of society trying to help people in need, but coming up short.”

A little outrage, then, is in order. But what kind of outrage?

Writing last week for Kaiser Health News, John Goodman suggests we channel our outrage at the whole concept of government insurance.

During the health care debate, Goodman notes, reform advocates like me complained about private insurers that yanked coverage from people with high medical claims–a practice known as “rescission.”

Goodman thinks we had it exactly backwards. It’s Medicaid that’s yanking away people’s coverage, in what he calls “Medicaid rescissions.” And “these abuses,” he says, were “not addressed in the health overhaul.”

Goodman, who runs the National Center for Policy Analysis in Texas, has been writing and speaking about the evils of government insurance for a long time. And that’s a respectable philosophical viewpoint, although not one I happen to share.

But his analysis here takes some curious turns–turns worth examining more closely, since Goodman columns have a way of reverberating through the conservative echo chamber and, eventually, into the national political conversation.

The place to start is with a reminder of what, exactly, Medicaid is and how it is supposed to work. Medicaid is for people who don’t have nearly enough money to buy decent private coverage on their own or through an employer.

“. . . to compare Medicaid cutbacks to private insurer rescission is grossly misleading.”

The federal government sets broad guidelines for the program, like who is eligible for it and what services it must cover, and it provides some of the money.

The rest of the money comes from the states, which are in charge of administering the program and have the option of expanding it, either by making the coverage more generous and/or offering it to more people.

States have frequently taken advantage of that option, particularly in recent years, for one simple reason: More and more people need it.

The proportion of Americans who get Medicaid coverage has expanded since its inception and, if not for that expansion, the total number of people without health insurance would be a lot higher than it is today.

States don’t have the money to sustain these expansions during hard economic times, forcing them to make cuts unless the federal government steps in, as it did last week.

And, make no mistake, this is terrible.

But to compare Medicaid cutbacks to private insurer rescission is grossly misleading.

The problem with rescission has been that there’s mounting evidence of insurer bad faith–that, in an effort to fatten margins, insurers singled out the people with big medical claims and found excuses to drop their coverage, frequently leaving these people to pay bills they’ve already incurred and thought were covered.

That’s a whole lot different from scaling back the safety net because the states have run out of money to sustain it at current levels.

Rescission is the product of insurers trying to make money at the expense of people in need. Medicaid cuts are the product of society trying to help people in need, but coming up short.

“This is–how do I put this?–a creative reading of health care reform.”

Of course, Goodman isn’t primarily focused on the here and now. His big beef is with the future–and the focus of health care reform.

The new health law, the Patient Protection and Affordable Care Act, expands Medicaid substantially, so that all Americans with incomes under 133 percent of the poverty line are eligible for it.

Goodman implies that, in so doing, the government exposes yet more Americans to the vulnerability present Medicaid recipients feel whenever state budgets get low.

This is–how do I put this?–a creative reading of health care reform. Yes, the new law expands Medicaid. But it expands the “mandatory” population that all states must cover, and it dedicates a stream of federal money to make that happen.

It also guarantees that people making more than 133 percent of the poverty line can get insurance, regardless of preexisting conditions, with subsidies to offset much or most of the cost. And, yes, it bans the practice of rescission except in clear cases of fraud.

In short, the law creates a seamless and permanent system of insurance that should eliminate precisely the insecurity that’s the focus of Goodman’s article.

Goodman does have a broader, more reasonable argument. The more government gets involved in health insurance, he suggests, the more people’s coverage will depend on politicians’ decisions.

Under health reform, government will be setting the rates at which Medicaid pays providers (something it does now) as well as defining a minimum benefits standard for private insurance (something it doesn’t do now).

And that means there will inevitably be fluctuation. If budgets are tight, for example, future governments might reduce Medicaid payments to providers–which, as Goodman rightly notes, makes it harder for people on Medicaid to get timely appointments with doctors.

But the new health law actually increases what Medicaid will pay primary care providers, at least for the first few years. It also locks in place certain guarantees, like who is eligible for Medicaid and the idea that basic medical care should always be covered that will be very difficult to alter.

Lawmakers and officials would still have some leeway, particularly if they’re willing to rewrite the law itself. But, unlike the people who run insurance companies, they will be accountable to the public when they come up for re-election.

Does that mean Medicaid under health reform will as reliable, and as strong, as the best private insurance policies? Regrettably, no. Future lawmakers will make cuts, just as today’s sometimes do. And those cuts will affect beneficiaries in one way or another. But it will still be far more secure than what the poor could get on their own–just as it is now.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Newspaper

When bad news about health reform isn’t bad

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KaiserHealthNews and The New Republic.

The weekend’s newspapers included a pair of headlines about health care reform. And they were probably not the kind that reform advocates like to see.

One was in the Boston Globe: “Firms Cancel Health Coverage.” According to the article, a number of small businesses had recently decided to stop offering insurance to employees.

In 2006, Massachusetts put in place a new health insurance scheme similar to the Patient Protection and Affordable Care Act, the federal law President Barack Obama and congressional Democrats passed earlier this year.

If businesses in Massachusetts were now dropping coverage three years into that state’s reform experiment, people might conclude the same will happen across the country. And they probably wouldn’t like that very much.

Those headlines don’t highlight reform’s problems. They actually highlight its virtues.

The other headline was in Sunday’s New York Times: “Insurers Push Plans Limiting Patient Choice of Doctors.”

As the story explained, insurers in three cities (Chicago, New York and San Diego) were testing new plans that offered beneficiaries significantly reduced networks of doctors and hospitals, in exchange for lower premiums.

The target audience, again, was small businesses, but the insurers thought the new plans might appeal to some larger businesses as well.

This isn’t the first time insurers have offered plans with fewer treatment options. It happened most famously in the 1990s, when insurers first introduced the concept of “managed care” on a wide scale.

Consumers didn’t like it then, and they might not like it now. But last time, most people blamed the insurance industry.

But employers were doing these things already . . . . Firms have been walking away from coverage ever since the early 1970s, when rising health care costs first hit American business hard.

This time, they might blame the government–in no small part because reform critics will use the occasion to say, “I told you so.”

Taking the blame for anything and everything that goes wrong in health care has always been the biggest political danger to reform, at least in the short term.

The Obama administration and the Democrats now “own” health care just as surely as they own General Motors.

But before Sean Hannity or the Wall Street Journal editorial page get their hands on these stories, let’s be clear about something: Those headlines don’t highlight reform’s problems. They actually highlight its virtues.

Insofar as the articles report broader trends–and they may not–they actually chronicle the same basic process at work. Health care is getting more expensive; the economy is still sputtering.

Employers who provide and help pay for employee coverage can react to this in one of two ways. They can stop offering insurance altogether, which is what the Globe reports some small Massachusetts firms are doing.

Or they can simply offer less generous policies, which is what the Times suggest will happen in those three cities.

But employers were doing these things already, long before Obama and his allies came along. Firms have been walking away from coverage ever since the early 1970s, when rising health care costs first hit American business hard.

Although the Globe story suggests a few firms are dropping coverage . . . the number of employers offering coverage actually increased after Massachusetts implemented its new scheme.

The question is whether reform makes employers more likely to drop coverage. The answer seems to be no, at least for now.

Reform includes a requirement that employers provide insurance or pay a penalty. Although the Globe story suggests a few firms are dropping coverage, the official data shows that, overall, the number of employers offering coverage actually increased after Massachusetts implemented its new scheme.

That doesn’t mean every company that offers insurance will keep doing it forever. Over time, some businesses will inevitably decide to drop coverage, just as they do now.

But before reform, employees in such companies were frequently in big trouble, since they no longer had access to decent policies they can afford.

In Massachusetts and, soon, the rest of the country, people without employer coverage will be able to get comprehensive policies through insurance exchanges–complete with subsidies to help pay for them.

But what about the people who watch as employers whittle down coverage, restricting which doctors and hospitals they can see?

Again, this happened before and was bound to happen again–only now, thanks to health reform, the law will limit how plans can do it. They can’t impose cost-sharing for basic preventive care. They can’t impose annual or lifetime dollar caps on benefits. And while they can limit beneficiaries to certain doctors and hospitals, they have to offer beneficiaries the right to appeal treatment denials–and the right to get treatment out-of-network if it’s not available in-network.

These guarantees aren’t as strong as they could or should be. Future legislators, hopefully, will improve upon them.

But they provide real security, the kind that didn’t exist before–and the kind that most Americans should appreciate, even if the critics of reform don’t.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Numbers on wooden type block

Back To The Future: CBO Budget Predictions and Health Reform

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KaiserHealthNews and The New Republic.

Here we are again, arguing about whether health care reform will make the government’s balance sheet better or worse.

The occasion for this latest round of debate is a new report by the Congressional Budget Office–one that predicts what the entire federal budget will look like several decades into the future.

Critics of health care reform say the report backs up what they’ve been saying all along–that, because of reform, tomorrow’s budget deficits will be even worse than they are today.

But CBO’s conclusion was a lot more complicated and at least a little more encouraging.

The report actually contains two different projections. The first and more optimistic is the “current law” scenario. In it, the CBO assumes that laws now on the books will remain on the books and that, over time, these laws will take effect as planned.

As far as health care is concerned, that means the government implements the Patient Protection and Affordable Care Act. It spends a lot of new money on Medicaid, drug assistance for seniors and subsidies for less affluent people buying private insurance.

But it also saves a lot of money (by, for example, paying less money to hospitals that see Medicare patients) and raises some new taxes (most notably, through a tax on expensive private health insurance plans).

Add it all up, as the CBO did, and the budget deficit actually gets a little smaller. The emphasis is on “little,” since the net reduction is actually pretty small. Instead of running really really really big deficits, the government ends up running really really big deficits.

Still, it’s an improvement–and maybe even a bigger improvement than the CBO predicts.

When calculating the current law scenario, CBO decided that reform would generate no new savings after 2030. In fact, many experts expect that reform’s greatest potential to generate savings lie in the medium- to long-term, as systems for reducing wasteful care become more adept.

More important, health care reform includes myriad changes to the medical delivery system–everything from creating an electronic medical record system to scrutinizing new drugs and devices for effectiveness.

All of these projections–the good ones and the bad ones–are possible. But it’s wrong to assume the more pessimistic scenario is more likely.

CBO does not anticipate these changes saving much money. But if they do–as respected experts, like Harvard economist David Cutler, claim they will–then the savings could actually be substantially larger than CBO has allowed.

Of course, none of these means anything to the critics, who could care less what it looks like on paper. They insist the real problem with health care reform is that it will never be fully implemented.

As this argument goes, policy-makers will chicken out when it comes time to impose cuts that affect powerful industries or enact taxes that might affect some constituents.

The CBO sketches out a possibility along those lines with its “alternative” scenario–a world in which the government refuses to impose various policies that might be politically unpalatable. In this scenario, health care reform doesn’t reduce the deficit. It causes the deficit to rise, although, again, not by that much.

Could this, more dour prediction prove correct? Absolutely. All of these projections–the good ones and the bad ones–are possible. But it’s wrong to assume the more pessimistic scenario is more likely.

During the 1990s, policy-makers passed–and then implemented–a set of tax and spending changes that eventually balanced the budget and actually led to budget surpluses.

Among these were cuts to Medicare actually more severe (as a percentage of total Medicare spending) than the ones health care reform anticipates.

The next decade’s policy-makers might not be as responsible as the last decade’s. But if not–if they want to abandon the commitments of the new health reform law–it won’t be easy. If, for example, a new president and Congress decide in 2017 they don’t really want to impose the new tax on health benefits, they can rescind it.

But then they’ll have to come up with something to replace the anticipated revenue–or willingly run up even higher deficits. And, given the political consequences of either move, they might very well decide to stick with the tax after all.

If that all sounds fanciful, consider what is happening right now on a related issue: Planned reductions to physician payments in Medicare.

The cuts are the product of a poorly designed payment formula from the 1990s. But calls to rescind the formula have gone nowhere this year, because doing so would mean running higher long-term deficits and there’s no political appetite for that.

Faced with this dilemma, Congress has instead resorted to passing a temporary stay, good for just a few months and paid for by money already set aside for other purposes.

In this political environment, getting a “permanent fix” of the formula seems highly unlikely until somebody figures out how to pay for it.

True, political environments change. Two, five, or 10 years from now, politicians might decide to be careless with taxpayer dollars–and taxpayers might let them get away with it. But that’s always true.

Today’s lawmakers can’t force tomorrow’s to be fiscally responsible. All they can do is pass fiscally responsible laws and hope future generations carry them out. With health care reform, they’ve done just that.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jon Cohn

View: Change coming to most health plans

Share

Even With The ‘Grandfather Clause’ Protection, Change Is Coming To Most Health Plans

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

Now that Karl Rove doesn’t have a Republican president to advise anymore, he’s been picking up some new hobbies. One of them is health care policy.

In a recent column for the Wall Street Journal editorial page, Rove made the latest in a series of attacks on the new reform law. Rove offered a number of familiar conservative allegations: Reform would bankrupt employers, stick people with lousy coverage, etc. But my personal favorite was his reaction to new regulations the Obama administration had issued just a few days before.

Health care reform includes a “grandfather clause.” Basically, an insurance plan that existed before reform became law won’t be subject to many of the law’s new regulations on benefit design and company behavior.

But under the new regulations the administration just unveiled, plans lose this exemption if their coverage changes substantially for the worse.

For example, if an employer offering insurance to employees decides to hike deductibles or stop covering a major disease, the grandfather clause would no longer apply.

The plan would become subject to the full array of reform’s requirements, which include everything from full coverage of preventative care to the right of appeal for treatment denials.

“To hear these Republicans talk, you’d think insurance arrangements never change–that people are walking around with the same generous policies they had 20 or 30 years ago.”

This horrified Rove. Among other things, he noted, a plan could lose grandfather status if employers decided to switch carriers–“a common practice when employers shop for lower prices.”

Well, yes. So what? The grandfather clause is there to let you keep your current insurance, assuming you like it and that it remains available to you.

But if your employer is switching carriers, then it’s not really the same plan anymore, is it? You’ve already lost your insurance. Obama didn’t take it away from you. Your employer did.

And that’s really the broader point to keep in mind–not just in the debate over this particular regulation, but in the debate over health care reform that’s going to continue over the coming months and beyond.

Rove and other Republican leaders have been making a lot of noise about the fact that, within a few years, the vast majority of Americans with private health insurance will have different health insurance arrangements than they do today.

The new motto for health care reform, according to House Minority Leader John Boehner, R-Ohio, “should be ‘If you like your health care plan, too bad.’ ”

To hear these Republicans talk, you’d think insurance arrangements never change–that people are walking around with the same generous policies they had 20 or 30 years ago.

Of course, nothing could be further from the truth, as anybody who pays attention to their coverage can tell you.

Insurance changes all the time. And it’s not usually for the better. In recent decades, as the cost of health care has skyrocketed, millions have become uninsured while additional millions have become under-insured.

The point of health care reform is stop and, eventually, reverse this trend–to make sure everybody has access to an insurance policy, to make sure insurance policies actually provide adequate protection, and then to make sure coverage is affordable both for individuals and the country as a whole.

The most logical way to do this, arguably, would have been to blow up the existing insurance system and just start over–perhaps by giving everybody a basic, government-provided benefits package through something that looks like Medicare, and then introducing system-wide reforms to make health care less expensive overall.

” . . .will most people’s health insurance still change? Absolutely. But change was coming no matter what. With reform, it’s likely to be change for the better.”

But that would have meant changing everybody’s coverage right off the bat. And that’s too big a jolt for the political system to handle.

Just ask veterans of the Clinton Administration, whose tried their own, similarly ambitious scheme–only to have it fail, in part because too many insured Americans feared it would instantly take away what they already had.

Instead, Obama and the Democrats have opted for a more gradual transition. As long as existing policies are still available–as long as employers and insurers continue to offer something as good as what they offer today–people can continue to buy them. That’s the reason for the grandfather clause.

But if an employer or insurer diminishes some existing coverage, then the protections of health care reform kick in–the guarantees that all policies will include basic benefits, the limits on out-of-pocket spending, and so on.

Even with this slower approach, will most people’s health insurance still change? Absolutely. But change was coming no matter what. With reform, it’s likely to be change for the better. If Rove and his Republican friends had their way, it’d likely be for the worse.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Pills-red-and-white

Healthcare reform whiplash

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

Will health care reform reduce spending on health care too little?

Or too much?

Over the last several days, one respected authority made a version of the former argument while another made a version of the latter–offering a reminder of why reform is so complicated and why the new law, for all its imperfections, is still an important step forward.

The first argument about spending came from Douglas Elmendorf.  Elmendorf is director of the Congressional Budget Office, making him Washington’s official accountant and among the most influential voices on all matters relating the federal budget.

During a conference presentation, he announced that the Patient Protection and Affordable Care Act won’t significantly reduce what the government spends on Medicare and Medicaid.

This wasn’t exactly news. Elmendorf and his staff had produced official cost estimates for the new health overhaul bill in the spring, just before the final debate and vote. Those projections showed that the initiative would reduce net government spending by only a modest amount.

Of course, the fact that reform would reduce net government spending at all represents a major achievement. The new health law includes expansions of Medicaid, additional drug assistance for seniors on Medicare and new subsidies for poor and middle-class people that buy private health insurance-that’s how it makes sure all Americans (or most of them, anyway) can actually afford their own medical care.

But those efforts require the federal government to spend large sums of new money. Only by coming up with an even larger set of cuts to existing programs, along with new revenues, could the law result in actual savings.

And yet Elmendorf was right about the long-term picture: The projected reduction in health care spending is small relative to what the government is likely to spend over the next few decades, given the aging population and the development of expensive new medical technologies.

Or, to put it more simply, even with the reform law’s projected reductions in government spending, Washington remains on the hook for spending more on Medicare and Medicaid than it is currently prepared to take in.

So the government needs to find even more savings. And there are savings to be had, Elmendorf suggested, since the best available evidence suggest a lot of what the government spends on Medicare and Medicaid doesn’t actually leave beneficiaries better off.

That evidence includes, first and foremost, a famous series of studies that researchers at Dartmouth have produced over the last 30 years.

Their research shows that spending on medical care varies wildly from community to community-with no apparent effect on the quality of care people receive.

Seniors in Miami, for example, get way more treatment than seniors in Minneapolis. But they don’t seem to end up healthier afterward.

To say that reformers have read and been influenced by the Dartmouth research is an understatement. President Barack Obama and his supporters cited it repeatedly over the last year.

But a front-page story in the New York Times—the type of story that, by design, gets Washington’s attention—suggested the Dartmouth research is full of ambiguity

One implication of the story was that overly severe cuts in medical spending would deprive people of necessary and appropriate medical treatments.

Sources for the Times story, including one of the Dartmouth researchers, claim (persuasively, from what I can tell) that the Times reporters either took quotes out of context or made errors. But the idea that cutting health care spending too crudely or severely will harm patients is credible.

The question isn’t so much whether the waste exists. The question, rather, is whether reform can pinpoint and excise that waste-whether it can cut out the bad medical care without removing the good.

Go back to that Miami versus Minneapolis contrast: To what extent are the Miami seniors getting too much care and the Minneapolis ones getting too little? To what extent does the disparity reflect other factors for which the Dartmouth studies and other related research may not fully account?

Different people will give you different answers to those questions.

My own view is that over-treatment (i.e., too much care in Miami) is more of a problem than under-treatment (too little care in Minneapolis) and that, in an ideal world, the health overhaul law would have reduced spending more severely.

It would have implemented many of the same reforms it does already-like applying scrutiny to new drugs, imposing penalties on hospitals with high rates of infection and so on. But it would have done so more quickly and more severely.

Still, providers and producers of medical care—all of them well represented in Washington—don’t like anything that might reduce their incomes.

And, as a recent survey in Health Affairs showed, the public continues to equate more care with better care. The reform law includes as many, or close to as many, cuts as these groups would tolerate.

And it enacts reforms that can be strengthened over time, through some combination of administrative rulings, congressional action and intervention from a new advisory board whose sole purpose is to control Medicare spending.

Over time, we can see which cuts reduce spending without harming quality–and which ones don’t. We can then double-down on the former while minimizing or eliminating the latter.

It’s not an ideal solution or even an elegant one. But given how health care costs are projected to rise, it’s what we have to work with.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jonathan Cohn, senior editor of The New Republic

Playing chicken

Share

By Jonathan Cohn, Senior Editor of The New Republic

This column is a collabortion between KHN and The New Republic .

A lot of people laughed when Sue Lowden, the Nevada Republican running for the U.S. Senate, suggested last month that people start paying for their medical care with chickens. I didn’t. I thought about my late grandfather Kurt, a family doctor who practiced in Brooklyn starting in the 1940s. His office was in the basement of his house and his clientele (like him) was very Jewish. He never mentioned getting paid with a chicken. But it seems entirely possible that somebody, at some point, offered up some poultry–and that, for the next few nights, it was matzoh ball soup for dinner at the Cohn household.

I would be more certain that Grandpa Kurt had been paid with chickens if he had started practicing 10 or 20 years earlier. Before the 1930s, when modern health insurance first appeared in the United States, most people paid for medical services with whatever resources they had on hand–which usually meant cash but, yes, sometimes meant goods for barter. Either way, they frequently ended up bargaining with their doctors over prices, just like Lowden suggests they did. Laugh if you want, but her sense of history isn’t that far off.

Lowden’s longing for that era, however, really is baffling. She may think that paying your doctor bills out of your own pocket is a great way to finance medical care. But the people who actually lived in the 1920s and 1930s were desperate for an alternative.

Medicine had undergone a revolution by then. Development of the sanitary technique, better understanding of anesthesia and other advances meant doctors and hospitals had unprecedented ability to treat and cure disease. But that care cost money, and soon it was more than most people could afford. When you got sick, you went bankrupt paying your bills or simply went without treatment.

The answer was for large groups of people to share the burden of medical bills collectively–in other words, to spread the financial risk of illness through the creation of insurance. Everybody paid a little, in the form of premiums collected every month, so that nobody had to pay a lot when injury or illness struck. The idea was instantly popular and, within a few decades, virtually everybody who could afford to buy coverage had it.

Today you can still find people find people bartering for care, mostly in rural areas. But insurance is generally the payment method of choice–and, to hear some conservatives tell it, that’s becoming a problem. As The Democratic Strategist’s Ed Kilgore recently observed, it’s a “bedrock conservative conviction that reliance on health insurance, private or public, is what’s driving up health care costs.” If insurance didn’t provide so much insulation from medical expenses, the argument goes, people would try harder to find lower prices or simply consume fewer medical services. To be fair, even many liberal economists would agree that overly generous insurance can create incentives for spending too much money on medical care.

But conservatives have argued for stripping down health insurance to the point where many people simply couldn’t afford treatment anymore. A family making $40,000 a year simply can’t find $10,000 to cover out-of-pocket expenses. (That’s a lot of chickens!) Sensible public policy shouldn’t ask people to reduce that health care bill by bargaining with their doctors over prices. It should prevent that kind of financial exposure in the first place.

Also embedded within candidate Lowden’s argument is another increasingly familiar claim about health care spending: That the problem with spreading risk through insurance is that it forces healthy people to subsidize the sick, thereby punishing people who take good care of themselves in order to pay the high bills of people who don’t.

Again, there’s a reasonable version of this argument: Health insurance rates should reward good behavior, like quitting smoking or taking steps to control cholesterol, that reduce costs both for individuals and society as a whole. But many medical problems are the product of sheer chance, whether it’s getting hit by a car or developing cancer. The solution is, or should be, to minimize the impact bad luck has on people’s lives by encouraging spreading risk through insurance.

Unfortunately, private insurance has become increasingly inadequate to this task over the last20 to 30 years. As the cost of medical care has grown, it’s been harder to find affordable coverage. Insurers haven’t done enough to drive down prices on their own and, in response, they’ve actually fostered the separation of healthy and sick. As a result, more and more people have found themselves in the same situation as those people in the 1920s and 1930s: medical bills they have no way to afford.

Health care reform represents an effort to reverse that trend, by making sure everybody can find an insurance policy and making sure everybody has the money to pay for it. And, in a sense, Lowden has performed a public service by reminding everybody what the alternative is: Making health care costs more and more of an individual responsibility, to the point where–yes–some people will end up bartering with fowl.

As my Grandpa Kurt would surely have agreed, chicken soup is a fine way to treat some illnesses–and a lousy way to pay for them.

This column was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Michigan Thumbnail

View: What one state stands to gain from health reform

Share

Report From Michigan: What State Residents Stand To Gain From Health Reform

Jonathan Cohn, Senior Editor of The New Republic

On their way to Washington last week, Tea Party activists stopped in Lansing, Michigan.

And among the officials who addressed them was Mike Cox, the state’s Republican attorney general. Cox recently announced he would be among more than a dozen state officials filing lawsuits challenging the constitutionality of health care reform.

And, at the rally, he whipped the conservative crowd into a frenzy: “Can’t you just see them running around (Washington) D.C. saying, ‘So much to spend, so much to spend, so little time to spend it’?”

Most legal experts seem to think the lawsuits won’t succeed. Among other things, it turns out that the U.S. fought a large war, about a hundred and fifty years ago, in order to settle the issue of state nullification.

But if the officials filing these suits seem not to understand that history–or at least, not to care about it–their opposition to the Affordable Care Act, like their supporters’, seems genuine. If they had their way, their states really would reject the new health care law.

Particularly since many of these officials are running for even higher office, it’s worth asking: What would happen to their states if they succeeded?

Consider Michigan, where Cox is running for governor and where, it so happens, I live. Despite the state’s economic troubles, the percentage of residents without health insurance is actually lower than the national average.

Still, it’s more than 1.1 million people–and there would be even more of them in the next few years if we were stuck with the health care system we have today.

But we’re not stuck with the health care system we have today. Reform is now law of the land. And, as a result, there won’t be an increase in uninsured. In fact, the number should fall—dramatically.

Thanks to the Affordable Care Act, the vast majority of the would-be uninsured should gain access to affordable insurance. Based on the official estimates, around 400,000 of them will get it through Medicaid, which the Act will expand.

Most of the rest will get them through the new insurance exchanges–that is, the new regulated marketplaces through which individuals and small businesses will be able to purchase the same sort of coverage large businesses get.

The people shopping in the exchanges should have more choices than they do today and the choices will be, by and large, good ones: plans with comprehensive basic benefits, no exclusions or higher rates for pre-existing conditions and lower.

Those who can’t afford even these reduced premiums will be eligible for generous tax credits, so that premiums never go higher than around 10 percent of income.

Does Michigan’s Cox prefer a world in which families making $45,000 a year miss out on thousands of dollars in tax credits? Where people with pre-existing medical conditions have to pay astronomical rates on coverage, if they can get insurance at all? Does he think those 400,000 people set to get Medicaid coverage would be better with no insurance?

And, if so, has he taken this up with the professionals and hospitals struggling, every day, to provide charity care for these people?

To be sure, Cox and his supporters aren’t necessarily very worried about the uninsured. Recent polling suggests the Tea Party movement is relatively affluent and their protests certainly suggest their primary concern is that reform could diminish the insurance coverage they currently have. (They seem unaware that the market will likely diminish that coverage all on its own.)

The full name of the health care law is the Patient Protection and Affordable Care Act. And there’s a reason for that “Patient Protection” part: The law also bolsters coverage for those people who have it.

It eliminates cost-sharing for preventative services.

It imposes a binding appeals process for people who think insurers wrongly denied treatments. I

t forces insurers to spend more on patient care and less on overhead –and that’s not to mention the many people who pay for insurance now, but will pay less starting in 2014, thanks to the tax credits.

Perhaps Cox should explain to Michiganders why, in his view, they should keep paying out-of-pocket fees for regular checkups, why some insurers should continue to have unchallenged authority to overrule doctors on treatment and why it’s better if stockholders take a bigger chunk out of everybody’s premium dollars.

And while Cox is at it, perhaps he can explain to senior citizens why they should continue to get stuck in the donut hole of Medicare Part D–the gap in prescription drug coverage that the Affordable Care Act would gradually close.

To be fair, it’s not the coverage and access benefits that Cox and other state officials are talking about in their speeches. It’s the threat of what “socialism” will do to medical care. It’s the burdens the new law will supposedly place on their states, businesses and citizens. But while plenty can go wrong as the new law comes on line–just watch how quickly insurers find loopholes in the regulations–most of the state officials’ complaints don’t really hold up under scrutiny.

Just consider what they are saying about Medicaid. The federal government and states run Medicaid jointly, which means that if the program expands states will have to spend more money on it.

But look more closely at the law: For the first ten years, according to the Congressional Budget Office, the federal government is going to cover 98 percent of the cost of the Medicaid expansion.

The federal contribution declines after that, but only to 90 percent. So for every additional dollar the states put into Medicaid, they’re drawing in nine from Washington.

Does Cox really want to turn down that money?

And, oh yes, the Affordable Care Act would do one other thing. It would put in place a whole series of cost-cutting measures designed to promote quality medicine and, over time, curb the year-to-year spikes in health insurance premiums. The law would encourage coordination among health care providers, begin to scrutinize treatments for comparative effectiveness and link hospital payments to performance, among other things.

Does Cox think Michiganders are better off when their physicians don’t consult with one another, when they pay more for inferior treatments and when Medicare continues to pay high reimbursements to hospitals that take the simple steps necessary for preventing infections around catheters?

For that matter, does he think Michigan businesses–already struggling with health care costs–prefer a world in which the government doesn’t start to reduce overall health care spending?

Of course, what’s true for Michigan is true for the rest of the country. The state officials leading the nullification campaign in places like Idaho, Minnesota, and South Carolina talk a lot about what their citizens stand to lose as the Affordable Care Act takes effect.

But the real loss will be if, somehow, the opposite were to happen–and the people living in those states were left dealing with the same dysfunctional health care system that exists today.

This column was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jon Cohn

The vote changes the debate forever

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

“There’s no fixing the government health care takeover Democrats forced through on Sunday. It must be repealed.”

So said Jim DeMint, the Republican senator and presidential hopeful, speaking one day after health care reform passed the House of Representatives, clearing the final legislative hurdle to enactment.

And it’s a sentiment you hear a lot on the right these days. Over the last week or so, as passage seemed ever more likely, Republicans moved from denial to anger: If they couldn’t stop this bill from becoming a law, they would stop the law from taking effect.

A historical precedent for repeal exists. In 1988, President Ronald Reagan and the Democratic Congress passed the Medicare Catastrophic Coverage Act.

The bill promised to fill in some key gaps in Medicare coverage, chief among them an overall limit on benefits and a lack of prescription drug coverage.

But the bill proved unpopular. Only a tiny fraction of seniors ever experienced catastrophic expenses that surpassed the Medicare limits; the drug benefit, although helpful, didn’t start right away.

To pay for the benefit, the act raised taxes on wealthy seniors. Conservatives attacked that future mercilessly, implying (wrongly) that many more seniors would end up paying the tax.

The public turned sharply against the act and, within a year, Congress had repealed it by an overwhelming margin.

Democrats complacent about their victory this week should remember that example and remember it well. But they should also take comfort in the fact that the situation is different in several key respects.

Although most of health care reform’s benefits won’t begin until many years from now, the architects of the bill understood what happened with Medicare Catastrophic.

That is why they front-loaded the bill with a handful of tangible benefits. Seniors will get additional assistance buying drugs, young adults under 26 will get to stay on their parents’ policies, the government will prohibit annual and lifetime limits on benefits and insurers will be prohibited from rescinding policies without good cause–all within the first year.

The politics are different too. Precisely because Medicare Catastrophic was a bipartisan act, passed by a Democratic Congress and signed by a Republican president, neither party really took political ownership of it.

Neither Reagan nor congressional Democrats had made it a defining issue of their previous campaigns and after enactment, neither was going to expend huge political resources defending it.

The situation today could not be more different. President Barack Obama and his allies made health care reform a centerpiece of the 2008 campaign.And over the last year, they’ve made it the signature cause of Obama’s first term.

Their political survival depended on its passage and, now, their political survival depends on its implementation. In short, they are going to keep fighting for it.

Of course, the prospect of yet more fighting over health care won’t excite most Americans, who at this point just want to move on to other matters. (Heck, even some of those who write about health care for a living are eager for something new.)

But there’s nothing wrong with fighting about–or, at least, debating about–health care. It’s an argument about how we, as a nation, want to set priorities. It’s a discussion we’ve been having for decades–over everything from Medicare spending to insurance regulation–and it’s a discussion we were bound to keep having, no matter what happened to reform.

What’s changing this week, with the enactment of the Democrats’ bill, is the boundaries of that discussion. All societies have to make decisions about how to allocate resources. Broadly speaking, there are two ways to make those decisions. A society can make those decisions collectively, through government, by imposing regulations and spending taxpayer dollars. And a society can make those decisions individually, through the market, by simply allowing individuals to spend money according to his own preferences and means.

It’s not a stark, either/or choice. Instead, each nation finds its own middle ground between the two extremes. And, historically, the U.S. middle ground has been closer to the market side. Unlike in the rest of the developed world, government didn’t guarantee access to coverage, although it subsidized it for some people who couldn’t afford it. Government didn’t set overall budgets for health care spending, although it would limit the money its own programs spent for treatment.

For a long time, Americans were comfortable with that approach. But, over time, it caused more and more people to struggle. Millions had no health insurance; millions more had either insurance that was too expensive or insurance that didn’t cover enough.

Health care reform promises to shift the middle ground between government and market, modestly, but in a way that will have far-reaching effects.

Now government will guarantee that all (or most) people have the ability to get insurance that will actually meet their needs. It won’t do so by taking over the insurance business–even if, truthfully, that’s what some of us would prefer.

Instead, it will do so by setting rules for how the insurance industry behaves. And it won’t make insurance free for all people. But it will provide financial assistance, enough so that people of limited means won’t have the same high exposure to medical costs they do now.

Minutes after the House finished passing health care reform, Obama described the bill as a major, but not a radical, reform. That about sums it up. It will change the way people live far more than it will change the principles by which we govern.

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
stethoscope-and-apple

How Blue Cross became part of a dysfunctional health care system

Share

Jonathan Cohn
Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

When Alma Dickson slipped on an icy sidewalk in Dallas, Texas, she knew she was hurt. But she wasn’t sure that she could pay for the medical care she needed.

The year was 1929 and Dickson, a schoolteacher, didn’t make enough money to pay for x-rays and treatment on her own.

But Dickson had recently signed up for something new: A plan under which she paid a monthly premium in exchange for a promise of care at a local Dallas hospital. Dickson went, had her broken ankle set, and left without paying a penny.

The Dallas plan eventually evolved into a network of similar plans around the country, bringing affordable medical care to millions who, like Dickson, would not have had it otherwise.

At one point, the director of the Minneapolis plan commissioned a series of advertising posters. The posters featured a nurse, whose image would quickly fade from memory. But they also featured a symbol that would become the most recognizable and, for a while, most trusted icon in American health care. That symbol was a blue cross.

Today, of course, the blue cross has come to symbolize something else: A deeply dysfunctional health care system. Last month, Anthem Blue Cross of California, a descendant of that original Dallas plan, announced that it was raising premiums for some of its customers by 39 percent.

A report from the Center for American Progress, a liberal think-tank, showed that Blue Cross plans from other parts of the country had similar ideas in mind. The high prices mean that beneficiaries will struggle to pay premiums–and, in some cases, be forced to give up coverage altogether.

But even before these rate hikes made headlines, the evolution of Blue Cross was a case study in the need for health care reform. As Robert Cunningham and Robert Cunningham Jr. recount in their 1997 book, The Blues, those early Blue Cross plans had several defining characteristics. Among them were the twin principles of “guaranteed issue” and “community rating.” The plans would sell insurance to anybody who wanted to buy it. And they would charge the same premium to every person, regardless of the person’s medical condition.

The plans did this because they were non-profits, designed not to earn money for shareholders but to insure a steady supply of paying patients for the hospitals. (It was the hospitals, who were struggling to pay their own bills during the Great Depression, that established the plans.)

What enabled the Blue Cross plans to succeed was their effective monopoly on the health insurance business. They had a huge, diverse base of customers–one based heavily on large groups of employees, like the Dallas schoolteachers–which meant they had sound finances. The majority of people were relatively healthy, with few medical bills. Their accumulated premiums were sufficient to cover the bills for that small group of people who, because of accident or disease, had much higher bills.

But as enrollment in the Blue Cross plans swelled, the commercial insurance industry took notice–and saw an opportunity. If Blue Cross was selling to everybody and charging everybody the same rate, that meant some people–healthy people–were effectively paying a bit extra in order to subsidize the sick.

The commercial insurers figured that if they could target just the healthier customers, by charging higher premiums or refusing coverage to people with medical problems, they could offer lower premiums to these people and still make a profit.

They were correct. And the effect on Blue Cross was devastating. Over time, Blue Cross plans lost more and more healthy customers, leaving a pool of beneficiaries in relatively worse health. In order to finance their medical bills, Blue Cross had to raise everybody’s premiums. With each increase, more and more healthy people fled for cheaper plans, creating a vicious cycle.

Eventually, the Blues faced a choice: Start acting like the commercial insurers, in order to compete, or go out of business. They chose the former. Soon Blue Cross plans were screening potential customers, charging them higher premiums or no coverage if they came with pre-existing conditions. Eventually, some of the plans converted outright to for-profit entities.

Anthem Blue Cross of California is the product of such a conversion. It is among the insurers that have drawn media scrutiny, and government investigations, for its practice of canceling the coverage of people who file large medical claims.

Last year Anthem Blue Cross paid a $10 million fine to the state of California for this practice and agreed to restore more than 2,000 canceled policies, although it denied any wrongdoing.

Meanwhile, its parent company, Wellpoint, posted profits of nearly $3 billion in 2009, despite the economic downturn.

Wellpoint executives have defended its approach to the insurance business, arguing–among other things–that it is necessary to compete in the marketplace.

That is true. If some insurance companies are allowed to do whatever they can to maximize profits, whether it’s keeping out people with pre-existing conditions or charging higher premiums to people with high medical expenses, then companies who don’t keep up will not be able to survive, any more than the old Blue Cross plans could.

The only solution is to prohibit all insurers from discriminating against the sick and to make sure that everybody is part of large, financially sound insurance groups in which there are enough healthy people to subsidize the cost of the sick. This is precisely what the Democratic health care reform plans would do.

Executives at Wellpoint and its affiliates have frequently said they agree with the argument. Publicly, they have pledged their support for health care reform as long as it includes an individual mandate, requiring that everybody carry coverage. (Otherwise, they argue reasonably, people won’t take coverage until they get sick, which would cause the same kind of financial death spiral that the Blues experienced decades ago.)

But they’ve carried a different message in private, lobbying against tight restrictions on pricing policies and other regulation on insurance company behavior.

It’s not surprising. The new Blue Cross plans have not only adapted to the realties of modern insurance marketplace. They’ve learned to thrive in it.

If the Democrats get their way, the plans will have to change their business model again, so that they act a bit more like the Blue Cross plans of old–the ones that helped schoolteachers, not stockholders.

Jonathan Cohn is a senior editor at The New Republic

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share
Jonathan Cohn, senior editor of The New Republic

Malpractice Reform: a test case for bipartisanship at the health summit

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic .

Ever since President Barack Obama announced he’d be having a bipartisan meeting to talk about health care reform, Republicans have been denouncing it as a charade. He’s not really interested in their ideas, they say. And he doesn’t really want their support.

But is the problem that Obama won’t listen to the Republicans–or that the Republicans won’t listen to Obama? One way to answer that question is to watch what happens at Thursday’s health ‘summit’ meeting if discussion turns to medical malpractice reform.

The issue is familiar to anybody who follows health care policy or, for that matter, anybody who has ever spoken to a doctor at length. Republicans have long said that frivolous malpractice lawsuits make medical care more expensive, by forcing doctors to spend money on lawyers, malpractice insurance and in some cases large jury awards.

In addition, they say, physicians who fear malpractice end up practicing “defensive medicine,” ordering up unnecessary tests and procedures that cost a lot of money.

The solution, according to the Republicans, is to cap jury awards, as several states have already done. California, for example, limits pain and suffering awards in malpractice to just $250,000 per case.

More often than not, Democrats have opposed malpractice reform. They’ve pointed to studies questioning just how big of an impact malpractice litigation has on overall health costs.

They have also cited evidence–fairly incontrovertible–that most victims of medical errors never get any compensation at all.

As such, Democrats have argued, capping damages won’t do a lot to reduce health care costs. What’s worse, it might discourage people with legitimate claims of malpractice from bringing legal action.

The parties’ allegiance to special interests has reinforced the political stalemate. Business groups, which traditionally support Republicans, have promoted malpractice reform because it’s part of a broader campaign to rein in liability lawsuits. (Such lawsuits frequently target corporations and result in large jury awards.)

Trial lawyers, who traditionally support Democrats, have fought malpractice reform for the same reason. (Trial lawyers are the ones arguing and making a living from such lawsuits.)

But there are ways to break the impasse. While malpractice may not be a major factor in rising health care costs, the system is clearly broken. It forces doctors to operate under a cloud of suspicion, without necessarily punishing those physicians who are truly negligent. It encourages the use of tests and treatments that are frivolous, if not downright harmful. And it leaves the vast majority of people who need compensation for medical errors with no easy way to get it.

The key is finding ways to fix the malpractice system so that it helps both physicians and the patients, rather than one at the expense of the other.And there are several promising possibilities for achieving that.

One is to have doctors report medical errors to hospital administrators, who would then notify patients and begin negotiations.

A version of this “sorry works” model is in place at the University of Michigan Health System, where it has reduced lawsuits, cut litigation costs and sped the resolution of cases.

Another idea is to create a no-fault system, similar to the way workers’ compensation works, or to channel most malpractice cases through special “health courts” that would come before jury trials. (The Scandinavian countries and New Zealand have such systems in place.)

One other proposal–perhaps the most intriguing–is to tie malpractice to quality incentives, by offering some sort of legal protection to physicians who demonstrate they have abided by accepted clinical guidelines.

Not only might such a scheme cut down on frivolous lawsuits. It might also improve the quality of care–which would, in theory, reduce the incidence of actual malpractice.

The good news is that Obama doesn’t need convincing on this front. Back in 2005, while he was still just a senator, he co-sponsored (with Hillary Clinton) a bill that would have implemented a “sorry works” model nationally. It didn’t become law, but Obama kept talking up malpractice reform. Last year, he instructed the Department of Health and Human Services to sponsor a series of demonstration projects around the country.

Michelle Mello, a Harvard professor and leading expert in the field, says experimenting with the different models is precisely the right approach to take–because the data on the different reforms is still very sketchy.

But, she adds, the experiments HHS has launched probably won’t go far enough, because they are too limited. To really see which approach works, it’s essential to get more data–and, whenever possible, to get data that covers an entire area (or areas) rather than one hospital or hospital network. Otherwise, it’s difficult to tell whether a program has worked simply because of idiosyncratic factors like a particularly dedicated staff.

This is where the Republicans could push the discussion forward. Both the House and Senate health reform bills encourage more experimentation. But they don’t set aside enough money. If Republicans wanted to do something to change malpractice, they could call for more funding of these programs–and, perhaps, more aggressive guidance about how to handle the results.

Of course, that would mean achieving malpractice reform, a cause they’ve long championed, in a different manner than the Republicans have traditionally embraced.

But that’s the definition of compromise: Finding common ground with an adversary in order to achieve a goal you both share.

Obama has shown he’s willing to do that. Will the Republicans do the same?

Jonathan Cohn is a Senior Editor at The New Republic

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share

View: The bipartisan trap – and how Democrats fell into it

Share

Jonathan Cohn, Senior Editor of The New Republic

This column is a collaboration between KHN and The New Republic.

Critics of health care reform have been hammering away at its substance for months. But, since last week’s election in Massachusetts, they’ve been focusing their attacks more on the way reform has come together in Congress.

As the argument goes, Democrats wrote the bill on their own and in secret, producing proposals full of shady back-room deals that aren’t in the public interest.

The symbol of reform’s hidden corruption is the so-called Cornhusker swindle: A promise, extracted by Nebraska Sen. Ben Nelson, that the federal government would pay the entire cost of expanding Medicaid in his state.

You can’t really defend the deal on the merits. No other state got the special treatment that Nebraska did. But if you stop and think about why Democratic leaders cut that deal, you’ll realize just how wrong-headed the broader critique of the process is.

If Democrats hadn’t been so determined to reach out to Republicans–and worked so hard for an agreement that didn’t seem overly partisan–they wouldn’t have made the Nebraska bargain, or many others, in the first place.

Remember how we got to this point–and how far President Barack Obama and the Democrats have gone to accommodate Republicans and the conservatives they represent. The plan Obama outlined on the campaign trail, the one Democratic congressional leaders endorsed, called for making sure nearly every American had insurance.

But accomplishing that would have cost well over $1 trillion over 10 years and, by some estimates, closer to $2 trillion. That was more than conservatives could stomach. To get the price tag down below $1 trillion, they settled on a plan that covered far fewer people.

The original Obama and congressional plans all called for creating a public insurance option, into which people could enroll voluntarily. But that proposal, too, ran afoul of more conservative sensibilities–and was summarily dropped.

(The House ended up including a public plan as part of its bill, but House leaders signaled long ago their readiness to drop it in order to reach a compromise with the Senate.)

These moves didn’t make health care reform more popular. If anything, they had the opposite effect. A plan that spent more money would have required finding more offsetting revenue or savings. But it also would have provided clearer, quicker benefits for middle-class people–many of whom now fear the bill does too little to improve their lives.

As for the public plan, poll after poll has shown that it is popular. And the really crazy thing is that the Democrats might have been able to keep both features–with, at most, minimal compromises–if only they’d been willing to go it alone, the way the critics insist they did.

Under Senate procedures, the Democrats had the option of passing health care reform, or at least many of its elements, through what’s called the reconciliation process. In reconciliation, a simple majority of senators can pass a bill, without the threat of a filibuster. Rules limit what can and can’t be considered during the process, so it has definite drawbacks.

But if Democratic congressional leaders were determined to pass something on their own–the way, say, Republican congressional leaders were frequently during the Bush years–they could have gotten much and maybe most of what they wanted.

But they didn’t–in no small part because they didn’t want to act in such a blatantly partisan way. Whether that was a matter of principle (i.e, they really believed bipartisanship is important) or a matter of perception (i.e., they thought voters would get mad), it ended up constraining them all year long.

Instead of wrapping up negotiations and passing bills before the summer was over, the process dragged into the fall and winter.

Over and over again, Democratic leaders (particularly Senate Finance Chairman Max Baucus) reached out to Republicans, only to be rebuffed.

When that didn’t work, they were left trying to deal with the most conservative members of their own caucus–culminating in the negotiations with Nelson and the promise to cover his state’s Medicaid expansion.

If Senate Democrats hadn’t needed Nelson’s vote to break the expected Republican filibuster–if they could have passed health reform with a “mere” 59-vote majority–they could have told Nelson to take a proverbial hike.

The same, by the way, goes for all of the other back-room deals made to pass this bill. If Obama and his supporters had a greater margin for error–if they could have passed health care reform with a simple majority of votes, instead of the 60-vote supermajority forced by the threat of Republican filibusters–they wouldn’t have had to make so many concessions to special interests that wield influence over the Congress.

But every special interest knew that the Democrats had a razor-thin margin for success–and that gave them maximum leverage. They understood early on that, by trying in good faith to reach deals with Republicans and conservatives, Democrats were falling into a trap–the one that’s ensnaring them now.

Jonathan Cohn is a Senior Editor of The New Republic.

This column was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Share