Current Health Reform Proposals No Government Takeover of by Anti-Flag


									                     Current Health Reform Proposals:
              No Government Takeover of American Health Care
                              Timely Analysis of Immediate Health Policy Issues
                                               September 2009
                                                Stan Dorn and Stephen Zuckerman

    Current national health reform proposals would not cause “a government takeover of health care.” Pending legislation
    would leave in place the country’s largely private medical care system, in which more than 90 percent of doctors are in
    private practice and 84 percent of all hospital admissions are to private facilities.
    Reform proposals would not give the federal government new authority to intervene in private health care decisions.
    Rather, legislation would mainly extend two current responsibilities of the public sector: to fund health coverage for low-
    income, uninsured Americans and to regulate health insurance so that it meets consumers’ needs. In fact, reform
    proposals would substantially increase health plan choices for many people, including workers covered by small firms.
    While 73.2 percent of these employees are offered just one plan today, pending legislation would let them choose from
    among multiple, diverse health plans available in a new health insurance exchange.
    Some predict that including a public plan in such an exchange would cause private health insurance to unravel, ultimately
    “removing the medical sector from the free enterprise system.” However, under the original version of the House Tri-
    Committee proposal, the Congressional Budget Office (CBO) estimates that, by 2019, 12 million people⎯just 4.3
    percent of Americans under age 65⎯ will be in the public option. Private insurance will cover 191 million people,
    according to CBO, or nearly 16 times the number in the public plan. Further, it is the consumer who chooses whether to
    enroll in public or private coverage offered through the exchange—a key detail sometimes obscured by arguments against
    reform. Finally, even if the public plan fully replicates Medicare’s basic structure, it will simply pay private health care
    providers for furnishing covered services. Using this approach, Medicare has achieved high levels of beneficiary
    satisfaction, wait times below average levels under private insurance, and a choice of physician that equals or exceeds
    that available through private coverage. Former Senate Majority Leader Bill Frist (R-TN) recently acknowledged that
    Medicare is not socialized medicine; the same would be true of a public plan based on Medicare.
    Many claims about government-run health care are based on hypothesized future scenarios that go far beyond current
    proposals. Such speculation can easily prove unfounded, as illustrated by confident predictions in the early 1960s that
    enacting Medicare would eventually lead to the conversion of American medicine into a socialized system for all
    With the debate over national health reform heading into a critical, perhaps determinative phase, reliable and objective
    analysis needs to focus on the details of current proposals and their likely results. Based on this standard, it is clearly
    mistaken to claim that proposed health reforms would lead to a government takeover of American medicine.

    Introduction                                given the emotional arguments now           medicine agenda,”2 with
                                                being made on all sides as well as          “bureaucrats making the health care
    At this critical juncture of the            the subject’s complexity.                   decisions that should stay with
    national health care reform debate,                                                     doctors, patients, and their loved
    decisionmakers and their                    This paper focuses on one central           ones.”3 In examining these
    constituents need clear and                 claim in the debate —namely, that           assertions, we do not mean to
    objective information about the             proposed reforms would represent            suggest that any one side in the
    content and implications of the             “a government takeover of health            debate has a monopoly on
    proposed changes. This is not easy,         care”1 that promotes a “socialized          unfounded claims. For example,

proponents of reform now attack the        major steps towards “socialized             2. A health insurance exchange
insurance industry’s role in the           medicine” or “government-run                   would offer diverse health
national debate, even though the           health care.” The authors explained            plans. People without access to
industry has agreed (assuming that         that socialized systems provide                employer-sponsored insurance
reform legislation fits certain            health care through government-                could buy coverage through the
parameters)4 to end preexisting            employed staff operating in                    exchange, which would feature
condition exclusions and similar           government-owned facilities. That              competing plans offering a
practices.5 Some reform advocates          paper concluded that most of the               variety of benefits, deductible
likewise suggest that increased            proposals10 advanced by Democratic             and copayment options,
preventive care automatically              candidates did not involve                     provider networks, and
lowers overall health care spending,       socialized or government-run health            premiums. Consumers who
despite much evidence to the               care, since they continued the                 select more costly plans would
contrary.6                                 central role played by private health          pay the associated higher
                                           care providers and insurers, leaving           premiums. Small firms (and
In addition, it is clear that supporters   considerable decisionmaking                    possibly other companies)13
of the current reform bills face           authority in private hands. Dorn and           would have the option to cover
legitimate questions. How many             Holahan suggested that claims about            their workers through the
low-income uninsured will use              a “government takeover of health               exchange, but each employee
Medicaid and new subsidies to              care” were a distraction from the              would choose his or her own
obtain coverage, given the                 more important issues of how                   plan.
proposals’ individual mandates and         reform proposals would affect cost,
enrollment systems? Are the                access to care, quality, and                3. Consumers buying coverage in
subsidies large enough to mandate          consumer choice. Over the past 16              the exchange could select a
enrollment or will many people             months, little has changed regarding           publicly-administered health
need to be exempt due to                   the meaning of “socialized                     plan. Depending on the
affordability concerns? Are the            medicine,” but the issue warrants              proposal, such a plan may
proposals to slow the growth in            reexamination given the specific               resemble Medicare, with a
health care costs adequate?7 Are           reform proposals now before                    federal agency paying private
there risks to moving low-income           Congress.                                      providers, or it could be a
children from current public                                                              consumer-owned cooperative.
programs into private insurance?8          Current health care                            In both cases, each consumer
Will slower growth of some                 reform proposals                               would decide whether to enroll
Medicare payment rates create                                                             in the public plan or in coverage
access problems for beneficiaries?         We focus on the reform proposals               offered by private insurers
                                           passed by four congressional                   through the exchange.
We do not attempt to address the           committees and under consideration
full range of such questions or to         in a fifth.11 While details vary, the       4. Individuals would be required
analyze the advantages and                 proposals share a remarkably                   to obtain health coverage,
disadvantages of proposed reforms’         similar basic structure:                       unless they cannot afford it.
many facets. Instead, this paper
builds on a previous exploration of        1. The low-income uninsured                 5. Employers above a threshold
what is meant by “socialized                  would receive subsidies.                    size would be required to help
medicine” and assesses what seems             Medicaid would cover the                    finance health care, by either
to be emerging as the primary                 poorest uninsured, and new                  buying coverage for their
public argument against reform.               federal subsidies would assist              workers or paying a tax to the
                                              people with incomes too high                federal government.
Previous analysis                             for Medicaid but too low to              6. New requirements would apply
               9                              afford health insurance without             to health insurers. Insurance
In April 2008, Dorn and Holahan
                                              help.12                                     companies could not exclude
analyzed claims that proposals
being advanced during the                                                                 the treatment of preexisting
presidential campaign represented                                                         conditions or engage in similar

                                                                            Timely Analysis of Immediate Health Policy Issues 2

    practices.14 Health plans would    The overall structure of                    Equally absent from current
    also have to follow new            proposed reforms                            proposals are attempts to vest the
    minimum benefit rules, such as                                                 federal government with direct
    required coverage of preventive    A typical criticism of the pending          control over medical
    care without copayments.15         reforms states: “The Obama health           decisionmaking. Presently, both
                                       care plan would allow, and even             private and public insurers define
7. Various policies would attempt      require, the government to take over        the limits of covered services, and
   to slow the growth in health        and run every aspect of the                 doctors and nurses attempt to meet
   care costs. Medicare pilot          American health care system… For            their patients’ needs, subject to
   projects would test promising       doctors, surgeons, and specialists,         these definitions. This same
   innovations, such as new            this also involves a substantial loss       approach would continue under
   payment methods that “reward        of control over their practice of           proposed legislation, without any
   value rather than volume.” If       medicine. Their clinical judgment           new federal authority that
   these experiments succeed,          would be increasingly displaced by          circumscribes the practice of
   Medicare could expand them.         the diktats of faraway government           medicine.
   Private insurers could also apply   bureaucrats who don’t even know
   successful Medicare                 their patients.”17                          Instead of mandating or forbidding
   innovations, as they have done                                                  any particular service, the proposed
   in the past.16 A separate cost-     Rather than expand government’s             expansion of comparative
   related measure would sponsor       role as the direct provider of health       effectiveness research would simply
   research into the comparative       care, current proposals leave the           provide patients, physicians, and
   effectiveness of alternative        practice of medicine firmly in              insurers with better information
   medical treatments.                 private hands. Fewer than 3 percent         about the treatments that are most
                                       of the nation’s physicians are              effective for particular medical
8. Increased costs would be fully      federal employees working for the           conditions. This element of reform
   funded by new revenues and          military, the Veterans Health               extends the tradition of federally
   policies that slow the growth of    Administration, or the Public Health        funded health care research
   Medicare and Medicaid               Service.18 Among nonfederal,                exemplified by the National
   spending. While proponents of       patient-care doctors, only about 5          Institutes of Health and the Agency
   reform all articulate this goal,    percent are employed by a city,             for Healthcare Research and
   final scoring from the              county, or state government.19 All          Quality. Gail Wilensky, who ran
   Congressional Budget Office         other such physicians are full- or          Medicare and Medicaid for
   has not yet demonstrated            part-owners of their practices or           President George H.W. Bush,
   whether this goal would be          employed by a privately owned               supports comparative effectiveness
   reached, and pending proposals      entity. Similarly, 84 percent of all        research as “providing objective,
   vary in how they raise revenue      hospital patients were admitted to          credible information on the likely
   and reduce projected spending       private facilities in 2006.20 The           clinical outcomes of different
   on current public programs.         remainder were treated at hospitals         strategies to treat the same medical
                                       run by state and local governments          condition. The information
In the main, reform proposals
                                       or the Veterans Health                      produced and disseminated would
simply extend the public sector’s
                                       Administration. Although Medicare           be intended to better inform clinical
current roles in funding low-income
                                       is a government-run program, its            decision making and to help design
health coverage and regulating
                                       beneficiaries were no more likely           sensible reimbursement
insurance. The most significant new
                                       than were the privately insured to be       strategies.”23 To insulate this
public responsibilities involve
                                       admitted to a government-run                potentially valuable research from
coverage mandates imposed on
                                       facility.21 Nothing in pending              allegations of rationing, pending
individuals and employers, but such
                                       proposals would increase the                legislation specifies that the agency
mandates do not seem to be the
                                       proportion of care provided in              conducting comparative
primary concerns raised by those
                                       publicly owned hospitals or by              effectiveness research has no
warning of a “government takeover
                                       publicly employed physicians.22             authority to impose “coverage,
of health care.”

                                                                        Timely Analysis of Immediate Health Policy Issues 3

reimbursement, or other policies for    through the exchange would be                 the “government takeover” label
any public or private payer.”24         more like shopping in a traditional           could have been attached to the
                                        marketplace, where consumers                  creation of Social Security and
A central feature of pending            balance the positive features of each         Medicare, the Environmental
proposals is the variety of choices     product against its price, and sellers’       Protection Agency, the federal
offered to consumers and to             desire for market share drives                highway system, and the National
businesses. By letting consumers        innovation and competition. This              Park system, each of which
choose from among diverse,              market-oriented approach to health            extended the federal government’s
competing health plans, with new        coverage seems at odds with claims            authority into a new sphere of
protections for patients with           that proposed reforms represent               American life, but none of which
preexisting conditions, the exchange    steps toward socialized medicine.             led to a socialist economy.
will dramatically increase coverage
options for many people. For            Notwithstanding those options,                During the debate over
example, 73.2 percent of workers        current proposals would also impose           reauthorizing SCHIP in September
covered by companies with fewer         important new responsibilities that           2007, Senator Grassley of Iowa
than 50 employees were offered a        would constrain some choices.                 made comments that may fairly
single health plan in 2008.25 These     Individuals would have to buy                 apply to many of today’s arguments
are the very workers most likely to     insurance if they can afford it.              against broader reforms. He noted
obtain coverage through the             Medium-sized and larger employers             that “screaming ‘socialized
exchange under reform proposals.        likewise would be required to                 medicine’ during a health care
By the same token, small firms will     contribute to their workers’ health           debate is like shouting ‘fire’ in a
gain a new option to insure their       care costs. Insurers would need to            crowded theater. It is intended to
employees through an exchange           cover preexisting conditions and to           cause hysteria that diverts people
that, by purchasing coverage            offer benefits that meet minimum              from looking at the facts.”30
collectively on behalf of numerous      requirements.26 Proposed reforms
individuals and companies, can          thus involve a straightforward                The public plan
apply substantially increased           exercise of traditional regulatory            Critics of reform argue that “a
leverage to get better deals from       authority.27                                  government-run insurance option”
insurance companies than small                                                        will “slowly erode existing private
businesses now obtain on their own.     Pending proposals likewise spend
                                        federal funds to subsidize health             insurance plans to the point where
At the same time, employers and                                                       the so-called government option is
individuals will remain free, if they   coverage for low-income
                                        Americans. Similar fiscal                     the only option,”31 thus causing
prefer, to purchase coverage directly                                                 “lower quality of care” by
from insurers, without going            arrangements in the past have not
                                        turned American medicine into a               “removing the medical sector from
through the exchange.                                                                 the free enterprise system.”32
                                        government-run enterprise.
Critically important, current           Examples include President Bush’s             This argument has three serious
proposals would shift the locus of      investment in community health                flaws. First, including a public plan
health plan choice. Today,              centers, which created or expanded            as an option in the health insurance
employers typically make health         more than 1,200 such centers;28 the           exchange is highly unlikely to end
insurance decisions for employees       establishment of the State                    the private health insurance industry
and their families. Under the           Children’s Health Insurance                   in America. The original Tri-
proposal, by contrast, consumers in     Program (SCHIP) in 1997; and the              Committee House bill included the
the exchange would choose their         creation of Medicare and Medicaid             most aggressive public health plan
own health plans, taking into           in 1965.                                      provisions of any major reform
account personal financial                                                            proposal.33 The Congressional
resources, available subsidies, and     Some contend that any significant
                                        increase in the federal government’s          Budget Office recognized inherent
their families' health care needs.                                                    uncertainties but estimated that,
Those who select more costly plans      role represents a dangerous step
                                        toward a government-run, socialist            under that proposal, only 12 million
would pay more. Compared to the                                                       out of 282 million nonelderly
status quo, buying health insurance     economy.29 From this perspective,
                                                                                      Americans, or 4.3 percent, would

                                                                           Timely Analysis of Immediate Health Policy Issues 4

enroll in the public plan by 2019.34                   consumers purchasing nongroup                          cooperative or the amended version
CBO estimated that private                             coverage outside the exchange, for a                   of the House bill that passed the
insurance would cover 158 million                      total of 191 million privately                         Energy and Commerce Committee,
people through employers’ purchase                     insured, or nearly 16 times the                        involve a public or quasi-public plan
of insurance outside the exchange,                     number of public plan enrollees                        with even less capacity to compete
24 million in private plans offered                    (figure 1). Other forms of a public                    effectively with private insurers.35
through the exchange, and 9 million                    option, such as a consumer-owned

    Figure 1. Congressional Budget Office projections of FY 2019 health coverage
    under the original specifications of the House Tri-Committee proposal (millions of
    people under age 65)

                                                          Private insurance,
                                                        inside the exchange,
                                                                24 Mil.             Public plan inside the
                                                                                      exchange, 12 Mil.

                               Uninsured, 17 Mil.

                          Medicaid/CHIP, 46 Mil.

                                                                                                              Private, employer-
                                                                                                            purchased insurance
                                                                                                            outside the exchange,
                                  Other insurance                                                                  158 Mil.
                               outside the exchange,
                                       16 Mil.

                                  Private nongroup
                                insurance outside the
                                   exchange, 9 Mil.

    Source: Authors’ calculations based on estimates by CBO, July 17, 2009, and July 26, 2009.
    Notes: “Other insurance outside the exchange” includes various systems of coverage that include Medicare for people under age 65 and care
    offered to active-duty military and veterans. “Private insurance inside the exchange” includes 20 million individual enrollees and 4 million people
    whose employers provide coverage through the exchange. “Public plan” members include 10 million individual enrollees and 2 million people
    whose employers provide coverage through the exchange.

                                                                                                  Timely Analysis of Immediate Health Policy Issues 5

CBO anticipated that only              In a different analysis, The Lewin           The claim that an inherently inferior
companies with fewer than 50           Group estimated (assuming full               public option would replace most
employees would be allowed to buy      implementation in 2011) that the             private health insurance has a
coverage through the exchange.         public plan could cover 103.4                second major flaw—namely, it is
According to 2008 survey data, this    million people, considerably more            individual consumers who decide
would exclude from the exchange        than forecast by CBO.39 Lewin’s              whether to enroll in the public plan
81.6 percent of all workers whose      analysis has been cited as evidence          or in private insurance options
employers furnish them with health     that an exchange with a public plan          offered through the exchange. If
insurance.36                           would dramatically reduce private            problems emerge with the public
                                       insurers' role, helping lead to “a           plan, consumers can vote with their
CBO also concluded that the            government-run, single-payer                 feet and move to private coverage.
proposal, rather than lead most        monopoly, with all private plans
firms to drop coverage and let their   driven out of business.”40                   The distinction between an option to
workers buy insurance through the                                                   select a public plan and mandatory
exchange, would cause a small net      However, as the Lewin analysts               enrollment into publicly
increase in employer coverage.         made clear, their estimate assumed           administered coverage makes a
Among other reasons, current           that the exchange would be                   dramatic difference to popular
federal tax advantages would           available to all employers, which is         support. A survey of likely voters in
continue to favor employer payment     not required by current legislative          January 2009 found that, while 73
of insurance premiums, medium-         proposals or believed likely by              percent supported giving all
sized and larger firms would face a    CBO. In addition, Lewin’s                    Americans a choice between public
financial penalty if they dropped      calculations assumed that the public         and private health plans, only 9
coverage, and employers would be       plan would pay providers at                  percent supported a proposal that
pressured to help their workers meet   Medicare rates and have                      would enroll everyone into public
the individual coverage mandate.       considerably lower administrative            coverage.42 The power of individual
CBO’s analysis is consistent with      costs than those incurred by private         consumers to decide whether to
experience in Massachusetts, where     insurers (although higher than               enroll in a public plan thus seems to
the combination of subsidies, a        Medicare administrative spending),           be a critically important element of
health insurance exchange, and an      resulting in public plan premiums            current proposals. Nevertheless,
individual mandate caused a nearly     30 to 40 percent below those for             some opponents of pending
3 percentage point increase in         comparable private coverage. If              legislation charge that reforms
employer coverage.37                   such a sizable cost advantage                involve a “massive, forced
                                       materialized, many people would              dislocation of currently insured
CBO further determined that,           select the public option. However,           individuals” who would
among the estimated 36 million         CBO determined that the likely               “involuntarily lose their coverage
Americans receiving coverage           premium differential would be                due to a government-run plan,”43
through the exchange, one-third        closer to 10 percent, taking into            and that “millions more Americans
would choose the public plan. This     account factors not considered by            will be forced onto a government-
is consistent with experience in       Lewin.41 When the Lewin analysts             run plan.”44 This perception is at
California, which runs the nation’s    calculated the effects of a 10 percent       odds with the clear legislative
largest health coverage system for     premium differential and assumed             language and CBO’s analysis of
public employees outside the federal   that only small employers and                pending proposals and their clear
government. California offers state    individuals could use the exchange,          legislative language.
workers 10 health plan options, 3 of   they estimated that 17 million
which are run by the same public       people would enroll in the public            Third, the public plan would not
agency that provides health and        plan—a number quite close to                 “remove medical care from the free
retirement benefits. In 2008, 29.3     CBO’s projection, given the                  enterprise system,” even if the
percent of state employees and         uncertainties inherent in all of these       public plan was based squarely on
retirees chose a public option.38      estimates. This lower estimate               Medicare. While programs like the
                                       suggests a strong and ongoing role           Veterans Health Administration
                                       for private health insurance.                (VA) furnish care through publicly

                                                                         Timely Analysis of Immediate Health Policy Issues 6

owned health care facilities and        The eventual consequences                    One noteworthy example is Ronald
publicly salaried medical staff,        of proposed reforms                          Reagan’s prediction in the early
Medicare pays private doctors and                                                    1960s about federal legislation that
hospitals who provide covered           Most of the claims that reform               later became the Medicare program:
services, and such providers            would impose federal control over
exercise considerable flexibility in    the health care system involve               First you decide that the doctor can
determining the care they furnish.      alarmist speculation about future            have so many patients. They are
As former Senate Majority Leader        events. For example, although the            equally divided among the various
Bill Frist (R-TN) recently              statutory language of current                doctors by the government. But then
acknowledged, “Socialized               proposals as well as CBO                     doctors aren’t equally divided
medicine is not Medicare.               projections suggest that, in the short       geographically. So a doctor decides
Socialized medicine is you [i.e., the   run, proposed reforms will not turn          he wants to practice in one town
government] own the hospitals, you      American medicine into a publicly            and the government has to say to
own the doctors… The VA is              administered enterprise, a recent            him, you can’t live in that town.
socialized.”45                          Heritage Foundation paper predicts           They already have enough doctors.
                                        that events will unfold differently.         You have to go someplace else. And
Medicare gives beneficiaries a          The public plan “would be a wholly           from here it’s only a short step to
choice between enrolling in a           owned subsidiary of Congress,” so            dictating where he will go…. All of
private health plan and seeking care    “if the exchange became a powerful           us can see what happens once you
from private providers whom the         regulatory agency,” Congress would           establish the precedent that the
program reimburses on a fee-for-        have “powerful incentives to set the         government can determine a man’s
service basis. There is considerable    rules to the advantage of its own            working place and his working
evidence that Medicare beneficiaries    plan,” causing “the deck [to] be             methods, determine his employment.
are quite happy with the program.       stacked against private-sector               From here it’s a short step to all the
More than 90 percent of                 players in a game that is rigged from        rest of socialism, to determining his
beneficiaries report good access to     the start,” thus “ensur[ing] the             pay. And pretty soon your son won’t
care.46 In fact, when compared to       eventual triumph of a single-payer           decide, when he’s in school, where
privately insured individuals age 50    system of national health insurance          he will go or what he will do for a
to 64, Medicare beneficiaries are       run by Washington.”51                        living. He will wait for the
less likely to experience waits for                                                  government to tell him where he will
either routine appointments or          A second example of such extended            go to work and what he will do.53
urgent care.47 Despite Medicare’s       extrapolation involves comparative
potentially open-ended cost-sharing     effectiveness research. Despite the          Reagan further claimed that the
obligations, only 15 percent of         above-described statutory language           backers of Medicare subscribed to a
elderly Medicare beneficiaries have     and the bipartisan origins of this           “foot in the door philosophy”
any problems paying medical bills,      policy initiative, Conservatives for         through which the creation of
compared to 30 percent of adults        Patients’ Rights sees it as “a first         Medicare “for this particular
with private coverage.48 In addition,   step towards rationing care in the           population” would later expand into
Medicare beneficiaries are              U.S.,” anticipating the ultimate             a system of “socialized medicine for
significantly more confident than       outcome as “injecting a government           every American.”54 None of these
older adults with employer coverage     bureaucracy between patient and              predictions came true. If reform
that they can get high-quality, safe    doctor in the name of cost,” which           legislation passes in anything like its
medical care when they need it.49 In    “can only lead to sacrificing care for       current form, opponents of today’s
giving enrollees their choice of        those whose perceived life value             proposals may not prove any more
physician, Medicare nearly equals       cannot meet the government’s                 accurate in their forecasts.
the flexibility offered by private      cost/benefit standards.”52
Preferred Provider Organizations
                                        Such projections of the future that
(PPOs) and exceeds the options                                                       The late Senator Daniel Patrick
                                        go far beyond the legislative
available through private Health                                                     Moynihan cautioned that “we are all
                                        proposals do not enjoy an
Maintenance Organizations                                                            entitled to our own opinions, just
                                        impressive track record of success.
(HMOs).50                                                                            not our own facts.” That warning is

                                                                          Timely Analysis of Immediate Health Policy Issues 7

well-taken for everyone involved in                  where we are in the legislative                           this standard, it is hard to conclude
helping the public understand the                    process, reliable and objective                           that health reform legislation would
complex undertaking of national                      analysis needs to focus on the                            lead to a government takeover of
health reform and assess its                         details of current policy proposals                       American medicine.
potential risks and benefits. Given                  and their likely results. Based on

                                                     9                                                         16
                                                       Stan Dorn and John Holahan, Are We Headed                 For example, most private insurers pay
  House Majority Leader John Boehner,                Towards Socialized Medicine? Prepared by the              physicians based on a multiple of Medicare’s fee
Americans Concerned about Impact of Dems'            Urban Institute for the Robert Wood Johnson               schedule; and when Medicare changed hospital
Health Care Plan on Taxpayers, Families,             Foundation, April 2008.                                   reimbursement to pay based on each patient’s
Seniors, August 6, 2009,                                                                                       Diagnosis-Related Group (DRG), most private       10
                                                        The one exception involved a proposal                  insurers followed suit.
tSingle.aspx?DocumentID=141038.                      advanced by Congressman Kucinich. While the
                                                     Kucinich proposal would preserve the private                Peter Ferrara, The Obama Health Plan:
 FreedomWorks, FreedomWorks Leads                    sector’s role in furnishing care, the federal             Rationing, Higher Taxes, and Lower Quality
Grassroots Fight against ObamaCare, July 21,         government’s authority would be so expansive as           Care, The Heartland Institute, August 2009.
2009,                                                to represent the functional equivalent of socialized                                                                18
                                                     medicine. Among its other features, the proposal             American Medical Association, Physician
mworks-leads-grassroots-fight-against-obamac.        would make it illegal to provide almost any health        Characteristics and Distribution in the US, 2003-
                                                     care services outside a greatly expanded Medicare         2004, Chicago, IL, 2004.
  Newt Gingrich, “Deal Bites Dogs,” Washington       program, place all capital investment decisions
Examiner, July 31, 2009.                                                                                       19
                                                     related to health care in the hands of the federal           Based on tabulations from the 2004-2005
                                                     government, and forbid the for-profit provision of        Community Tracking Study Physician Survey.
  America’s Health Insurance Plans (AHIP), the       health care.
industry trade association, has agreed that, if                                                                20
                                                                                                                  Authors’ calculations based on data from: (1)
legislation mandates the purchase of health          11
                                                       Reform bills have been passed by the Senate             American Hospital Association, AHA Hospital
coverage, practices such as excluding preexisting    Health, Education, Labor and Pensions (HELP)              Statistics: 2008 Edition, Health Forum: Chicago,
conditions can be outlawed, since consumers will     Committee and the House Committees on                     IL; and (2) Personal communication with staff at
no longer have the option of delaying the            Education and Labor, Energy and Commerce, and             the Veterans Health Administration. Hospitals
purchase of insurance until they get sick.           Ways and Means. The Senate Finance Committee              operated by the Veterans Health Administration
                                                     has released an outline of policy options and is          are public facilities and admit approximately
  For example, insurers would be forbidden from      working on a legislative proposal for potential           800,000 patients each year.
limiting benefits or raising premiums based on the   action in September.
individual medical condition of each consumer;                                                                 21
                                                                                                                 Medicare Payment Advisory Commission
and premiums could vary by no more than a            12
                                                       The upper end of subsidy eligibility varies from        (MedPAC), A Data Book: Health Spending and
specified ratio based on such factors as age,        300 percent of the federal poverty level in the           the Medicare Program, page 73, June 2009.
gender, industry of employment, and area of          proposal under discussion in the Senate Finance
residence.                                                                                                     22
                                                     Committee to 400 percent in the bills adopted by             If anything, the proportion of care furnished
                                                     the other committees.                                     privately may increase; some reform proposals
  Congressional Budget Office, letter to the                                                                   fund health insurance subsidies through reduced
Honorable Nathan Deal, August 7, 2009,               13
                                                       For example, the House Tri-Committee bill               payments to safety-net hospitals and could lead to          leaves it to the exchange administrator to                the closure of public hospitals.
=1.                                                  determine whether large employers can
                                                     participate after the first two years the exchange is       Gail R. Wilensky, “The Policies and Politics of
  See Robert Pear, “House Committee Approves         operational.                                              Creating a Comparative Clinical Effectiveness
Health Care Bill,” New York Times, July 16,                                                                    Research Center,” Health Affairs, July/August
2009, discussing CBO Director Doug                   14
                                                        Plans are likewise forbidden from engaging in          2009; 28(4): w719-w729.
Elmendorf’s concerns about proposed                  medical underwriting—that is, assessing
legislation’s impact on cost growth.                                                                           24
                                                     individual enrollees’ health risks to determine the          New Social Security Act Section 1181(h),
                                                     coverage that will be offered or the premiums that        added by H.R. 3200, Section 1401(a).
  See Genevieve M. Kenney and Stan Dorn,             will be charged—or rescinding coverage if an
Health Care Reform for Children with Public                                                                    25
                                                     illness arises.                                              Agency for Healthcare Research and Quality,
Coverage: How Can Policymakers Maximize                                                                        Center for Financing, Access and Cost Trends.
Gains and Prevent Harm? Prepared by the Urban        15
                                                        As another example, some proposals forbid              2008 Medical Expenditure Panel Survey-
Institute for the Robert Wood Johnson                lifetime or annual limits on the amount of covered        Insurance Component (MEPS-IC).
Foundation, June 1, 2009.                            services.

                                                                                                    Timely Analysis of Immediate Health Policy Issues 8

  House Tri-Committee bill includes standards               people would enroll in the public plan, given
that seek to prevent discrimination by insurers           In his only public speech since leaving office,           CBO’s estimates.
based on health status (H.R. 3200, Sections 111-          George W. Bush indicated openness to this line of
116) and that require health insurance to include         argument. According to CNN: “Bush was asked                  The Senate Finance Committee proposal
certain “essential benefits” (H.R. 3200, Sections         what he thinks about conservative pundits who             appears likely to include, not a publicly
121-124). State insurance regulators would                claim the Obama administration’s fiscal policies          administered health plan, but a health insurance
enforce these minimum federal standards, but              are opening the door to socialism. ‘I've heard talk       co-op owned by consumers. The House Energy
they could set more demanding standards. If states        about that,’ he said. ‘I think the verdict is out. I      and Commerce Committee, after negotiations
did not enforce these rules, federal enforcement          think people are waiting to see what all this             between House leadership and “Blue Dog”
would occur. The goal articulated by                      means.’” Peter Hamby, “Bush: ‘The information             Democrats, approved a bill that eliminated any
congressional sponsors is to require insurers to          we got saved lives,’” CNN Political Ticker, May           linkage between Medicare reimbursement rates
treat people fairly by making them accountable to         29, 2009,                                                 and the public plan, applied to the public plan
a transparent set of rules. In the end, there would        various legal requirements that also govern
be more uniformity in insurance rules across              sh-the-information-we-got-saved-lives/.                   private insurance, facilitated the establishment of
states than currently exists.                                                                                       state-level rather than federal exchanges, and
                                                             John K. Iglehart, “Fate of SCHIP—Surrogate             supported the development of health insurance co-
   Under current law, the federal government              Marker for Health Care Ideology,” New England             ops owned by consumers. See Amendment to the
regulates some aspects of insurance markets. For          Journal of Medicine 357, no. 21 (November 22,             Amendment in the Nature of a Substitute to H.R.
example, employers cannot exclude preexisting             2007): 2104–2107.                                         3200 offered by Mr. Ross of Arkansas, Mr. Hill of
conditions for new workers with prior, continuous                                                                   Indiana, Mr. Matheson of Utah, Mr. Space of
coverage, and states must prevent certain types of          Conservatives for Patients’ Rights, Say No to           Ohio, Mr. Barrow of Georgia, Mr. Gordon of
discrimination based on health status when people         Government-Run Healthcare, undated on-line                Tennessee, and Mr. Melancon of Louisiana
transition from employer-sponsored insurance to           petition,          (AINS-EC_001), July 31, 2009, 6:40 pm,
non-group coverage. Mila Kofman and Karen                 run-healthcare.php.                             
Pollitz, Health Insurance Regulation by States                                                                      90731/hr3200_ross_2.pdf.
and the Federal Government: A Review of                      Conservatives for Patients’ Rights, All Roads
Current Approaches and Proposals for Change,              Lead to Government-Run Healthcare,                           Authors’ calculations from Agency for
prepared by Health Policy Institute, Georgetown               Healthcare Research and Quality, 2008 MEPS-IC.
University, April 2006,                                   df.
                                                                                                                    37                                                                     Sharon K. Long, “On the Road to Universal
nsuranceReportKofmanandPollitz-95.pdf.                      For example, payment rates are set at Medicare          Coverage: Impacts of Reform in Massachusetts at
However, the states, rather than the federal              levels for the first three years of plan operation,       One Year,” Health Affairs, Web Exclusive, June
government, currently set minimum benefit                 with a 5 percent increase for providers who also          3, 2008. Subsequent surveys show that employer-
requirements, which do not apply to self-insured          accept Medicare; Medicare-participating                   sponsored coverage continued to grow after the
coverage. As explained above, proposed                    providers automatically participate in the new            one-year period documented by Long.
legislation would expand the federal                      public plan, unless they opt out; and federal funds       Massachusetts Division of Health Care Finance
government’s role in this area by setting a “floor”       help capitalize the public plan, amortized over 10        and Policy, Health Care in Massachusetts: Key
below which state benefit standards could not fall,       years of premium payments. House Ways and                 Indicators, February 2009.
and these new national rules would apply to self-         Means Committee, America’s Affordable Health
insured plans.                                            Choices Act Section-by-Section Analysis, July 14,            A similar proportion, 27.9 percent, chose a
                                                          2009,                                                     publicly-administered plan in 2003, the earliest
   The President’s 2009 Budget for the U.S.                 year for which data are available, suggesting a
Department of Health and Human Services,                  ys3200.pdf.                                               relatively stable level of enrollment into public                                                                      coverage, rather than the rapidly growing
get/hhs.pdf.                                                 CBO, Letter to the Honorable Charles B.                percentage some observers (but not CBO) foresee
                                                          Rangel, July 17, 2009,                                    under federal reform proposals. Authors’
   As noted in one news article, “Republican                 calculations, California Public Employees’
opponents say [President Obama’s] commitment              200.pdf; CBO, Letter to the Honorable Dave                Retirement System (CalPERS), Preparing for
of huge sums to try to revive the ailing economy          Camp, July 26, 2009,                                      Tomorrow: Comprehensive Annual Financial
is driven by a philosophical belief in greater               Report, Fiscal Year Ended 6.30.08, December 17,
government intrusion in many areas, from                  -26-InfoOnTriCommProposal.pdf. In the former              2008; Authors’ calculations, CalPERS,
healthcare to education, dubbing it socialism.”           document, CBO estimated that 30 million people            Comprehensive Annual Financial Report,
Tabassum Zakaria, “Resistance Grows to                    would receive coverage through the health                 California Public Employees’ Retirement System,
Obama’s Bigger Government,” Reuters News                  insurance exchange in FY 2019, and 164 million            Year Ended June 30, 2003, December 17, 2003.
Service, March 22, 2009,                                  would receive ESI. In the latter document, CBO            On the general issue of state-administered plans             made several important clarifications: its estimate       for state employees, Moffit argues that such self-
E52L0J820090322?sp=true. As one example, on               of 164 million ESI recipients included 6 million          funded forms of coverage are not analogous to the
May 5, 2009, Lou Dobbs commented on his radio             people whose employers would buy them                     kind of public plan included in reform proposals,
show, “For the first time in the history of the           coverage through the exchange; and these 6                since these state plans typically carry the trade
United States, the federal government has                 million people were not counted in CBO’s                  name of a private insurer, and states, rather than
supplanted sales, property, and income taxes at           estimate that 30 million people would be covered          perform as an insurer, simply contract with third-
the state level as the biggest source of money for        through the exchange. As a result, we concluded           party administrators to handle claims payment and
state and local governments,” adding that “so             that 36 million would receive coverage through            similar functions. Robert E. Moffit, State
socialism has arrived in the first three months of        the exchange. CBO further explained that,                 Employee Health Care as a “Public Plan,” The
this year, folks, and it is—well, it is what it is, and   whether they reach the exchange as individuals or         Heritage Foundation, May 28, 2009. In California,
it’s not going to change, I’m afraid, for a little        through employer sponsorship, one-third of                the former concern is not well-taken. The publicly
while.” Media Matters, "Mr. Independent" Dobbs            exchange participants would choose the public             sponsored plans are named “PERS Choice,”
repeatedly smears Obama, progressives as                  plan. We accordingly calculated that 12 million           “PERS Select,” and “PERSCare,” after CalPERS,
"socialist," August 6, 2009,                                                                                        the state agency that provides public employees

                                                                                                         Timely Analysis of Immediate Health Policy Issues 9

                                                    41                                                      49
with health and retirement benefits. And while           CBO, Letter to the Honorable Dave Camp.             Davis et al., “Meeting Enrollees’ Needs: How
CalPERS contracts with a third-party                                                                        Do Medicare and Employer Coverage Stack Up?”
administrator to perform key administrative            Lake Research Partners, Voter Attitudes on a
functions, the same is true of Medicare and would   Public Health Care Plan, January 26, 2009.                The percentage of physician practices accepting
doubtless be true of a public option under reform                                                           new patients, based on such patients’ source of
proposals.                                             House Republican Conference, “Healthcare,”           coverage, is 96.7 percent for Medicare, compared
                                                    GOP Solutions for America (undated)                     to 98.3 percent for private PPOs and 86.3 percent
   John Sheils and Randy Haught, Analysis of the                for private HMOs. MedPAC, A Data Book, page
July 15 draft of The American Affordable Health                                                             57.
Choices Act of 2009, prepared by The Lewin             Senate Republican Policy Committee, What We
Group for The Heritage Foundation, revised July     Know So Far from CBO about the Democrats’                 Robert E. Moffit, “A Federal Health Insurance
23, 2009,                                           Health Care Plan, July 30, 2009,                        Exchange Combined with a Public Plan: The      House and Senate Bills,” Heritage Foundation,
HouseBillAnalysisHeritageRev.pdf, The same          SheetHealthFactsWhatWeKnowSoFarfromCBOa                 July 30, 2009.
findings were released several days later as John   bouttheDemocratsHealthPlan.pdf.
Sheils and Randy Haught, Cost and Coverage                                                                     Conservatives for Patients’ Rights, Is Congress
Impacts of the American Affordable Health             “Healthcare Reform with Dr. Howard Dean and           Importing Health Care Rationing from Britain?
Choices Act of 2009: The July 15th draft, Staff     Dr. Bill Frist,” The Charlie Rose Show, July 29,        Undated White Paper,
Working Paper #8, July 27, 2009,                    2009, transcript at                                    importing-health-care-rationing-from-britain.php.
AnalysisHouseBill2009.pdf.                          #frame_top.
                                                                                                               Larry DeWitt, “Operation Coffeecup: Ronald
40                                                  46
  Ferrara, The Obama Health Plan. See also               MedPAC, A Data Book, page 53.                      Reagan’s Effort to Prevent the Enactment of
House Minority Leader John Boehner, Detailed                                                                Medicare,” September 2004,
Analysis: House Democrats’ Government-Run                MedPAC, A Data Book, page 55.            
Health Care Plan Breaks President Obama’s
                                                    48                                                      54
Promises, August 24, 2009,                            Karen Davis, Stuart Guterman, Michelle M.                A recording of the entire Reagan speech is      Doty, and Kristof M. Stremklis, “Meeting                available at
tSingle.aspx?DocumentID=142197; Conn Carroll,       Enrollees’ Needs: How Do Medicare and         
Myths and Facts About Obamacare, The Heritage       Employer Coverage Stack Up?” Health Affairs,            AAs.
Foundation, August 24, 2009,                        Web Exclusive, May 12, 2009.

                                                                                                Timely Analysis of Immediate Health Policy Issues 10

The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic,
and governance problems facing the nation.
This research was funded by the Robert Wood Johnson Foundation. The authors appreciate the helpful advice and suggestions of
John Holahan and Genevieve Kenney of the Urban Institute, Len Nichols of the New America Foundation, Karen Pollitz of
Georgetown University, and James Reschovsky of the Center for Studying Health System Change. The authors also appreciate
the research assistance of Juliana Macri of the Urban Institute.
About the authors: Stan Dorn is a senior research associate and Stephen Zuckerman is a senior fellow at the Health Policy
Center of the Urban Institute.
The views expressed are those of the authors and should not be attributed to the individuals named above, to the Robert Wood
Johnson Foundation, or to the Urban Institute, its trustees, or its funders.


                                                                                 Timely Analysis of Immediate Health Policy Issues 11

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