In Washington, it’s what between the lines that counts.
Today is a prime example. The NYTimes’ article on the latest from the White House today was entitled “Obama Overrides Aide on Health Insurance ‘Public Option”.
But reading the article, and talking with folks inside the Beltway reveals a different angle.
President Obama did NOT override his Chief of Staff, but rather reinforced Rahm Emanuel’s Monday statement, where Emanuel stated “‘The goal [of health care legislation] is to have a means and a mechanism to keep the private insurers honest. … The goal is non-negotiable; the path is’ negotiable,” (as reported by The Wall Street Journal)
“Mr. Emanuel said one of several ways to meet Mr. Obama’s goals is a mechanism under which a public plan is introduced only if the marketplace fails to provide sufficient competition on its own”. In his ‘override’, Obama said:
“I am pleased by the progress we’re making on health care reform and still believe, as I’ve said before, that one of the best ways to bring down costs, provide more choices, and assure quality is a public option that will force the insurance companies to compete and keep them honest…[I] look forward to a final product that achieves these very important goals.”
Note the careful parsing of words – the President wants a final product that achieves those goals (cost reduction, choice, quality); Obama does not say the public option is the only way to get us there, but rather “one of the best ways”.
Which means there are other ‘best ways’.
I’m hearing that the public option does not have enough traction in the Senate, and Sen Conrad’s co-op plan is not going anywhere.
The moderate Democrats (Ben Nelson (Neb.), Mary Landrieu (La.) Evan Bayh (Ind.), Blanche Lincoln (Ark.) and Mark Pryor (Ark.)) may be supportive of health reform, but are not enthusiastic about the public plan, and neither is Joe Lieberman (I CT). According to a source familiar with the situation, “[the] Blue dogs have specifically written a letter against a Medicare-like plan. Big issue for them. With everyone focusing on the Senate people are missing the opposition in the House. Pelosi plans to strong-arm. We’ll see…”
But without their support, reform’s chances drop from solid to slim. While some may think the reconciliation process can be used to ram through reform, that may well be a false hope. Again, according to someone knowledgeable about the process; “Reconciliation is not the issue it would seem to be. A Senator can object to any non-budget item in a bill under reconciliation rules as not a budget item. Insurance exchanges, underwriting rules, mandates etc [which are critical to reform] get tossed. This will take at least 60 votes. Moderate Dems are not onside on many of these items.”
While the White House’s plan is to stay out of the public fray, draw no lines in the sand, and do the serious arm-twisting once a bill is on the floor, it’s anyone’s guess as to how a mammoth thousand-page bill will fare. Harry and Louise clones will come out by the dozens, the various interest groups will ramp up their donations, and the longer this takes, the less likely it succeeds.
That leaves us with no health reform, unless Congress decides there is another ‘best way’.
I’ll suggest that Laszewski’s Affordability Model is entering the discussion at the right time.
Because as things look now, without it, or some other mechanism that will address the cost issue while avoiding ideological non-starters, we aren’t going to have reform.

Hospitals have agreed to accept cuts in reimbursement from Medicare and Medicaid totaling $100 billion over the next ten years, with most of the reductions coming several years from now. Another $55 billion or so will be saved from several other measures.
In return, the White House and Senate Finance Committee have agreed that a public plan option will not reimburse facilities at Medicare rates. Reportedly, the three big hospital associations agreed to the $155 billion deal after President Obama’s June announcement that his team had identified more than $200 billion in payment reductions.
The associations were also leery of the proposal to move the power to set Medicare reimbursement rates from lawmakers to a muscled-up MedPAC (Medicare Payment Advisory Commission). The current rate-setting process is controlled by Congress and subject to intense lobbying by all parties, including hospitals and sub-groups of hospitals, intent on preserving and increasing their reimbursement. An independent board modeled on the Federal Reserve would eliminate much of the industry’s influence, a situation that likely terrifies the hospitals.
As Maggie Mahar recently noted; “[MedPAC has] digested the Dartmouth research revealing that when patients in some parts of the country receive more aggressive and more expensive care, outcomes often are worse. They realize that doctors and hospitals should be rewarded for the quality of the care they provide, not the quantity.”
Yikes, that’s scary stuff. It clearly illustrates the challenge of health reform – reducing waste, which everyone agrees is rampant, means reducing revenues, in this case for hospitals. Empowering an independent commission to reduce waste would be a death sentence for many cherished hospital programs and more than a few hospitals.
The watering down of the Rockefeller bill may well be the most important piece of the deal – for both sides.
A little perspective here might help.
First, note that these savings are accruing to governmental programs.
Second, we’re talking about $15 billion in savings per year.
Third recall that hospital costs account for about a third of total expenditures, or about $700 billion per year.
I just can’t get that excited about a deal that reduces costs by two percent, especially if it eliminates/reduces our chances of saving really big dollars by not paying for lousy health care.
While the President may not be directly involved in negotiations or policy writing, he is definitely wielding the big stick. I’d respectfully suggest he use it to keep the MedPAC independence bill moving, regardless of what hospitals want.

Last week Bob Laszewski proposed requiring health plans achieve cost control or lose their tax preferred status.
A commenter referred to this as cost control with teeth – the teeth of a pit bull. I agree, and while it has all the subtlety of a pit bull, it also has that canine’s simplicity.
We health policy folks tend to get all intellectual and esoteric, arguing about nuance and subtlety and discoursing about the intricacies of the French system vs the US system and the correct way to measure live birth rates and the merits of evidence-based clinical guidelines and whether and how our current system is rationing care and what if it is.
Losing 99.9% of the population in the process.
Bob’s idea – the Affordability Model – is to require all health plans meet pre-determined inflation targets set by an appointed health board or forfeit their tax-preferred status. They could continue to sell health insurance, but buyers wouldn’t be able to deduct the premiums from their taxes. Yes, that would mean the death of that plan – chewed to death by the very sharp teeth of fleeing customers.
Here’s what that means:
1. we don’t need a public plan option – and don’t have to fight that fight.
2. health plans finally have a reason to control costs – they have had none to date.
3. we avoid the arguments about taxing benefits.
4. it is easily attached to existing proposals – I suggest the Healthy Americans Act as the best foundation.
5. it appeals to ‘fairness’ – if healthplans meet the target, they survive and prosper. If not, the market kills them.
6. it is non-ideological – neither liberal or conservative, rather pragmatic and workable.
7. it is simple and easy to explain.
There’s still some work to be done – the implications of the Affordability Model on chronic conditions and vice versa need more thought.
But for the first time, I’m hopeful.

From most Democrats in DC, the reform discussion to date has focused on expanding coverage, and to hell with the financial consequences. On the R side of the aisle, the chorus has wailed endlessly, uselessly, and moronically, about ‘government run health plans’.
Its enough to make anyone throw up their hands and move to…any place where we can avoid watching health reform head off yet another cliff. But just when you’re about to collapse in despair, something that is actually promising comes along.
An intriguing new proposal hit my inbox this morning, authored by the very-well-connected Bob Laszewski.
Bob’s idea is to require all healthplans to restrain the rate of increase in health care costs to a level set by an independent board; failure to do so results in that plan losing tax-exempt status (and then rapidly going out of business). Here’s the intro:
“Health plan networks made up of insurers and providers would be required to first begin to stabilize and then control their costs. Failure to do so would mean the loss of their federal tax qualification. Premiums for a non-qualified health plan would no longer be tax deductible for individuals or plan sponsors who used these unqualified plans.
The Affordability Model would create an unambiguous reason for each of the stakeholders to finally work together to get America’s health care system under control. The Health Care Affordability Model creates unavoidable incentives for health plans and their provider network partners to maintain their tax qualification.”
There’s a lot more to this, and Bob has thought it through carefully. And knowing Bob, he’s been talking with others – influential others in key roles in DC – about this for some time. This is an elegantly simple, yet very effective way to blunt the rise in costs without alienating too many stakeholders.
There’s no need for a public plan if the industry constrains costs. Healthplans will find it rather difficult to oppose Laszewski’s Affordabilty Model, because by doing so they would admit they can’t control costs and increase quality (tough for even marketing types to spin that…).
And there’s lots of waste out there, lots of opportunities to reduce costs. (the Dartmouth Atlas has been publicizing this for two decades). Yet to date, no one has made any credible effort to do anything with all this knowledge – we know where the waste is but neither providers nor payers had any incentive to do anything about it.
The problem with the healthplan industry has been and continues to be simple – they have few incentives to restrain much less reduce costs. As costs go up, so too do their top lines, commissions for brokers, and in many cases margins. They add precious little value, acting more as network aggregators and marketing agents for providers than ‘care managers’. And without any change in their incentives, private insurers are not going to impact costs.
For some reason the Republicans mindlessly continue to laud the free market, despite thirty years of evidence that private insurers can’t control costs. The definition of insanity indeed.
But their Democratic colleagues are equally blind, worried way more about coverage than about long-term cost control. Frankly, the plans coming out of the HELP and Finance Committees to date are recipes for disaster.
Except for the Wyden-Bennett Healthy Americans Act, which promises to actually reduce total health care spending. The HAA was missing an ‘enforcement mechanism’, some way to force private insurers to get serious about cost control. Laszewski’s contribution does just that.
His effort is well worth your consideration.

is made here by AirAmerica’s Sam Seder, as he responds to Sen. Olympia Snowe’s (R ME) argument against the public option…

The Senate HELP (Health Education Labor and Pensions) Committee has released the full version of their health reform bill, and pundits are applauding the cost savings scored by CBO.
In a piece published last night, Jonathan Cohn noted:
“CBO says the net outlays are around $600 billion. But that’s based strictly on what’s in the bill. It doesn’t appear to include the cost of the Medicaid expansion…if you want the true cost of reform, you have to account for that Medicaid expansion, too. If my back-of-the-envelope calculations are correct, that puts real price tag somewhere between $1 and $1.3 trillion. Again, that’s a rough guess, based on just a few conversations, although it is is more or less what the experts have predicted all along.
(On the plus side, also outside HELP’s jurisdiction–and thus not part of the CBO estimate–are Medicare/Medicaid savings. Those would offset some of the price tag, even before factoring in new revenue.) ”
That’s good – HELP’s bill is about $400 billion less expensive than the one authored in the Senate Finance Committee.
But it is still far too expensive and does not cover all Americans (leaving about 13 million without coverage, or three percent of citizens/documented workers). And most troubling it does little to reduce health care cost inflation.
The details are here; key provisions include:
– a strong public option (the Community Health Insurance Option) accessed via a health insurance exchange
– maintains current employment-based insurance system
– requires all employers (including ones with >25 workers) that don’t offer heath insurance to pay a $750 annual fee per FTE ($350 per PTE) to help pay workers’ health insurance costs.
(the employer mandate got a big boost yesterday from WalMart’s announcement that they would support a requirement that employers provide insurance for workers)
The public option all but ensures this bill will be voted on along party lines as GOP Senators continue to hold that the public option is a non-starter. There may be a couple of cracks in the united front, as Maine Sen. Olympia Snowe signaled that she may be open to the public option.
The big difference between the trillion dollar plus cost of the Finance bill and the $600 billion for the HELP bill looks to come from the public option. While I’m not sure exactly how the public option would result in a $400 billion differential, the CBO seems confident that it would.
I’d suggest the HELP bill is best characterized as ‘less unaffordable’. I don’t see how we can afford either version; deficits are growing dramatically, revenues are down, and further tinkering with monetary policy looks increasingly dangerous.
The American health care problem is straightforward – we cannot afford our current system, and must reduce the rate of inflation if this country is going to have a hope in hell of competing with other developed countries who spend half what we do on health care.
A third of what we spend on health care is waste. Playing with employer contributions and public plan options amounts to deck-chair rearrangement and nothing more; they do nothing to attack that waste.
Note to Republicans – there’s an opportunity staring you in the face – get serious about health reform by cutting waste instead of meme-ing on about the threat of big government. Alas, their needle seems stuck in that groove.

Bob Laszewski has an excellent post on one of the key lessons from the Massachusetts experiment – the dangers of allowing people to buy into and drop out of coverage whenever they see fit.
Evidently a number of people are buying coverage when they need care, then dropping it when the treatment is over. This is adverse selection from the consumer perspective; they can buy coverage when they need it and insurers are forbidden to do any medical underwriting or charge different premiums.
Before someone way overreacts and says “see universal coverage will never work”, understand that the issue here is very specific – the law in Mass allows this behavior. It is correctable (to a large extent) through two mechanisms:
1.) require everyone to have coverage, and
2.) prohibit members from enrolling and disenrolling except during designated times and require them to maintain enrollment with one plan for a minimum of twelve months.
And, no, the answer is not ‘health status insurance‘.