Plans still fighting policy nuances

December 1, 2009

Tweak them all you want, policies still lack enough action to truly bend the cost curve

The Obama administration and Democrats are determined to pass any bill that can be identified as health reform, while Republicans insist that such action will drive up spending even more and bankrupt the nation. Those who are pro-reform seem to outnumber those who are anti-, believing that some change is better than none and that policymakers have to take at least some steps toward reforming the nation's dysfunctional health system.

INSURERS WOULD GAIN LIVES

Now, industry faces even stiffer market reforms coming from added limits on age rating as well as an individual coverage mandate with fines that are considered too weak to boost coverage to a critical enrollment level.

The penalty for failing to buy coverage is so small and premiums are projected to climb so high, that many of those in the young invincibles' crowd will opt to pay the fine and skip insurance until they actually have a need for healthcare services.

In addition, a squeeze on subsidies to support the purchase of individual coverage is likely to keep health plans too costly for many middle-class Americans.

Insurers remain outspoken about the prospect of competing directly with a public option, which is still on the table. The BlueCross BlueShield Assn. (BCBS) complained that a government-run plan will use its "built-in advantages" to eventually "take over the market." An important victory for insurers comes in the House bill, which requires the public plan to negotiate rates with providers, instead of giving it free rein to institute lower Medicare fees. Even so, BCBS still predicts that the program "would quickly resort to price-setting" based on Medicare or other government health program rates.

Senate leaders back a less robust public plan option with leeway for states to opt out if local officials feel a government-run plan will undermine a viable state insurance market. Each state would make that determination based on the number of uninsured and how many private insurers offer competing plans in the state.

A related Senate proposal calls for government seed money to launch networks of nonprofit cooperatives that would offer affordable coverage plans to individuals and small businesses. While some critics see these programs as a first step toward a government-run healthcare system, they're more palatable for many policymakers.

TREND OUTLOOK

A main source of disappointment in reform legislation from both the House and Senate is that the bills do very little to bend the cost curve. While some individuals are likely to see premiums decline-namely those now obtaining coverage through the individual market and small employers-many more will be facing higher rates. Raising minimum benefit levels to a benchmark higher than the average policy today is likely to drive up premiums for consumers even more.

A number of provisions purport to curb spending by cutting fraud and waste, establishing electronic medical records, assessing the effectiveness of medical treatments and bolstering preventive care. These strategies might improve quality but most believe they won't make any real dent in expenditures. The bills also support pilot programs to test bundled payment approaches and to promote quality care, but those won't accomplish much without an authority for the implementation.

PICKING UP THE TAB

Moves to increase taxes on consumers and healthcare companies to pay for the large expansion of coverage might help Congress reduce the cost burden of reform legislation on the federal budget, but they do little to curb spending overall-and run the real risk of boosting outlays even more.

Serious cost control involves overhauling provider payment methods and, according to many reform supporters, changing the tax treatment of employer-provided benefits. Unfortunately, these policies would draw too much opposition to survive in today's political arena.

Congressional leaders are looking to create a new commission to propose strategies for cutting healthcare costs, along with a federal health oversight board to implement reform measures. Such panels are regular Washington fixtures, but this route might provide enough cover for skittish lawmakers to vote for health reform with the hope that others will fill in many of the details later.