An Overview of Exchanges under the House and Senate Bill

On January 8th, 2010, the Alliance for Health Reform and The Commonwealth Fund  co-sponsored and moderated a panel discussion on the health insurance exchanges that are being proposed in both the House and the Senate health reform bills. The panel consisted of Washington and Lee professor Timothy Jost, John Kingsdale of the Massachusetts Commonwealth Health Insurance Connector Authority, and Philip Vogel of the Connecticut Business and Industry Association (CBIA), which runs the non-profit CBIA Health Connections, a health insurance exchange for the state of Connecticut.

The co-sponsors have uploaded all of the event’s materials, including a webcast of the entire event, as well as all of the powerpoint slides and papers. All of this information can be found here.

Professor Jost and the Commonwealth fund created detailed charts comparing the differences between the two bills. Below is a reproduction of Professor Jost’s chart, which can be viewed by clicking on the thumbnails.

Both the House and the Senate bills would create new health insurance exchanges that would help consumers and employers navigate the purchase of health insurance. Though the common thread of a regulated marketplace runs through both bills, all three panelists noted the stark difference in the vision and implementation of the exchanges under the respective bills.

Below are some of the key distinctions between the two bills.

The House Bill — Public Option with Opt-Out Possibility

The House’s bill, H.R. 3962 (click here for entire pdf) provides for a federal exchange that would essentially eliminate the individual marketplace for health insurance going forward. A public plan would be offered that would reimburse providers at negotiated rates between those of Medicare and commercial rates. The applicable section of the House’s bill is Title III, entitled Health Insurance Exchange and Related Provisions.

Title III of the House Bill would create the Health Choices Administration with a Commissioner who would oversee the exchange. Citing Section 301 and 308 of the Bill, Professor Jost notes on page 17 of his paper:

The exchange operates at the national level, established within a new Health Choices Administration. The Commissioner of the HCA can, however, permit individual states or groups of states to administer an exchange within their territory in place of the national exchange if specific requirements are met, subject to revocation if the state ceases to meet the requirements of the bill. Even if the HCA delegates exchange authority to a state, the Commissioner retains enforcement authority and can further specify functions retained by the Commissioner and not delegated.

Thus, the House’s bill would create an exchange system that is fairly centralized and regulated, but with added flexibility. If the states fail to implement their own exchange then HHS will implement an exchange for them. Only those policies considered “grandfathered” could be sold outside of the exchange, and such “grandfathering” can only occur in the individual market. (See Section 202). Insurance offered inside the exchange would fit into one of four tiers: basic, enhanced, premium, and premium plus. (See Section 303). These tiers would correspond to different actuarial values of the plans. Subsidies would be provided on a sliding scale that is determined by the purchaser’s income.

The House bill would also limit the medical loss ratio of plans offered in the exchanges to 85 percent, largely prohibit the rescission of contracts, eliminate lifetime coverage limits, eliminate pre-existing condition exclusions, as well as require guaranteed issue and renewal of plans. Variations in premiums based on the age of the insured could only vary by a maximum of 2:1.

Not all of the panelists agreed with every provision. For example, Mr. Vogel took issue with the dependence on the medical loss ratio in regulating the market, instead arguing for a greater reliance on the “claim dollar” as a guide post.

Whether offered inside the exchange or grandfathered, all plans must meet certain requirements in terms of essential benefits, which would be determined by HHS, and would be based on the recommendation of the Health Benefits Advisory Committee–a public/private hybrid entity.

• Click here to jump to section 223 outlining the Health Benefits Advisory Committee

These benefits would include hospitalization, outpatient care, prescriptions drugs, equipment, and a host of other benefits.

• Click here to jump to the section 222 which details the essential benefits.

The House bill would also impose rules regarding the transparency of the plans offered in the exchange by requiring certain information about the plans to be disclosed.

The Senate Approach — No Public Option; Multistate Substitute Would Exist

For whatever reason, the Senate crafted a more complicated framework of exchanges.

A crucial point of divergence from the House bill is the Senate bill’s lack of a federally financed public plan offered through the exchange. However, as discussed below, part of the Senate plan attempts to act as a substitute. Another area of divergence is that existing individual and group plans may continue alongside newly created exchanges, in addition to any grandfathered plans. This is in stark distinction to the House bill that would eliminate some existing policies. Though as noted, the House bill would allow for some grandfathering.

The Senate’s exchange framework is based on section 1001 of the bill which provides that HHS will, with the help of the National Association of Insurance Commissioners (NAIC), craft standards regarding the minimum benefits and other aspects of the plans sold through the various exchanges.

In terms of the Senate’s framework for exchanges, it is as follows. The Senate bill will allow for a number of exchanges that would exist on variety of different governmental levels. Whereas the House bill envisions a more federal exchange system, the Senate bill would instead allow for state-based exchanges, multistate exchanges (i.e. regional), or substate exchanges.

• Click here for a pdf version of Senate bill, as passed.

State-based Exchanges
For the individual and the small group markets, the Senate bill would require each state to create a American Health Benefit Exchange for individual purchasers of insurance, and a Small Business Health Options Program (SHOP) for small businesses purchasers. HHS would regulate these exchanges (See section 1321(a)(1)). These exchanges would be governed by regulations promulgated by HHS, unless the states adopt alternative standards that the HHS finds acceptable.

The state may combine the individual market exchanges with the small business (SHOP) exchanges. Additionally, states have the flexibility to establish regional exchanges or smaller subsidiary exchanges that target specific geographic areas within the state. (See Section 1311(f)). If the states do not create a system of either separate exchanges for individuals and small business, or some combination, HHS will establish an exchange or utilize a non-profit insurer to fill the void. See 1321(c).

The multistate exchanges are important, as they may mollify those who have been touting the idea of interstate health insurance offerings as a panacea for the woes of U.S. health insurance.

Regardless of how any states’ exchange(s) plays out, many of the important provisions of the Senate’s bill such as certain minimum benefits, the ban on lifetime or annual dollar limits, the ban on rescission, and medical loss ratio requirements would apply across the landscape of exchanges.

State Opt-Out Possible
Under the Senate bill, the states would be eligible in 2017 to opt-out of the federal requirements listed above if they can demonstrate that they are providing affordable coverage that is at least as affordable and comprehensive as the Bill requires. Alternatively, the state may be allowed to create a “public health plan” for those under 200% of the federal poverty level. Under this arrangement, the federal government would compensate the state for 95 percent of what would have been provided through premium tax credits as well as cost-sharing reduction payments. (See Section 1331).

Multistate plans: A Compromise?
One major amendment passed on December 24th was section 1334 which amended section 1333 which dealt with multistate exchanges. Under section 1334, The Office of Personnel Management (OPM)–the agency that governs the federal employees health benefit program (FEHB)–will enter into contracts with insurance carriers to offer at least 2 multistate plans through each exchange in each state. (See 1334(a)(1)). These plans will cover the individual and small group market. At least one of those plans must be a non-profit insurance plan, and must be in accordance with the general standards set forth for health insurance plans.

Though there would be a minimum level of benefits and protections required for all plans, the States would be entitled to offer multistate plans with more substantial benefits. However the state will have to defray the costs of the additional benefits.

Unlike the House bill which eliminates the state-based individual market, the Senate bill envisions exchanges that would co-exist with both the individual and small-group markets, and operate under the same rules. Though the Senate bill allows for flexibility, the subsidies provided by the federal government could only apply to insurance plans sold through the exchange.

One of the most important and controversial sections of the amended Senate bill is section 1334(a)(4), which specifies that, in administering the multistate plan, OPM will have the same bargaining power as they currently have for plans offered in the FEHB. Thus, OPM would be able to negotiate for a specified medical loss ratio and profit margin, as well as specified premium rates and any other terms in the “interest of the enrollees.” The goal is for these plans to be offered nationwide. Whether the OPM-run exchange will succeed is obviously yet to be determined, but some like Professor Timothy Jost are worried that the Senate’s plan to allow some plans to operate outside of the exchange complicates the federal government’s job in risk adjustment.

Reform Rodeo

1. Big Pharma: The pharmaceutical industry is threatening to reverse their support of the health care reform legislation if the bill calls for a reduction in the number of years that a company’s biologics are protected from generics.

2. The Caddy Conundrum: NPR reports that organized labor appears to be on board with taxing Cadillac plans, with some movement in their favor regarding the thresholds triggering the tax.

3.  Health Insurance Exchanges: The Commonwealth Fund and the Alliance for health reform moderated a discussion on health insurance exchanges. Fantastic materials that outline the House and Senate plans can be found at the bottom of this page, which includes the extraordinary paper which Professor Timothy Jost presented.

4. Health Reform Discussions: The Health Care Blog has rounded up many of the discussions on health care reform.

5.  Play-or-Pay Problems: The NEJM has a thorough analysis of the “play-or-pay” provisions in health reform legislation, and the problems that may arise.

6. Multimedia: Atul Gawande chats with Charlie Rose on January 5th about health care, as well as Gawande’s new book “Checklist Manifesto”.

Intersecting Issues: Immigration Reform and Health Care Reform

The LA Times reported this past week that the pending health care reform would negatively affect rather than improve the health of California’s citizens.  Why would this be the case?  Nearly thirty percent of the state’s population consists of immigrants.  In L.A. County itself, there are more uninsured residents than any other U.S. county; as the L.A. Times calculates, the majority of that uninsured population are likely immigrants:

It’s a safe bet that the majority of those people are immigrants, because health officials say that 40% of all the patients treated at county hospitals are undocumented. In recognition of that fact and of the hospitals’ legal and ethical responsibilities to treat the uninsured ill and injured — regardless of their immigration status — Washington currently subsidizes their care at facilities, like L.A. County’s, with “disproportionate” numbers of such patients.

The House bill for health care reform would reduce the funding for such subsidies modestly, while the Senate bill would significantly decrease payments towards the subsidies.  Whatever the outcome of the compromise bill, L.A. County will be left worse off.

As we know, neither the House nor the Senate bill would cover undocumented immigrants, or allow them to receive subsidies or tax credits for purchasing insurance.  However, even if the country will not be paying for the health coverage of such immigrants, it will be and already is paying for the high costs of having immigrants treated in emergency rooms, since many hospitals, such as those mentioned in the L.A. Times piece above, treat patients regardless of their immigration status.  Hospitals that provide emergency services and participate in Medicare are required to treat all who come to them for emergency services by the Emergency Medical Treatment and Active Labor Act; some of the costs for the emergency care are covered through Medicaid, while others result in expenditures that the hospitals incur as debt.  The effects of the debt can result in higher hospital fees for other patients.  But greater hospital charge rates for the uninsured are a matter of contention, and tend to obscure the actual value of services rendered and unpaid for. Having said that, it is not unimaginable to think that provisions in the health care bills may actually drive up medical expenses for some segments of the population–and that such increased expenses will have significant adverse affect upon the whole.

Again, the House bill does a better job than the Senate version does at addressing the issue of immigrant health, as the House would allow for undocumented immigrants to participate in the health insurance exchange by permitting them to purchase insurance policies. While the House bill would require immigrants to pay for the policies entirely, the Senate bill does not allow for immigrants to participate whatsoever.  It is worth considering that the immigrant community consists largely of young, healthy individuals; the impact upon the risk pool of their inclusion is no small thing.

Some health care advocates believe that resolution lies in immigration reform, so that immigrants can become citizens of the United States.  An LA Times story about a UCLA study released this last week is also worth considering:

The report said that legalization, along with a program that allows for future immigration based on the labor market, would create jobs, increase wages and generate more tax revenue. Comprehensive immigration reform would add an estimated $1.5 trillion to the U.S. gross domestic product over 10 years, according to the report.

Though many Americans seem to feel that immigrants are taking jobs away from unemployed American citizens, CNN writer Ruben Navarrette, Jr. points out that much of the labor immigrants participate in is in areas of work that Americans themselves have shunned.

Behind the politics of both health and immigration reforms lies the compelling stories of immigrants who have labored in our county and who are in desperate need of health care.  While data and numbers can show the cost-benefits of allowing immigrants to participate in health care, the issue of treating ill humans seems an ethical one– not something to be justified by statistics alone.  But at the heart of this is the simple question, is healthcare a  human right? Or is it a luxury–a “treat,” if you will,  to be dispensed according to the rules of carrots and sticks? and not just a luxury.

New Jersey Legislature Passes Medical Marijuana Bill

Yesterday, the last day of its 2008-2009 legislative session, the New Jersey legislature voted to legalize the use of medical marijuana by New Jersey residents suffering from debilitating medical conditions.

The version of the New Jersey Compassionate Use Medical Marijuana Act passed yesterday represents a compromise between the version that the state Senate passed in February of 2009, which Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy endorsed in a position paper distributed to key lawmakers, and the Assembly version, which included a number of amendments intended to bolster the Act’s already strict safeguards against abuse and diversion.  (The differences between the Assembly and Senate versions are outlined here; a summary of the changes made in the final legislation is posted here on the Legislature’s website.)   Governor Corzine is expected to sign the Act into law before he leaves office next week.

Among other changes, the final legislation:

• revises the definition of “debilitating medical condition” to specify that severe or chronic pain, severe nausea or vomiting, and cachexia or wasting syndrome qualify a patient to use medical marijuana if they are symptoms of cancer, HIV/AIDS, “or the treatment thereof.” The new definition also adds inflammatory bowel disease, including Crohn’s disease, muscular dystrophy, and terminal illnesses expected to cause death in 12 months or less to the list of debilitating conditions;

• deletes the Assembly provision that allowed patients to designate an individual to transport marijuana to them in an emergency, and reverts to the Senate language allowing patients to designate a primary caregiver to assist them with their use of medical marijuana on an ongoing basis; and

• preserves the Assembly version’s requirement that patients obtain their marijuana from “medical marijuana alternative treatment centers,” i.e., that they not be allowed to grow their own, but increases the amount of marijuana that patients can be dispensed in a 30-day period from one ounce to two ounces.

Interestingly, the final legislation also requires that the system the Division of Consumer Affairs in the Department of Law and Public Safety establishes to monitor the dispensation of marijuana for medical use must “serve the same purpose as, and be cross-referenced with” the Division’s system for monitoring the dispensation of certain prescription drugs with the potential for abuse.  This is further evidence that marijuana is slowly but surely, as Fordham Law Professor Kimani Paul-Emile writes, “migrating from the criminal regulatory regime into the public health regulatory regime.”

Reconciliation Without Conference: The Health Reform Bill Moves Closer to a Vote

[Ed. Note: Health Reform Watch is very pleased to welcome Corey Klein to the blog. Corey is both a journalist and a law student here at Seton Hall Law. As a reporter, Corey garnered numerous awards from both the New Jersey Society of Professional Journalists and the New Jersey Press Association. We look forward, as we're sure will you, to his contributions to HRW.]

Congressional Democrats have been attempting to iron out a final health care reform bill behind closed doors this week in order to avoid delay tactics by Republicans, according to media reports.

The House and Senate passed two versions of the bill. Typically, an official public conference would be held to resolve differences between the two versions, but Democrats want to keep Republicans from extending the debate in an effort to stall the bill. President Barack Obama has not been critical of this move, stating that he is eager to sign a health care bill into law as soon as practical, according to Reuters.

A few key differences between the House and Senate versions are how the bill will be financed and whether the bill will include a public health care option.

Congressional Republicans have stated that they would block the bill by any means necessary. In response, Democrats decided to finalize the bill behind closed doors.

If the bill had gone to a public conference, a number of Senators and Representatives would meet together to work out differences between the two bills. The members of the conference committees, known as managers, cannot substantially change the bill, but they could keep provisions in one version of the bill or drop amendments in another. They cannot add any new amendments.

Each house of Congress has several managers. For example, the House may have seven and the Senate may have four. The numbers do not need to be equal.

After reaching a decision, the managers return to their respective houses of Congress and tell their fellow Congressmen and Senators if they were able to agree on all or part of the bill or if they were not able to agree on the bill.

If they were able to agree on the entire bill, the bill is revoted upon in both houses. If they were not able to agree on the entire bill, or if they were only able to agree on parts of it, the bill returns to the conference committee. If the differences are too vast, the bill could just die out.

The members of these conference committees are usually senior members of standing committees. These conference committees would have been made up of members of both parties and high-ranking Republicans vowed to block efforts to let the bill leave their respective committees to go up for a final vote.

Also, the House and Senate support the bill by slim margins, with some Democrats opposing certain aspects of the bill. By negotiating informally and out of the public eye, Democrats can bring a final version of the bill to a vote without a formal conference.

Democrats responded by negotiating with their own party behind closed doors. The decision to finalize the bill behind closed doors was met with some criticism. CSPAN has issued a letter to Democrats urging them to make the negotiations public.

Republicans seized on CSPAN’s letter as evidence that Democrats were not being transparent, but Democrats dismissed these criticisms as further efforts to kill the legislation.

John V. Jacobi on Health Reform & Care for the Chronically Ill

In case you missed it: Health Reform Watch regular, Professor John V. Jacobi, interviewed by Lester Feder for Legal Issues in Health Reform, a publication of The O’Neill Institute for National and Global Health Law at Georgetown University. In part:

Covering the Chronically Ill: An Interview with John V. Jacobi

John V. Jacobi is Dorothea Dix Professor of Health Law and Policy at the Seton Hall University School of Law. The O’Neill Institute’s Lester Feder spoke with him about health reform and covering those with chronic illness.

Lester Feder: Generally speaking, what do you think of what it is looking like we’re going to get out of Congress?

John V. Jacobi: I think that there are two big clusters of issues: one is covering the uninsured, which has gotten most of the attention, for good reason. The other issues, which I’ve been most concerned about is access for the most vulnerable: people with chronic illness and disabilities. On the first part it’s anybody’s guess on how well we’re going to do at covering the uninsured. On the second part, there are lots of interesting structural pieces in the bills that will help people with chronic illness, but I think that the overall structure of the reform may end up undercutting that quite a bit.

The pieces in the bills that are helpful are the ones that create medical homes, or chronic care management, or assure coordination of care for people with chronic illness. It is the sort of change that our delivery system and our finance system really need to be looking at. The problem with getting those innovations to actually work is that much of the coverage under the plans for the chronically ill will be provided through the private marketplace.

And here’s the problem with that: Private insurance companies are more or less profitable  depending on the risks that they accept. They are much more likely to be profitable if they are good at risk selection than if they are efficient and provide good service in other ways. There is such a dramatic concentration of cost in any actuarial pool that if an insurance company can avoid the 10 percent of the sickest people it is going to be doing quite well, whether it’s good or bad at delivering its services. And the ones that attract those 10 percent of the sickest are going to be in trouble unless there’s quite a good risk-adjustment program for premiums, which doesn’t seem to be available yet.

Read More

Ringing in a New Year in Health Reform: For Whom the Bell –Still– Tolls

As we come upon this new year and the prospect of House and Senate Bill reconciliation,  I find myself taken by the process. The length of it–the depth of it–or perhaps more precisely, the lack of depth thereof. Back in the dog days of summer I wrote this:

The debate wandering to and fro and fueled by hyperbole, the desire for “victory” (whatever that may mean), and lobbyist dollars descending upon the corridors of Washington until they have become, in the words of T.S. Eliot,  ”Streets that follow like a tedious argument / of insidious intent.”

The words, unfortunately, seem as apt now as they did then. The passage of time harboring more of the same as the process “followed” into the need for 6o votes and the compromises (if not betrayals) necessary to garner the same.

“Had we but world enough and time/ This coyness, Lady, were no crime”

This article published back in September is worth considering

Research released this week in the American Journal of Public Health estimates that 45,000 deaths per year in the United States are associated with the lack of health insurance. If a person is uninsured, “it means you’re at mortal risk,” said one of the authors, Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School.

The researchers…determined that the uninsured have a 40 percent higher risk of death than those with private health insurance as a result of being unable to obtain necessary medical care. The researchers then extrapolated the results to census data from 2005 and calculated there were 44,789 deaths associated with lack of health insurance.

Last New Year’s Day I wrote this in anticipation of the continued economic meltdown as it regarded Health Reform:

As we ring in the New Year and begin to contemplate the inter-relatedness of the macro-economy and commence what may well be the “fall into a ‘death spiral’ of unemployment, disfiguring ailments, and a tendency to be underemployed due to such ailments,” it might be worth a moment to consider the often sudden and unexpected nature of both job loss and catastrophic illness– and John Donne.

The bell which John Donne refers to in his most famous quote is “the passing bell,” tolled by the Church for those who are dying. As Donne lay very ill in his bed and heard this bell being tolled, he wondered if he were, in fact, sicker than he thought. And that perhaps that bell was being rung for him personally. He came to realize, however, that whether that was the case or not was largely irrelevant because

“No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend’s or of thine own were. Any man’s death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee.”

In the midst of the year long “tedious argument / of insidious intent,” that bell tolled for thee another 45,000 times.

Reform Rodeo

1. Getting Up to Speed: Kaiser Health News breaks down where reform currently stands now that the Senate has passed their version of the Bill.
2. Multimedia Perspective: A thorough and well-done interactive timeline of U.S. Health Care Reform helps to provide some much-needed context. Clicking on the event gives a synopsis as well as a link to an NEJM piece on the event from that era.
3. No Snow(e) in Sight: Sam Stein notes how Olympia Snowe–a Senator who not long ago garnered the attention of all health reform followers–rationalized her “Nay” by questioning the Bill’s constitutionality.
   1. Speaking of the constitutionality of the Senate’s bill: As we have noted on this site earlier, questions of constitutionality pervade the dialogue. For those whose interest has been piqued, bloggers at the Volokh Conspiracy have penned a number of pieces on the issue, here, here, and here.
4. Senate Bill’s impact on health insurance companies: Bob Laszewski discusses the Bill’s impact on insurance company–channeling the skepticism of non-profit Harvard Pilgrim’s CEO Bruce Bullen.
5. Impending Car Crash?: Michael Goozner reiterates his view that the tax on “Cadillac” plans is the biggest issue facing health reform.
6. In case you missed it (an oldie but goodie): A Health Reform Watch article on the impact of lobbyists included in the Wikepedia entries for “Health Care Reform, United States” and “Health Insurance.” Which, now that a bill has passed in the Senate, begs the question: do you think those lobbyists might be in line for a bonus?

Senate Passes Health Reform Bill, Republicans Challenge Constitutionality

The Senate has passed its version of a Health Reform bill, 60-39. The votes were cast, with Vice President Joseph Biden presiding, at 7:00 am on Thursday, December 24th. The Washington Post reports that

Sen. Robert C. Byrd (D-W.Va.), who is 92 and ailing, bellowed when his name was called: “Mr. President, this is for my friend Ted Kennedy. Aye.”

Aye indeed.

Washington Monthly notes that a number of Republican Senators, many of whom in recent months had formerly brushed aside the issue of constitutionality for the provision for insurance mandates, have experienced a change of direction– if not heart– and have openly challenged that which they formerly embraced.

For an explanation of the mandate’s constitutionality, Washington Monthly cites this article, “Is it Unconstitutional to Mandate Health Insurance?” by Professor of Law and Public Health, Wake Forest University, Mark Hall–which originally appeared here on Health Reform Watch, and was later cited by the Washington Post’s Ezra Klein among numerous others.

The Price of Sausage in Nebraska (and elsewhere)

“Laws, like sausages, cease to inspire respect in proportion as we know how they are made.” The quote, and a number of variants thereof, is most often attributed to Otto von Bismarck. The Boston Globe/A.P. does a nice job taking us through the cost– the spoils, if you will– of the votes requisite thus far to have taken the Senate’s Health Reform bill to its present status. The picture is not particularly pretty– with sizable benefits inuring to the holdout Senators and their constituents. The cost of 60 votes– filibuster-proof critical mass– is, one might say, the cost of doing business. But it is a risky business. By virtue of being so, the 60th vote,  Senator Ben Nelson of Nebraska, brought home the following pieces of bacon home for his constituents:

the federal government will pay the full cost of a proposed expansion of Medicaid, at an estimated cost of $100 million over 10 years; Blue Cross Blue Shield of Nebraska will be exempted from an annual fee on insurers; supplemental Medigap policies such as those sold by Mutual of Omaha are exempted from the annual fee on insurers; and a physician-owned hospital being built in Bellevue, Neb., could avoid a new ban on referrals from doctors who own such hospitals.

And what does the 23rd vote tell his constituents who will have to shoulder the costs of their state’s expansion of Medicaid?

The Boston Globe/A.P.  list is partial but telling. You can see it here.

For a more thorough look at the cost control and program implications of the bill, Professor Timothy Jost’s latest article in Health Affairs is a must read. In addition to a wealth of other information, Jost provides the following:

…the bill provides a cures acceleration program” to fund research for “high need cures” for which incentives in the commercial market are unlikely to result in timely development.  The Food and Drug Administration, the National Institutes of Health, and a new Cure Acceleration Network Board are supposed to work together to facilitate the discovery of such cures and to translate them from bench to bedside.  Grants can be made under the project of up to $15 million a year to eligible entities such as academic medical schools, biotech companies, and drug companies, who need only meet a $1 to $3 matching requirement.  $500 million is appropriated for this program for 2010.

This is all well and good and a great idea.  But nothing that I can see in the legislation gives the taxpayer any stake in this investment.  A drug or biotech company that in fact discovers a blockbuster drug or biologic through the federal government’s investment (perhaps for an off-label use) owes nothing in return.  Shouldn’t we the taxpayers get some return on  our investment, or at least the promise of reasonable prices?

Bismarck also is said to have said,  “Politics is the art of the possible.” To see that, you’ll want to read the rest of Professor Jost’s article.

The Tragic Sense of Health Insurance Reform

It looks like there are now 60 votes behind the “The Patient Protection and Affordable Care Act”, and the set of amendments to it released today. For the sake of this post, I will assume that this Senate bill will basically be the template for health insurance reform.

Given all the twists and turns of this debate, I’m sure there still will be some important changes (even though holdout Sen. Ben Nelson has been promised a “limited conference” in exchange for supporting it). But today’s announcement does strike me as a turning point in the debate. It’s time to reflect on a growing divide between “realists” in the Democratic party and more idealistic progressives.

Democratic Divisions

Ed Kilgore of The New Republic describes the divide over the Senate bill as follows:

[O]n a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. . . . [T]his is not the same as the conservative “privatization” strategy, which simply devolves public responsibilities to private entities without much in the way of regulation.

[I]n the health care reform debate, the Obama administration pursued legislation that utilized regulated and subsidized private for-profit health insurers to achieve universal health coverage. This approach was inherently flawed to “single-payer” advocates on the left, who strongly believe that private for-profit health insurers are the main problem in the U.S. health care system. The difference was for a long time papered over by the cleverly devised “public option,” which was acceptable to many New Democrat types as a way of ensuring robust competition among private insurers, and which became crucial to single-payer advocates who viewed it as a way to gradually introduce a superior, publicly-operated form of health insurance to those not covered by existing public programs like Medicare and Medicaid.

Now that the public option compromise is apparently no longer on the table, and there’s no Medicare buy-in to offer single-payer advocates an alternative path to the kind of system they favor, it’s hardly surprising that some progressives have gone into open opposition . . . . To put it more bluntly, on a widening range of issues, Obama’s critics to the right say he’s engineering a government takeover of the private sector, while his critics to the left accuse him of promoting a corporate takeover of the public sector.

Glenn Greenwald is one of the most forceful progressive voices on the issue, offering a multifaceted indictment of dominant Democrats’ coziness with a series of corporate interests:

The health care bill is one of the most flagrant advancements of . . . corporatism yet, as it bizarrely forces millions of people to buy extremely inadequate products from the private health insurance industry — regardless of whether they want it or, worse, whether they can afford it (even with some subsidies). In other words, it uses the power of government, the force of law, to give the greatest gift imaginable to this industry — tens of millions of coerced customers, many of whom will be truly burdened by having to turn their money over to these corporations — and is thus a truly extreme advancement of this corporatist model.

One finds this in far more than just economic policy, and it’s about more than just letting corporations do what they want. It’s about affirmatively harnessing government power in order to benefit and strengthen those corporate interests and even merging government and the private sector. In the intelligence and surveillance realms, for instance, the line between government agencies and private corporations barely exists. Military policy is carried out almost as much by private contractors as by our state’s armed forces. Corporate executives and lobbyists can shuffle between the public and private sectors so seamlessly because the divisions have been so eroded. [links omitted]

If one judges the bill purely from the narrow perspective of coverage, a rational and reasonable (though by no means conclusive) case can be made in its favor. But if one finds this creeping corporatism to be a truly disturbing and nefarious trend, then the bill will seem far less benign.

Chris Hedges concurs (in his book Empire of Illusion), dismissing “proposals to require insurance companies to use more income from premiums for patient care or link payment with reported quality” as “unworkable.” He favorably cites physicians John Geyman and Steffie Woolhandler, who think health reform as it now stands is a doomed effort to keep a failing system on life support. Yet many on the left are standing behind the Senate bill, embracing it as what Sen. Harkin called a “starter home” with a good foundation for future additions.

Realism and Idealism in an Increasingly Ungovernable Nation

There has been a lot of talk about a Niebuhrian “Christian realism” in Obama’s foreign policy–a willingness to deploy force and otherwise questionable means to accomplish worthwhile ends. The health reform bill strikes me as another iteration of these endlessly complex, ethically ambiguous moments. The political opposition to the public option has been so intense that those pursuing universal coverage have been forced to bargain with (and even become identified and intertwined with) the very entities they are trying to force to act responsibly. In this topsy-turvy world, where an anti-system opposition refuses to responsibly deal with problems that most developed nations addressed decades ago, Democrats and the Obama administration must cut deals with moneyed interests (whose influence over politics grows apace as a “conservative” judiciary continues to gut campaign finance regulation).

But abstractions can only go so far in describing this bill. I just want to give a counterintuitive spin to two bits of journalism on health reform, to prefigure what I’m sure will be months and years of unintended consequences (some good, some bad) flowing from this bill.

1. Pilot programs: Atul Gawande has pointed to a hodgepodge of pilot programs in the Senate bill as one of the best reasons to support reform efforts. Like many physicians, Gawande is attracted to the organic development of “best practices” in cost control, instead of top-down imposition of a general theory:

Where we crave sweeping transformation . . . all the current bill offers is those pilot programs, a battery of small-scale experiments. . . . The bill tests, for instance, a number of ways that federal insurers could pay for care. Medicare and Medicaid currently pay clinicians the same amount regardless of results. But there is a pilot program to increase payments for doctors who deliver high-quality care at lower cost, while reducing payments for those who deliver low-quality care at higher cost. There’s a program that would pay bonuses to hospitals that improve patient results after heart failure, pneumonia, and surgery. There’s a program that would impose financial penalties on institutions with high rates of infections transmitted by health-care workers. Still another would test a system of penalties and rewards scaled to the quality of home health and rehabilitation care.

Other experiments try moving medicine away from fee-for-service payment altogether. A bundled-payment provision would pay medical teams just one thirty-day fee for all the outpatient and inpatient services related to, say, an operation. This would give clinicians an incentive to work together to smooth care and reduce complications. One pilot would go even further, encouraging clinicians to band together into “Accountable Care Organizations” that take responsibility for all their patients’ needs, including prevention—so that fewer patients need operations in the first place. These groups would be permitted to keep part of the savings they generate, as long as they meet quality and service thresholds.

The bill has ideas for changes in other parts of the system, too. Some provisions attempt to improve efficiency through administrative reforms, by, for example, requiring insurance companies to create a single standardized form for insurance reimbursement, to alleviate the clerical burden on clinicians. There are tests of various kinds of community wellness programs. The legislation also continues a stimulus-package program that funds comparative-effectiveness research—testing existing treatments for a condition against one another—because fewer treatment failures should mean lower costs.

There are hundreds of pages of these programs, almost all of which appear in the House bill as well. But the Senate reform package goes a few . . . steps further. It creates a center to generate innovations in paying for and organizing care. It creates an independent Medicare advisory commission, which would sort through all the pilot results and make recommendations that would automatically take effect unless Congress blocks them.

None of this is as satisfying as a master plan. But there can’t be a master plan. That’s a crucial lesson of our agricultural experience. And there’s another: with problems that don’t have technical solutions, the struggle never ends.

I agree with all of this, but I want to add one more dimension to the “neverending struggle”–the very interest groups that are supposed to be reined in by pilot programs are likely to do their best to alter, influence, or limit those programs over the coming years. One need only look at the sad and convoluted history of gainsharing pilot programs (merely adumbrated here) in order to get a sense of how, as the “rubber hits the road,” various lobbies will be storming veto points in order to undermine experimentalists’ efforts. This is not to say that pilot programs are a sham–I am about to publish a book chapter with the subtitle “A Plea for Pilot Programs as Information-Forcing Regulatory Design.” I just want to temper the technocratic optimism at the heart of Gawande’s worldview with a touch of the skepticism driving progressives like Greenwald and Markos Moulitsas.

2. Cuts in Medicare Home Health Care: Now here is an aspect of the bill that I at first felt offended by. Doctors, insurers, hospitals, and pharmaceutical companies all appeared to be making at most modest concessions in the final bill. But home health care, staffed by some of the most vulnerable workers, was to be slashed. If anything appeared to fit the Greenwald storyline of rapacious private interests shifting public burdens onto the unfortunate, it seemed to me, these cuts would fit the bill.

Yet once one digs in a bit to this story, more complexity emerges. According to one of the speakers on this podcast of the Diane Rehm show, over half of the “extraordinary patient” payments in the program are made in Miami-Dade County alone. It’s hard to get upset with a long overdue crackdown in the Ponzi State. Many other apparent abuses were mentioned in the podcast, as well as in this discussion on the NYT website. After sorting through all the commenters’ underlying empirical data, I may still come back to my original diagnosis of brutal, bareknuckle pluralism as the driving force behind home health care cuts. But I can’t justify that level of cynicism currently.

Concluding Thoughts on the Tragic Dimensions of Moving Forward

The personal is always political, and rarely is this more the case than in health policy. As with abortion and the draft, the law of health care financing directly impinges on the body of the citizen, determining fundamental opportunities for individuals. Despite all of my reservations and disappointments, in the end I am for this bill for a very personal reason: I cannot imagine how my family would have afforded treating my mother’s ailments over the past decade without the private and public insurance she has continually been covered by.

Earlier this year, I had hoped to be a larger part of the academic legal debate on health reform. But my mother broke her back in early September after falling off a scale in her bathroom, and I am her primary caregiver. Attending to her has taken up much of my free time since then. It’s hard to explain how much pain this incident has caused her, and how it has disrupted her life. All I can say is that I cannot imagine how stressful this incident would have been if she were one of the 46 million uninsured. Without question, her 3 weeks in the hospital, four weeks in rehabilitation, and related care, would have bankrupted her (and nearly bankrupted me). Millions of people may end up in such a situation–without coverage, battered by fate, and broke–if progressives in Congress stand on principle (or dubious constitutional arguments) and torpedo the bill.

Nevertheless, I also realize that this immediate victory, like 2009’s stabilization of the financial system, may be a Pyrrhic one for the Democratic Party. It entrenches the power of one more sector of America’s overweening FIRE industries (finance, insurance, and real estate). I’ve recognized the potential of private insurers to rationalize health care, but that potential is rarely realized. I am very worried that just as “GM hired a thousand lawyers, and Toyota hired a thousand engineers” in response to the Clean Air Act, private insurers will plow new revenues attributable to an individual mandate into endless lobbying to hollow out the terms of “minimum creditable coverage.” They will certainly devise clever tricks designed to drive away the 5% or so of the population that accounts for 49% of medical expenses. If pervasive regulatory capture occurs, the “reform” will be an albatross around the necks of Democrats for years.

“In their determination to avoid Harry and Louise, they’ve become Thelma & Louise.” That’s the verdict on the Obama Administration from a Democratic strategist tweeted by horserace reporter extraordinaire, Chris Cillizza. Although it’s a characteristically snide and smug observation from The Village, I think this bon mot has some chance of coming true. Like most of the conventional wisdom excrudescing from Beltway pundits, it’s less a reflection of reality than a narrative our entrenched political class enacts. The “politics of reform” will be endlessly refracted in DC media celebrities’ halls of mirrors, where a 24-hour news cycle is always hungry for “backlash.” The lazy conventional wisdom has already coalesced around a narrative of Obama-as-Icarus, perpetually mistaking his cautious incrementalism as a seamless web of socialism.

The real tragedy here lies in a struggle for the soul of the Democratic party–between idealists like Greenwald, Hedges, Woolhandler, and Kos, and the DLC/Brookings “realists” who’ve dominated the official Democratic response to the financial and health care crises. The sclerotic Senate’s supermajority rules have put the realists in the driver’s seat, and idealistic progressives have been left with little more than the power to refuse the bill that Reid & Co. craft. Idealists want an FDR-style rejection of what TR called the “malefactors of great wealth,” and they also want to see the millions of Americans without health care coverage given some semblance of a safety net beyond the bankruptcy courts. But we cannot have both. As Martha Nussbaum writes in The Fragility of Goodness (speaking generally about such quandaries),

We are considering [a] situation[], then, in which a person must choose to do (have) either one thing or another. Because of the way the world has arranged things, he or she cannot do (have) both. . . . He senses that no matter how he chooses he will be left with some regret that he did not do the other thing. . . .

Aristotle speaks of a captain who throws his cargo overboard in a storm in order to save his own and other lives. The man sees all too well what he must do, once he grasps the alternatives. . . .And yet he was also attached to that cargo. He will go on regretting that he threw it into the ocean–that things turned out so that he had to choose what no sane person would ordinarily choose, throw away what a sane person would ordinarily cherish.

By passing this reform bill, Democrats will jettison whatever “populist” credentials they once had, opting instead for an early-twentieth-century “progressive” vision of technocratic alliance between corporate and government experts. However many disastrous missteps the FIRE industries make, this is the only arrangement that the media will credit as responsible governance. We’ll commence an endless argument (read: notice and comment rulemaking and subsequent administrative adjudications) over what constitutes an adequate baseline of coverage, what is the fair share of revenue for middlemen like insurers, and what regulatory infrastructure can best vindicate the entitlements (and impose the burdens) specified by the bill. But the fundamental victory of reform–the national commitment that no one should have to choose between death or bankruptcy when confronted with a serious illness–will also endure. The tragic paradox is that the Democrats can only achieve this great cultural and ideological victory by becoming identified with the very interests that only they are willing to confront.

Senator Joseph Lieberman “Regrets Any Misunderstanding”

Senator Joseph Lieberman says that he “regrets any misunderstanding.” Lieberman, who according to NPR’s All Things Considered “has angered a lot of people,”  also said  “I thought I made myself clear all along.”

All Things Considered characterized Lieberman’s rejection of the Senate’s Gang of Ten Compromise as follows: Lieberman “rejected both an expansion of Medicare to cover uninsured people down to age 55, as well as its revamping of a Public Option so that users would be covered by private rather than government insurance.”

Joe Lieberman “regrets any misunderstanding.” All Thing Considered noted “But as critics were quick to point out, this was the same Joe Lieberman who told the Connecticut Post just three months ago that he’d been a supporter of expanding Medicare to age 55.”

Lieberman said, regarding the video we posted yesterday,

“I finally got to see that on TV last night and it looked to me like I was referring back to things I had supported in the past to make the point that though I was against the Public Option, I was not against health reform.”

And there you have it– just a big, “regrettable,” misunderstanding.

In addition, Senator Lieberman said: “I haven’t received any pressure from Insurance Companies. I mean it!”

And I believe him. One rarely pressures a man who does everything one wants.

Maybe Instead of a Dollar We Should Send Joe Lieberman Instructions on How to Use YouTube

A little while back Senator Joseph Lieberman stated that, seemingly contrary to his prior positions, he would not–and could not– support a bill which contained a public option–nor would he join in a vote to end a filibuster against the same. Relying heavily on the underlying analysis of Tim Noah, I opined at the time that perhaps we all needed to send Joe Lieberman a dollar so that he could vote his conscience as opposed to the will of Private Insurers: that the financial constraints involved in being an Independent (i.e., little or no infrastructural help from either the Democratic or Republican Parties) meant that Senator Lieberman, if he wished to continue being Senator Lieberman, would have to curry favor among donors to finance a bid for re-election.

I also noted that Chris Dodd, by virtue of his support for a public option and health reform in general, had alienated said Private Insurers and seemingly vacated his seat as “the Senator from Aetna.” I also noted that, as one might imagine, considering the sudden advent of available Aetna money, that a man (or Senator) from Aetna’s home town seeking money (such as Mr. Lieberman) might, somewhat understandably, look to align himself with the will and desires of that money. As much as it pains me to say, my antidote–sending Joe Lieberman a dollar with the words “Public Option” written on it– did not work. Sadly, the efforts of Yale students, who took a concilliatory approach in beseeching Senator Lieberman to back health reform, have seemingly not worked either.

Since then, Mr. Lieberman has come out in opposition to the plan to allow  people from 55-64 years old to buy into Medicare. Unfortunately for Mr. Lieberman, he seems to be unaware of YouTube as a means of chronicling statements made on video. Back when he was attempting to explain his desertion of the Public Option he said (thank you Merril Goozner) this:

Convergence on Health Reform (Death of the Public Option)

Thomas (Tim) Greaney

Saint Louis University School of Law

So maybe the two parties are coming together on health reform after all.   Last night we learned that after days of “secret talks” among the “gang of ten” the Democrats have reached agreement to restructure their health care proposal.  The changes are significant:

• ditch the already-watered-down public option plan;
• create a new insurance exchange “option” for individuals and small groups consisting of a nonprofit plan as negotiated by the Office of Personnel Management;
• expand Medicare eligibility to cover uninsured individuals aged 55-64.

What does the Democrats’ “public option ultralight” compromise have  in common with Republicans’ alternative universe?  Well, consider the latter’s proposal to open interstate competition for all health insurers–a move they promise will immediately lower health care costs.   Besides being shameless attempts to offer simple solutions to complex problems, the two proposals are guilty of the same fundamental misunderstanding of health insurance. Simply put, they both ignore a critical economic truth of health insurance today: insurers require a provider network of hospitals and doctors or must have market leverage in order to negotiate for lower provider prices and for controls on excessive volume.

How, then, would a nonprofit insurer not presently competing in one of the concentrated markets succeed in putting competitive pressure on the incumbents?  As one insurance industry observer put it ,

So, Kaiser Permanente, which operates with highly organized and capital intensive networks in its markets, would now come into a state where it has no networks and offer a plan? Blue Cross of Nebraska might offer an individual and small group plan in Rhode Island? Tufts Health Plan out of Boston might offer a plan in Oregon?

Based upon what network of providers in those places where they do not now do business?

Likewise, in expanding Medicare, the Dems are taking a page out of the Republican playbook. For the last several weeks,  Senate Republicans have been loudly touting the benefits of Medicare.  By their lights, not only does the program produce unmatched (and untouchable) health care services in terms of quality of care and beneficiary satisfaction, but any cost-cutting constitutes a betrayal of our commitment to seniors.  As far as one can tell, the expansion proposal will do just that: offer the now-sacrosanct program to a few million almost-seniors.  As to the other 20 million citizens, forced to shop for insurance through an exchange flawed by inadequate competition and inadequate subsidies? Well, maybe the Democrats will borrow the rhetoric of Republican National Chairman Michael Steele: this is no time for a “government-run health-care experiment.”

Micro-Chipping (and then pulling the plug on) Grandma as part of HIT and the Public Option

I had the opportunity to speak with one of our Health Law professors from private practice the other day (some professors teach full time, others teach only part time in addition to working full time as attorneys or judges), and he had been practicing (and teaching) health law for decades. He was both amazed and incensed: at our inability as a country to have a reasonable discussion about health care; that a provision to remunerate consultations regarding end of life issues somehow turned into “pulling the plug on grandma” and “death panel” sound bites–from people who should (or do) know better; and that people somehow believe that “rationing” doesn’t exist right now in the for profit health insurance system. “They speak as though their insurance policies are unlimited. They are not. There are insurers denying coverage all the time.”

This article in the New York Times’ Prescriptions won’t make him feel any better. It regards a recent chain email which tells of the impending forced implantation of microchips into patients as part of a government sponsored health plan.

Prescriptions reports:

…fears of death-panel bureaucrats voting to euthanize elderly Americans may pale in comparison to the latest fright point: according to a widely forwarded chain e-mail, the Democrats’ health care bill would require anybody who enrolls in a new government-run health insurance plan “to have a data-receiving microchip implanted in their bodies.”

The assertion would seem to tie together policy points from both the House-passed health care measure, which would create a government insurance plan, or public option, and the economic stimulus measure earlier this year, which approved billions of dollars for health information technology.

The widely distributed email is said to have prompted House Speaker Nancy Pelosi to issue a Myth Buster fact sheet:

Myth: People who enroll in the public health insurance option will be forced under the law to have a microchip implant.

Fact: The Affordable Health Care for America Act does not have any provision requiring any person to have a microchip — or anything else –implanted on their bodies for any reason.

The Times also notes that “Ms. Pelsoi’s office also noted that “PolitiFact — the Pulitzer-prize winning Web site — labeled this claim a ‘Pants on Fire’ lie, its highest degree of untruth.”

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