Reform Rodeo

1. Principle or Posturing (or both)? –Kaiser Health News discusses the sudden plea from certain Senators for a reintroduction of the public plan into the Senate’s bill.

2. Starting From Scratch? — The Hill highlights polling indicating that many Americans favor scrapping the health bill and starting over, an option that President Obama has repeatedly said is not an option.

2a. Presidential Preemption? — Interestingly, the New York Times details the possibility of Obama posting his own health reform bill on the Internet ahead of the much-hyped health care summit. Could Obama use his “new” bill as evidence of a “fresh start” to appease Republicans?

3. Back to Basics — Maggie Mahar details the longstanding debate about whether health insurance actually saves lives.

4. Scoop on Standards — Dr. John Halamka, a physician who serves as CIO of Beth Israel Hospital and Chairman of the Health Information Technology Standards Panel (HITSP) at the ANSI, shares his thoughts on the vocabulary standards that will come to be the Esperanto of HIT.

5. HIT Funding — On Febuary 12th, the first $1 billion of federal funding for HIT promised under the HITECH Act was made available, with $10.6 million going to Massachusetts for the creation of a health information exchange.

6. Health Reform “Casualty”: The New York Times reported that former Congressman-turned head of PhRMA Billy Tauzin is resigning.  Betting on the passage of health reform, Tauzin offered billions in concessions to the White House in exchange for, among other things, favorable patent exclusivity periods for pricey biologics.

7. Health 2.0 — The Health Care Blog reports on the purchase of online pain management company ReliefInSite.com by PatientsLikeMe.com–the popular patient web site which claims to be the  “leading online community for patients with life-changing diseases.” Don’t be to surprised to see further growth of similar “Health 2.0″ websites that seek to take advantage of the increasing digitization of health care delivery and research.

8. The Science Behind Reform — Stephen Novella at Science-Based Medicine revisits the question of the effectiveness of colonoscopies.

Obama’s Plan for a Health Care Summit and the Unenthusiastic Response

Last week, President Obama announced plans to hold a bipartisan health care summit to push forward on health care reform and to give both sides an opportunity to discuss ideas for health reform legislation that will be able to garner enough votes for passage.  While President Obama and Democratic Congressional leaders want to use the health care proposals that have already passed in the House and in the Senate, Republicans say that they are unlikely to vote for a bill unless the current proposals are scrapped and the process is started afresh.  It seems like Americans, once again, may be left watching the theatrics of the health care reform debate without actually being the focal point of it.

Some conservative Congress members have already responded to the President’s invitation publicly to make their steadfast positions known.  Representative Eric Cantor (R-Va.) said this past week that he was not willing to discuss a “health reform package that spends money we don’t have.”  He added that “House Republicans have offered the only plan that will lower health care costs.”  If that is true, it is likely attributable to the fact that the House Republican bill would cover only 3 million uninsured Americans, compared to the Democratic House bill which would  insure an additional 36 million Americans.

On Monday night, House Minority Leader John A. Boehner (R-Oh.) joined Cantor in submitting a letter to White House Chief of Staff, Rahm Emanuel, which said that the Republicans were not willing to come to the table unless certain prerequisite questions were answered.  You can see the whole letter here.  In the letter, Cantor and Boehner express their non-support for reform that the American people themselves are not supporting; the basis for such being the recent Republican Senate win in Massachusetts.

Exactly what are the citizens of American thinking about health care reform anyway?  CNN reported on Tuesday that nearly two-thirds of Americans want Congress to persist in passing health care reform legislation.  The poll, an ABC News/Washington Post survey, also indicates that Americans blame both Democrats and Republicans on their unwillingness to compromise.  HHS Secretary Kathleen Sebelius herself is quoted as saying, “When people look up close at the personal activities of Congress they are confused and disgusted with the whole process and too afraid that whatever is going on can’t possibly be good for them or their families.”

Many believe that the idea for the health care summit was to address the back-door processes that led to American distrust and to make it all more transparent.  Still, there appear to be more differences between the conservative version of reform and the liberal version than points of reconciliation.  Though the prolonged tug-of-war between both sides does not seem like one that might be resolved in a day of convening, the summit is, perhaps, at least a start.

And, while the political contenders decide what to do about the summit, the health reform stalemate has presently-occurring repercussions. Many hospitals, which were holding on to the hope of reform, are now at the point where downsizing their health systems is thought to be the only step left.  Hospitals all around the country have been seeing more and more uninsured patients, and with no one to cover the full cost of services, the hospitals providing unreimbursed care are said to be further sinking into debt– and must therefore cut staff as well as services.  On the individual level, Americans are also finding it difficult to  keep up with the costs of health care, and while many forgo insurance, those that cannot due to chronic illness or necessity of care are finding the cost further prohibitive.

It would make sense, then, that Americans do want reform.  Andrew Rubin, Vice President for Medical Center Clinical Affairs for NYU Langone Medical Center and radio show host for HealthCare Connect, says that one of the underlying reasons why Americans are reluctant to give support for legislation is their lack of understanding of what is happening, not because they do not want to see change.  Let’s hope that the proposed health care summit will be used to clarify issues for Americans who do need and want health care, instead of for just another political brouhaha.

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.

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.

Taking Steps Toward Reform

Should an imperfect health reform bill be passed?  Health reform should be about four things: 1) expanding coverage to all; 2) providing health security for those already insured; 3) ending the fragmentation of health care delivery in favor of sound coordination of care; and, 4) constraining cost to ensure that we can afford appropriate care in the future.

The House leadership bill (HR 3962) does a good job on the first, reaching a large proportion of the uninsured — although it will not achieve universal coverage.  It also gets good marks for reforming insurance regulations — although its weak version of the public plan will make true insurance reform more difficult to achieve.  It makes some tentative progress on care coordination, mostly through pilots and demonstrations in public insurance programs.  It provides some cost saving measures in Medicare and through encouraging alignment of financing systems — but cost containment is clearly the weakest aspect of the bill.   So, should the reform be passed, warts and all?

After months of criticism of the majority’s plans and promises of the production of a better plan, House Republicans proposed a substitute to the House leadership bill.   How does it stack up?  The CBO finds that the Republican substitute would reduce the deficit over the next ten years by about $68 billion, which is about $40 billion less than the reduction the CBO projects from the Democratic version.   The CBO also estimates that the Republican bill would reduce the number of uninsured over the next ten years by “about 3 million relative to current law, leaving about 52 million nonelderly residents uninsured,”  compared with its assessment that HR 3962 would reduce the number of nonelderly uninsured by 36 million during that time period.  So, the GOP substitute would do less to reduce the deficit, and cover 33 million fewer uninsured.   It includes some insurance reform provisions, many based on consumer-directed models that tend to further fragment, rather than coordinate care.  HR 3962 is far from perfect, and the CBO’s estimates have been subject to criticism, but the reports provide food for thought for those who hoped that the Republican plan would offer a meaningful alternative.

Sometimes proceeding in steps is necessary, particularly with complex systemic reform.  Massachusetts has in many ways been a model for drafters of federal reform plans, and stands as an example of incremental steps toward full reform.  It enacted sweeping health insurance reforms in 2006, creating a marketplace for regulated private insurance, the addition of public plans, and responsibility shared among businesses, individuals, and providers.  It has been remarkably successful at expanding access, driving the uninsurance rate down to 2.6% as of the spring of this year, and enjoying continuing strong support within Massachusetts.    Costs are a growing concern.  But the coalition of business, consumer, and provider groups behind the reform anticipated the need to circle back and tackle finance.  Cost concerns have only grown with the economic downturn, as tax receipts lag and countercyclical demand for Medicaid coverage strains budgets.  Resolve to push forward appears strong.  Representatives of several stakeholders reported last year that,

Since passage, all stakeholder groups have remained deeply engaged in implementation.  Despite news reports of higher-than-expected costs, the governor, legislative leaders, and stakeholders have repeatedly reiterated support for full implementation.  This consensus, crucial to enactment, has proved equally vital to implementation.

Massachusetts reformers made the decision to proceed in two steps: coverage first, cost control second.   While no one is proposing a two-step process for federal reform, expanding coverage and reforming insurance practices have been the overriding emphases in Washington.  And HR 3962 does advance the cause of care coordination for the chronically ill.  It was interesting to see the Dutch Health Minister in a recent interview emphasize coordinated care as a central feature of reform.  In describing his country’s reforms (from which some draw lessons for our country), he explained:

We are trying to make sure that no one receives health care that is not coordinated. And [we intend] that the general practitioners cannot negotiate any longer with insurance companies unless they are part of a coherent group that is offering coherent care.

What does the GOP bill do for people with chronic illness?   The CBO found that provisions in the proposed substitute would “tend to increase the premiums paid by less healthy enrollees.”   The substitute, then, entails fiscal benefits for the well at the expense of those who most need care and coverage.

HR 3962 reforms the insurance market to safeguard coverage for those who have it now; expands coverage for the uninsured; and begins the arduous task of shifting care delivery from fragmentation to coordination.  The GOP alternative covers one-twelfth as many uninsured, makes coverage for the chronically ill harder to maintain, and does less to reduce the deficit.  Common sense tells us that taking positive steps toward reform is vital, and that the GOP substitute is no reform at all.

Thanks for Sharing, The Republican Party Offers Up a Health Reform Plan

Ezra Klein over at the Washington Post does a fine job of analyzing the political lesson in the recently proffered Republican health care reform plan–and the even more recent initial Congressional Budget Office analysis of the plan:

Late last night, the Congressional Budget Office released its initial analysis of the health-care reform plan that Republican Minority Leader John Boehner offered as a substitute to the Democratic legislation. CBO begins with the baseline estimate that 17 percent of legal, non-elderly residents won’t have health-care insurance in 2010. In 2019, after 10 years of the Republican plan, CBO estimates that …17 percent of legal, non-elderly residents won’t have health-care insurance. The Republican alternative will have helped 3 million people secure coverage, which is barely keeping up with population growth. Compare that to the Democratic bill, which covers 36 million more people and cuts the uninsured population to 4 percent.

But maybe, you say, the Republican bill does a really good job cutting costs. According to CBO, the GOP’s alternative will shave $68 billion off the deficit in the next 10 years. The Democrats, CBO says, will slice $104 billion off the deficit.

The Democratic bill, in other words, covers 12 times as many people and saves $36 billion more than the Republican plan.

Congressman Boehner had this to say: “Not only does the GOP plan lower health care costs, but it also increases access to quality care, including for those with pre-existing conditions, at a price our country can afford.”

In regard to savings, CBO notes that

some provisions of the legislation would tend to decrease the premiums paid by all insurance enrollees, while other provisions would tend to increase the premiums paid by less healthy enrollees or would tend to increase the premiums paid by enrollees in some states relative to enrollees in other states.

As to provisions of the legislation which would “tend to decrease the premiums paid by all,” CBO points out that savings may be derived from

“Changes in the extent of insurance coverage purchased”

Yes, that’s exactly what that says: the Republican plan will afford us all the opportunity of saving money on insurance (but not nearly as much as the Democrats’ plan), by granting us the right and ability to have less insurance coverage.

CBO states:

The second source of change in average insurance premiums is changes in the average extent of coverage purchased. Those changes can reflect both changes in the scope of insurance coverage–the benefits or services that are included–and changes in the share of costs for covered services paid by the insurer–known as the “actuarial value.” With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates. CBO’s assessment was that the amendment would not have a substantial effect on actuarial values.

So the actuarial costs– “the share of costs for covered services paid by the insurer,” will not be substantially affected; but “the scope of insurance coverage–the benefits or services that are included” for people, will be decreased. Worse insurance, less money–thus a lower premium and Republican “savings.” Couple that with 17 percent uninsured after 10 years, increased premiums for “less healthy” enrollees, some malpractice “reform” and a few other sundry measures and we’ve got us a plan. Thanks for sharing.

Report: Uninsured Hospitalized Children Face a 6o Percent Increased Risk of Dying

Sometimes the numbers speak louder than words, and the words are just painful to hear: the New York Times’ Prescriptions reports that

Researchers analyzed data from more than 23 million children’s hospitalizations from 1988 to 2005.

Uninsured children who wind up in the hospital are much more likely to die than children covered by either private or government insurance plans, according to one of the first studies to assess the impact of insurance coverage on hospitalized children.

Researchers at Johns Hopkins Children’s Center analyzed data from more than 23 million children’s hospitalizations in 37 states from 1988 to 2005. Compared with insured children, uninsured children faced a 60 percent increased risk of dying, the researchers found.

On a regular basis writers on this blog have discussed health reform as a moral imperative: citing religious doctrine, philosophers, economists and statistics to show that health care, unlike the purchase of automobiles and designer shoes, is not correctly a conventional aspect of a market economy– that the distribution of healing and life itself should not be premised upon who is the best capitalist, or, for that matter, the child of the best capitalist. That uninsured hospitalized children face a 6o percent increased risk of dying says that in a way that I simply cannot add to. Lack of insurance kills.

The Times noted that “Although the research was not set up to identify why uninsured children were more likely to die, it found that they were more likely to gain access to care through the emergency room, suggesting they might have more advanced disease by the time they were hospitalized.”

According to the Times the study showed that “uninsured children were in the hospital, on average, for less than a day when they died.”

Which is to say that it was too late by the time they got there.

The Times noted that “Alison Buist, director of child health at the Children’s Defense Fund, a nonprofit advocacy organization,” said in response to the study’s findings:

If you wait until a child gets care at a hospital, you have missed an opportunity to get them the types of screening and preventive services that prevent them from getting to that level of severity to begin with.

The Times further noted that

The most common reasons for children being hospitalized were complications from birth, pneumonia and asthma. The study found that the reasons did not differ depending on insurance status.

Read the full NY Times article here.
Read the Report here.

Principles for the Homestretch

House and Senate leaders will soon have to reconcile several different versions of health reform bills. The bills are complex, but some simple principles should guide the process of integrating them into a final product. As the press reports on a whirlwind of proposed laws, we need to ask of any particular proposal: Does it . . .

1) Increase productive competition in health care? Everyone talks about “increasing competition” among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize:

[T]o avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

Both the Netherlands and Switzerland have already experienced problems in this area, even though the Netherlands has implemented risk-adjustment methods (which attempt to deter such “cherrypicking” and “lemondropping”) far more serious than anything proposed in current bills in the US. As Karen Pollitz has repeatedly argued, we’re going to need a much greater investment in insurance regulation to make any reform bill work.

2) Make it easier for uninsured or underinsured individuals to buy coverage? Many of the proposals for allocating and awarding subsidies for coverage sound exceedingly complex. We’re hearing about serious limitations on access to exchanges, subexchanges, burdensome “free rider” provisions, etc. Any particular provision may sound good in the abstract, but taken as a whole they could become an obstacle course that makes obtaining insurance coverage a miserable and exasperating experience for those supposedly aided by reform. During the second Bush administration, hundreds of thousands of children eligible for subsidized health insurance were not enrolled because states failed to make enrollment convenient enough for time- and cash-strapped parents. As Liebman and Zeckhauser remind us, “we must design systems for mere mortals, not the people who inhabit the models of traditional economists.” What seems easy to one of DC’s privileged elite can be very hard for an overworked mom or minimum wage-earning service worker.

I believe that the main reason a solid 2/3 to 3/4 of the country supports a public option is because it is a straightforward, transparent way to provide a backstop of health insurance for everyone. If Congress both rejects a public option and makes subsidies for private insurance as complex as the tax code, health reform risks becoming a model case of government failure. Last week’s negative votes on Rockefeller’s strong and Schumer’s weak public options could easily become a “you broke it, you bought it” moment for centrist Democrats and Republicans on the Senate Finance Committee.

3) Fairly distribute the burdens of reforming the health care system? This is the tax and finance question, and it promises to generate some epic battles on Capitol Hill. However the Senate Finance proposal ultimately evolves, it will be in tension with a House of Representatives that sees progressive taxation as a foundation for financing reform. The Baucus proposal to tax “high end”/Cadillac/”gold-plated” health plans may seem progressive, but it promises to gradually engulf even normal plans. While David Leonhardt offers some good economic arguments for such a tax, policymakers should be guided by Leonhardt’s observations on the propriety of taxing those at the very top of the income scale, who have disproportionately benefited from economic trends and tax cuts of the past decade.

4) Provide incentives for long-term cost-saving and preventive medicine? Comparative effectiveness research is a crucial tool for focusing pharmaceutical research on drugs that save lives. We have a shortage of primary care doctors vis a vis specialists. Reimbursement systems are too easy to game. Insurance markets are concentrated and need more competition and transparency. Any bill that ignores these problems (or fails to empower HHS or another agency to address them) can’t lead to truly sustainable universal coverage.

The health reform fight has been bruising, disappointing, and frustrating for many who care about health policy. Many unwise assumptions are already baked into leading bills. In the Senate, ostensibly Democratic lawmakers are promoting what are essentially Republican ideas and granting enormous subsidies to industries that may well betray them at the next electoral cycle. Nevertheless, there remain many opportunities for improving the final product at the beginning of the end of the legislative process.

The Truth About Young Invincibles

Recently released data has indicated that young people don’t care about health care reform.  Or at least not in large numbers. The poll, released by Gallup, says that only 34% between the ages of 18 and 34 want their Congress members to vote for reform legislation.

But this conclusion, drawn by so many, may be somewhat at odds with what the underlying situation might realistically be: that young people actually do care about health care reform itself– but are reluctant to bear the costs for not only themselves–but aging boomers as well–especially as young people have borne disproportionately the effects of the economic crisis.  For those of us who are in between still being dependents on our parents’ insurance and having health coverage of our own through employment, health care coverage is important –and we’re not so stubborn so as to not admit it– but the cost of insurance at the onset of a working life can be a significant barrier.

Why is there a problem of young uninsured people anyway?  19 years of age seems to be the limit for when young people in our country can still get medical coverage under their parents’ policies.  Although many states have altered this equation, many have not. For many private insurance companies as well as Medicaid, young people are cut off from coverage at the age of 19 or when they graduate from high school.  Many insurance companies cover those dependents that go on to college, and many college insurance plans provide some level of coverage. But those who choose to join the workforce  directly following high school graduation are largely left without.  In addition, once a “young and invincible” graduates from college, most are severed from insurance coverage altogether (that is, if they weren’t already).

Again, what might lend itself to misconstrual among all the data on health care legislation support is the difference between young people wanting health reform and being able to afford it– even if we get it.  According to the Commonwealth Fund, the majority of the uninsured young adult population (ages 19-29) are from low-income households.  Also, more than 2.5 million recent college graduates are unemployed.  Important to remember is the fact that recent graduates simultaneously face the difficulty of paying off college loan debt.  Thankfully, President Obama has not forgotten that fact.

Some policymakers think that because young people are so “invincible” we make an ideal group to add into the health care insurance pool: we are healthy, cheap to cover, and take up a small percentage of overall costs on health care.  For them, it makes perfect sense to add a relatively healthy group to the larger pool of Americans requiring insurance so as to drive premiums down overall and/or increase the profitability of insurers.  Ideas like this overlook (or disregard) the resultant fact that young people will then bear the responsibility of subsidizing health care costs of older generations– counterintuitive and somewhat contraindicated  when we look at wage status and unemployment numbers for recent high school and college graduates entering the workforce, don’t you think?

Importantly, besides the issue of unemployment, the types of work young people are usually able to secure affect their chances of getting health coverage too.  Those who are able to obtain jobs usually start off working part-time or lower-wage jobs, ones which typically do not offer benefits such as medical insurance.  Read the story about this young woman who was highlighted in the LA Times; she was unlucky enough to need an operation to remove a cyst while she was still in the introductory period as a new-hire (no insurance until you prove yourself, of course).  The only way she was able to cover the out-of-pocket expense of $12,000 was through her parents’ refinancing of their home.

Implicit in all this is age rating. For many reasons beyond its potential negative effects on both young and old, age rating should be divorced from actual health care reform.  Age rating would allow insurance companies to actively discriminate against its beneficiaries based on age alone.  For young people, such proposed age-rated, young-invincible plans are not even comprehensive; they would only cover medical care in times of emergencies or extreme illness, giving the plans the name of “catastrophic insurance.”  That sounds enticing.  Hard to believe young people wouldn’t be banging down the doors of their elected officials, adamantly demanding “catastrophic insurance,” right?

Better plans would incorporate the real needs of young people: preventive care, prescription benefits, and affordability.  These issues are not just unique to older generations.  If we want to keep the so-called invincibles healthy, we have to give them better options than just care in times of dire need.  Keeping young people on their parents’ insurance until a certain age limit is a good idea, as long as it plays out in practice too.  Anything is better than forcing young people to get coverage they can’t afford.  If you want our support for health care reform, try tailoring some of the reform bills to what we actually need.

The 85% Solution and Health Costs

Reform may be bogging down over cost issues.

Blue Dogs and Republicans argue that the cost of reform is too high.  Attempting to predict what large expenditures set off fiscal responsibility alarms is chancy (Financial bailout? Iraq war? Health coverage for all?).   Public money should be spent wisely, but outrage at the scale of the thing — about $100 billion per year to bring equity and sense to a system that cost $2.4 trillion in 2008, and is projected to cost $4.4 trillion by 2018 — doesn’t scan well.  Time lines have been stretched.  The level of political energy has ratcheted up, with the President fully engaged, and business and the health industry  more publicly pushing back.

It may be time to think back to a catch-phrase of the last health reform period.  It was common at that time for objectors to assert that reformers were applying a 100% solution to a 15% problem — that is, that comprehensive reform was unnecessary to address a problem affecting “only” the 15% of the population without health coverage.  There are glimmers of a similar argument this time, with objectors asking whether it is worth it for the haves (taxpayers) to provide for the have-nots (the uninsured).  This argument would be flawed definitionally, as plenty of the working poor without insurance pay a higher total tax rate than better-off insured people.  More significantly, the message should be rejected on its merits: this round of reform is necessary for everyone, and not just the uninsured.

So, what’s the 85% solution?  The figure 85% pops up in a couple of interesting places in the health reform debate.  First, a NYT/CBS poll last month found that about 85% of Americans believe that the American health system needs to be “fundamentally changed or completely rebuilt,” numbers that match well with an EBRI Issue Brief published earlier this month.  This number demonstrates the inclination of the insured to support reform.  After all, the other place the figure 85% pops up in insurance coverage rates — 85% of Americans are insured, and 85% of Americans recently told Gallup that their own health care as “excellent” or “good.”  In the sharpening public debate, progressives should keep this group in focus.  They’re empathetic toward the uninsured, but that empathy is doing too much work.  They should be engaged, in addition, by the fact that health reform is in their direct interest.  They need reform for at least three reasons: our system is fiscally unsustainable and will run off the rails in coming years without comprehensive reform; our system encourages procedure-driven medical practice that serves patients poorly, and even harms them; and the basis for competition in the private insurance market is less on quality and service, and more on seeking out “good risks,” driving into public programs or uninsurance those who most need care, inefficiently increasing taxes or health insurance premiums for the 85%.  Those rallying support for reform should pay heed to these issues.

Attention to an 85% solution is not in tension with covering the 15%.  Uninsurance kills people, and extending coverage to all is critical.  Most Americans clearly care about universal coverage, but the negative blitz will be intense, and it will be helpful to also emphasize that reform helps the 85% as well as the 15%.  Benefit to the 85% sometimes gets underplayed, allowing nay-sayers to create a divisive us-them dynamic.  Today’s reform efforts are necessary because the system is broken with respect to all participants.

All of the health reform draft bills address the key issues of cost, practice reform, and risk selection to greater or lesser degrees.  They could, of course, be improved in these areas. But too often, the debate tends to be reported as though sponsors are advocates only for the uninsured, while Blue Dogs and Republicans fight a rear-guard action to protect those with insurance.  If the struggle is so mischaracterized, reform is unlikely to pass.  We need reform that contains cost for all, restores incentives to practice humane medicine, and reduces as much as possible insurers’ incentives to avoid covering those most in need of care.  Below are some quick thoughts on comparative effectiveness analysis as cost containment, in this spirit.  I hope to touch, in coming days, on the need for reimbursement reform and for an end to insurance competition on the basis of risk.

Cost containment: Health Technology Assessment

There’s been a lot of talk about how to “bend the curve” of health care cost projections.  Containing cost increases helps everyone, of course.  It would be tragic indeed for Congress to expand coverage to all only to find in a few years that we can’t sustain the new program.  One important, and controversial, aspect of cost containment is comparative effectiveness research (CER).   CER is often demonized as rationing.  The Institute of Medicine’s recent work in this area defines this hobgoblin, however, in terms that seem positively pro-patient:

[CER] is the generation and synthesis of evidence that compares the benefits and harms of alternative methods to prevent, diagnose, treat, and monitor a clinical condition or to improve the delivery of care.  The purpose of CER is to assist consumers, clinicians, purchasers, and policy makers to make informed decisions that will improve health care at both the individual and population levels.

Shouldn’t we care about whether expensive new devices and procedures improve health?  The scare tactics should be taken on in two ways.  First, as the IOM makes clear, most CER is directed toward choosing the clinically appropriate alternative.  A second, rhetorically more difficult task, is to point out (as have both my colleague Frank Pasquale and economist Uwe Reinhardt ) that “rationing” is not a swear word, but rather a description of a method for allocating scarce resources.  The choice isn’t whether rationing to some degree will occur, but rather whether it will be done through a transparent process rather than on the basis of ability to pay — or on the basis of an insurer’s preference.

That good health technology assessment should be a concern for the 85% was made clear by David Leonhardt’s recent NYT piece on slow-growing, early stage prostate cancer.  Leonhardt describes the five forms of treatment commonly prescribed, ranging from “watchful waiting” to proton radiation therapy.  The price, he reports, ranges from “a few thousand dollars” to over $100,000.  Which works best?  No one knows.  Remember — the question posed by the article isn’t which produces the most QALYs per unit cost; rather, it reveals that there is no real scientific basis to choose among the options.  Shouldn’t we encourage research to allow us, and our doctors, to choose wisely?

Price-Gouging by Doctors and Hospitals

Mark A. Hall, Professor of Law and Public Health, Wake Forest University

Carl E. Schneider, Professor of Law and Internal Medicine, University of Michigan

[Ed. note: As noted above, we are very pleased to welcome Professors Mark Hall and Carl Schneider to the blog today.]

We cannot reform health care intelligently unless we understand the medical marketplace well. Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers.

The Problem

When patients are not protected by large private or public insurers, doctors and hospitals charge them astonishingly more than patients with Medicare or managed-care insurance.  Some price difference would make sense, because insurers offer providers large volume and economies of scale.  But we are not talking about discounts of 10, or 20, or even 30 percent.  Providers routinely double, triple, or even quadruple prices for unprotected patients.  Such huge mark-ups can only be regarded as price-gouging — exploiting market power to charge prices virtually unrelated to actual cost or market value.

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs.  In some states mark-ups average four-fold.

Data for physicians’ prices are less comprehensive, but information from office management systems is disturbing.  Across a range of diagnostic and invasive specialty services (echocardiography, coronary catheterization, liver biopsy, upper GI endoscopy, circumcision, flexible sigmoidoscopies, hysterectomy, appendectomy, gall bladder removal, and arthroscopic knee surgery), many physicians in 2003 charged uninsured patients roughly two to two-and-a-half times what insurers paid.  Only primary care physicians appear to be staying within plausible bounds.  They typically charge uninsured patients only one-third to one-half more for basic office or hospital visits than they received from insurers.

Some Excuses

Providers defend themselves in several ways.  First, they call these price differences steep discounts rather than huge mark-ups.  This is almost laughable.  Most providers charge “list prices” to only a small minority of patients (10-20%), so these are hardly a genuine baseline.  Second, providers argue that because they often cannot collect list prices, they are on balance receiving little more than they would receive from insurers.  However, when patients cannot pay inflated bills, doctors and hospitals regularly send them to collection agencies, ruining patients’ credit and bankrupting millions of them.

Third, providers blame the government by claiming that program and accounting rules require them to bill this way.  But governmental agencies have declared that this is not true, and while some rules may still be irksome, rules about billing certainly do not require providers to set their prices as high as they do.  Many tax-exempt (non-profit) hospitals recently wilted under scrutiny and adopted sliding-scale policies for low-income uninsured patients, but these policies do little to help insured patients who are receiving care out-of-network or uninsured patients from the broad middle class.

The Solution

Insurers’ attempts to stop price gouging have failed.  Some large insurers have refused to reimburse out-of-network providers for the full amounts they charge on the grounds that those amounts are not “usual, customary, and reasonable.”  But New York’s Attorney General called this “consumer fraud” because patients were left owing the full bill.  Courts have been little help.  Consumer class-action lawsuits have attacked price gouging by non-profit hospitals, but courts have dismissed most of these cases on various technical grounds.

Government regulation has inhibited price gouging, but only for people covered by government programs.  Medicare, for instance, prohibits doctors from charging Medicare patients more than about 10% over Medicare-approved rates.  But inflated pricing still afflicts the uninsured and privately insured people buying care out of network.  Some reformers simply advocate greater price transparency so that patients know better what to expect when seeking care without the protection of insurers.  But transparency will not fix the structural dynamics of market power that allow providers to charge almost whatever they want.

To help medical markets work better, the government should cap what doctors, hospitals, and other providers may charge patients who are not protected by regulated or negotiated discounts.  The details can be debated and refined, but one approach is to cap charges at, say, 150% of a normal reference rate.  The reference rate could be what Medicare pays, or a weighted average of what larger private insurers normally pay across a region.  Doctors with boutique practices could still charge what they wished for extra concierge services, or perhaps doctors who don’t accept any insurance should be exempted.  Design features are important and tricky, but they should not keep us from setting reasonable bounds within which markets can function.

Substance: Obama names Regina Benjamin, MD, MBA, to Surgeon General Post

In a week that has us considering personal experience as it relates to job performance as regards a seat on the Nation’s Highest Bench, I’ve found myself considering the well worn aphorism of Oliver Wendell Holmes: “The life of the law has not been logic: it has been experience….The law embodies the story of a nation’s development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics.”

And it has occurred to me that perhaps Holmes’ rubric lends something to a consideration of health care reform and President Obama’s pick for Surgeon General, Regina Benjamin, MD, MBA.

Although much in healthcare (and healthcare reform) can be (and perhaps must be) the complex and dismal mathematics of zero sum, gored oxen and have and have not—as Holmes reminds us: the math is not all. Yesterday, in a post by Professor Kathleen M. Boozang, we looked at health reform through the lens of Catholic social doctrine: a proposition leading to the conclusion that

We must pursue a system in which each of us has access to health care, which necessarily requires that, in solidarity for our fellow being, those of greater fortune accept the responsibility for those who do not, giving the gift of an opportunity for the basic good of health.

In a recent post considering Atul Gawande’s article on McAllen, Texas, which lamented Medicine performed as a sheer business proposition (McAllen is “one of the most expensive health-care markets in the country” and suffers from what Gawande sees as an all too prevalent, treat the patient as though they were an ATM mentality), we came face to face with Immanuel Kant’s Categorical Imperative:  “Act in such a way that you treat humanity, whether in your own person or in the person of any other, always at the same time as an end and never merely as a means to an end.”

We noted then that we found it “passing strange to find ourselves, in the midst of such daunting medical, technical, and financial data contained within the  proposed solutions and counter-solutions to arrive at this–a simple (but difficult) age old moral truth.”

And that it had “struck me while reading that what Gawande finds is essentially a medical culture functioning, and incentivized, contrary to Kant’s categorical imperative (see above): the simple moral admonition that one must not merely “use” others.”

And then there’s Dr. Benjamin.

She is the founder and CEO of the Bayou La Batre Rural Health Clinic in Bayou La Batre, Alabama (if the name of the town sounds vaguely familiar, think Forrest Gump, shrimping boat). Emily P. Walker, Washington Correspondent, MedPage Today reports:

A major supplier of charity care, Dr. Benjamin has provided medical care to patients in the Gulf Coast regardless of insurance status.

“I decided I would treat patients regardless of their ability to pay,” she said when she accepted the president’s nomination in the Rose Garden on Monday. “It should not be this hard for doctors and other providers to provide care for their patients.”

Dr. Benjamin’s practice was destroyed several times by hurricanes, and once by a fire, but she always rebuilt, sometimes by refinancing her home and maxing out her personal credit cards, President Obama said Monday.” (emphasis added).

She is also said to have “had to moonlight in an emergency department and nursing homes to keep her practice open.”

It is notable that while Congress argues over where the money will come from to fund health care reform, when faced with the need to rebuild the clinic she herself had started– which offers care regardless of ability to pay–Dr. Benjamin, despite the MBA which follows her name, maxed out her credit cards, mortgaged her house and took a part-time job.

Extraordinary and beyond the call. Perhaps beyond Kant, and certainly beyond the math. According to the NY Times, “Dr. Benjamin is a devout Roman Catholic.”

By no means am I advocating this degree of personal risk and sacrifice as a paradigm for health care reform. It is much too much to ask or expect–as it seems Dr. Benjamin herself well understands: “It should not be this hard for doctors and other providers to provide care for their patients.” Agreed.

As noted in the post,  “Why McAllen Texas Kant be the Answer to Health Reform,”

Pragmatically, as one looks upon the current system of health care and health care finance,  it is well worth quoting Harold Luft from today’s Washington Times: “A redesigned system must create new incentives for those entities so their self-interested behavior leads to a better societal outcome.” Gawande offers examples of systems which provide an infrastructure conducive to Mr. Kant’s imperative.

Dr. Benjamin offers an example of personal commitment despite extraordinary disincentives. The Huffington Post reports

She said she would combat preventable diseases. Her father died with diabetes and high blood pressure, her only brother of HIV. Her mother died of lung cancer because as a girl “she wanted to smoke just like her twin brother,” an uncle now on oxygen.

“I cannot change my family’s past. I can be a voice in the movement to improve our nation’s health care and our nation’s health,” Benjamin said. “I want to be sure that no one falls through the cracks as we improve our health care system.”

Sounds like the voice of experience.

Jost on Cooperatives

In the last post, I introduced Timothy S. Jost and his case for a public insurance plan option. Jost has also recently addressed the new “middle ground” between a public option and the status quo: cooperatives. I’m honored to print his analysis below on our blog.

Are Cooperatives a Reasonable Alternative to a Public Plan?
by Timothy S. Jost

First, a word about history. We have tried cooperatives before. During the 1930s and 1940s, the heyday of the cooperative movement in the United States, the Farm Security Administration encouraged the development of health cooperatives. At one point, 600,000 mainly low-income rural Americans belonged to health cooperatives. The movement failed. The cooperatives were small and undercapitalized. Physicians opposed the cooperative movement and boycotted cooperatives. When the FSA removed support in 1947, the movement collapsed. Only the Group Health Cooperative of Puget Sound survived. Over time, moreover, even Group Health, though nominally a cooperative, has become indistinguishable from commercial insurers–it underwrites based on health status, pays high executive salaries, and accumulates large surpluses rather than lower its rates.

The Blue Cross/Blue Shield movement, which also began in the 1930s, shared some of the characteristics of cooperatives. Although the Blue Cross plans were initiated and long-dominated by the hospitals and the Blue Shield plans by physicians, they did have a goal of community service. The plans were established under special state legislation independent from commercial plans. They were non-profit and, in many states, exempt from premium taxes. They were exempt from reserve requirements in some states because they were service-benefit rather than indemnity plans and because the hospitals and physicians stood behind the plans. They were exempt from federal income tax until the 1980s. In turn, they initially offered community-rated plans and offered services to the community, such as health fairs. In some states their premiums were regulated and they were generally regarded as the insurer of last resort for the individual market.

Over time, however, the Blues lost their focus on community service and began to look more and more like their competitors. They abandoned community rating (which, realistically, they could not maintain when faced with competition from experience-rated commercial plans) and began to impose underwriting and cost-sharing requirements indistinguishable from the private plans. Although providers lost control of the Blue plans, the plans never took a leadership role in bargaining aggressively with providers, despite their market dominance in many states. Many of the largest Blue plans became for-profit, and those that remain non-profit are largely indistinguishable from commercial insurers. Although the national Blue Cross/Blue Shield association offers some coordination services to local plans, it has not resisted the move of Blue plans away from a community-service toward a for-profit orientation. Lacking a national focus on public service, state and regional plans have become indistinguishable from their commercial competitors.

Blue plans are not the only non-profit insurers that survive. Many church and fraternal organizations have their own non-profit plans. Although these plans often try to serve their communities, they usually have a small presence and little bargaining power in most communities in which they operate; tend to insure individuals and small groups, the most costly market; are often the victims of adverse selection; usually underwrite much like commercial plans; and tend to offer low value, high cost-sharing policies. They are not a model on which to build national reform. Mutual insurers are also in theory owned by their members. They also, however, are indistinguishable from for-profit insurers in most states.

What can we learn from this history? First, health care cooperatives are, in fact, an American response to health care reform. Cooperatives and non-profit insurers were there before for-profit commercial insurers entered the health insurance business, and we could try to revive the idea again.

But why would state or locally-run cooperatives be any more successful now than they were when we tried them before?

First, it is hard to imagine how they would get underway. Capitalization and critical size were problems before and would likely be problems again. Senator Conrad’s recent draft suggests that members of the coops would elect their boards, and that the coops would then obtain state licensure as mutual insurers, meeting state standards for solvency and reinsurance (with the help of federal seed money). But there is a chicken and egg problem here. Until the coops had members they could not have a board. Until they had a board, how would they meet licensure requirements? The state coops, moreover, would, under Conrad’s proposal be supervised by a national board, but the national board would be elected by the state coops. Again, the state coops would presumably not be able to get underway until the national board provided policy guidance, but the national board could not get underway until the state coops were formed to elect it. None of this makes sense.

Second, there is every reason to believe that small, state run coops would fail like their predecessors did in the 1930s and 1940s. Unless they reached the critical mass necessary to bargain effectively with providers, to accumulate reserves, and to compete with national private insurance plans, they would be doomed to failure. Even if they managed to succeed here and there, they would contribute nothing to a national effort to control costs, drive value, and make affordable care accessible.

Third, if state-run coops in fact, against all odds, became large, successful competitors for insurance business, what would keep them from following the course of the Blue and mutual plans before them? Without strong Congressional direction and a unifying national leadership, what could keep them focused on cost control, quality improvement, transparency, and service rather than simply becoming indistinguishable from their commercial competitors? How would they drive the delivery system change we need?

Fourth, how does setting up cooperatives on a state-by-state basis drive national health care reform? Each state currently can set up cooperatives if it wishes to, but none have done so. Why would states suddenly embrace this concept? And what assurance do we have that they would pursue anything like a common strategy? To approach this issue on a state-by-state basis is simply to surrender on national health care reform. A federal fallback plan to be implemented in the future is also unlikely to work. HIPAA contained a federal fallback plan for states that failed to implement reforms in the individual market, but it was poorly implemented and eventually abandoned. To revert to a state-by-state approach is to surrender on national health care reform.

What Would Make the Cooperative Concept Work?

In fact the cooperative idea in itself is promising. The proposed cooperatives look much like the social insurance funds of Germany and of other central European states. Those funds are governed by their members and do a comparatively good job of keeping health care costs in check. But they operate in a strong framework of national laws and under the guidance of national leadership.

The only viable strategy is Senator Conrad’s Option 2–-a federal charter to license and regulate a national non-profit coop, with coop governance prescribed by Congress. Leadership could initially be appointed as directed by Congress to represent consumer, labor, and small business interests, and thereafter be elected by the membership. The federal government could provide seed funding to assure initial solvency, but thereafter the coop could be self-supporting. It would be financed through premiums, and compete on a level playing field with private insurers (although some account would have to be taken of the fact that private insurers, no matter what underwriting rules were imposed, would still dump high-risk insureds into the coop). Some administrative functions could be delegated to the regional level, much as Medicare Advantage or drug plans are administered at the regional level. Regional councils could also be elected by members, who could have a role in selecting the national board and an influence on national policy.

A national cooperative could perhaps compete effectively with national private insurers. It could perhaps bargain effectively with providers, including global pharmaceutical firms and national hospital chains. It is possible that it could drive creative national quality initiatives and provide national data on health care use. It would not be government-run insurance, the great fear of the American right. But it could perhaps provide a national solution for a national problem. It will not happen on its own, however. It will only work with concerted and probably long-lasting support from the federal government.

Jost on the Public Plan

Timothy S. Jost is one of the leading figures of the American health law academy. He has unparalleled knowledge of comparative health law, which he’s applied to the American debate in an impressive series of articles and books.

When I heard that Jost was writing on current debates, I really wanted his insights on our blog. Here is the first part of an essay he wrote making a case for a public option, which 83% of Americans support.

Why Public Plan Choice?
by Timothy Stoltzfus Jost

One of the most significant and innovative proposals of the 2009 health-reform debate has been the concept of public plan choice. Although the exact features of a public plan have not been specified, the public plan concept offers several significant benefits:

Cost control. Health reform cannot happen unless we can control the continual upwards spiral of health care costs. The public plan would control costs in three ways. First, it would be able to keep its costs down by not having to make a profit and by avoiding many of the administrative costs incurred by private insurers. Second, it would introduce competition into the health insurance industry. Although there may be, as Karl Rove asserted yesterday, 1300 health insurers in the United States, health insurance markets are segmented into the large group, small group, and nongroup markets and within each of those categories competition is exceedingly local. In 36 states, 65% of the small group market is controlled by 3 insurers; in 16 states one insurer controls half of the market. In any one locality, moreover, the market is even more concentrated. In my home town of Harrisonburg, Va., one insurer controls 86% of the market.

Private insurers simply do not compete; they simply take prices from providers and pass them on to consumers, driving the health care price spiral. A national public plan would introduce vigorous competition into every part of the country, forcing private insurers to compete for business and to bring down their premiums. Third, a national public plan would also have the bargaining clout to make providers moderate the increase in their prices, bringing down the cost of health care itself.

Choice. Right now the only choice available to most Americans is private insurance and, in many markets, small businesses have only a choice of one or two insurers. Americans want to have alternatives to choose among to best meet their needs. A public plan offers this.

Delivery System Reform. A national public plan could drive delivery system reform and improve the quality of care, as Medicare has been doing through its demonstration projects, payment reforms, and consumer information initiatives.

Transparency and Accountability. One of the most important developments in the health care reform debate over the past decade has been the data that has emerged from the Dartmouth research group on variations in health care spending. This data, discussed by Atul Gawande in his widely noted recent article on health care costs and the President in his speech at Green Bay, could only be collected because Medicare data are available to researchers. No comparable research can be done on the under 65 population because private insurers regard whatever data they have to be proprietary. Private insurers are also much more secretive about their coverage and utilization review policies. A public plan could make anonymized data available to researchers and be open with its subscribers about coverage and utilization policies.

A National Strategy. We have waited for decades for the states to make affordable health care available to Americans. A few have tried, most have failed. None have developed an effective alternative to private insurance. All Americans are experiencing the same problems with health care–lack of access, high costs, and uneven quality. We need a national strategy for health care reform that will help all Americans, not just some. We also need a national public plan that offers uniform benefits to all Americans and national bargaining power.

Market Entry by Health Care Cooperatives: Neither Quick Nor Easy

The idea of establishing regional cooperatives, advanced as an alternative to President Obama’s public plan option, has attracted attention as a means of assuring that health reform legislation contains some means to improve competition among health plans around the nation. But the proposal, which may have superficial appeal as a “middle ground” between a public plan option and an unchecked private market, is ill-equipped to fix the key problems a public plan would address. In addition, recent experience teaches that timely and effective entry by such plans is unlikely.

The first issue is whether a cooperative, organized by consumers or other groups, can effectively deal with the shortcomings of the existing delivery system and insurance market. Thus far, the proposal advanced by Senator Conrad is pretty sketchy, but are grounds for skepticism. A central reason for having government sponsored plans is to allow the efficiencies of Medicare’s well-established administrative structure and innovative payment experiments to carry over to the private sector. Coops provide no such advantage. A second advantage of public plans is that they would likely achieve some bargaining leverage by virtue of their probable role as insurer for people representing higher risks whom private insurers find some methods to avoid. Hospitals and physicians will be hard pressed to bypass such a significant presence in the market and the public plan can thereby exert market-wide pressure to keep provider and pharmaceutical costs down. Whether co-ops will be willing to undertake the role of covering such individuals or able to sponsor innovative delivery systems to treat them is far from certain.

In any event, it is hard to envision numerous regional coops gathering the necessary data, experience and reputation to serve as a benchmark or counterweight to dominant hospitals and provider groups across the country. Further, there is a serious question regarding the independence and mission of coops. It is a mistake to assume that nonprofit entities will necessarily work to the advantage of the public. Unfortunately, our experience with nonprofit hospitals and HMOs suggest that they can easily be persuaded to play along with other providers and may not always vigorously pursue their charitable mission. Keeping cooperatives’ eye on the ball would require close attention to the control and governance of such entities.

The second objection is based on timing and practical considerations. There is ample evidence from our experience with health insurance markets that developing effective coop-sponsored plans will not come easily or quickly. It is clear that new entrants into health insurance markets face a host of obstacles. The prevalence and magnitude of entry barriers is evidenced by the dominance and profitability of existing insurance plans. One or a handful of companies dominate most health insurance markets around the country and these firms have enjoyed consistent and robust profits. Economic theory would suggest that such profit opportunities should have invited entry by rivals eager to capture some of the profits available in those markets.

Additional proof of the obstacles to entry are found in the investigations by insurance commissioners into proposed mergers in their states. In Pennsylvania for example, the proposed merger of Highmark and Independence Blue Cross would have combined the dominant insurers in two large distinct geographic regions of the state. Evidence provided to the State indicated that numerous attempts by regional and national firms such as Aetna and Coventry to enter both markets had proved unsuccessful over the years. Expert studies suggested that a variety of factors including brand loyalty, difficulties in securing physician and hospital network contracts, regulatory and information gathering costs, and obstacles created by the contracting practices of incumbent providers, thwarted entry. Newly formed coops needing to acquire expertise and develop networks will surely face enormous difficulties penetrating markets.

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