That Was A Big Waste Of Time

With debate officially beginning at 3 pm today in the Senate, Ezra Klein makes a good point about the relatively static state in which health care reform has been:

If you had tuned in six months ago for 10 minutes, you would have had all the information necessary to predict exactly where we'd be today. Democrats commanded exactly 60 votes, which meant that they had enough potential supporters to overcome a filibuster, but that each individual senator had sufficient leverage to extract enormous concessions in the final days. You would have known that the most controversial issues were the public option and the total cost of the bill, and both of those would be targeted by conservative Democrats like Nelson, Landrieu, and Lincoln. You would have known that liberals would be furious if any concessions were made on these issues, and would organize aggressively to protect their priorities.

I think Klein's one mistake is not so much that you could have predicted six months ago where we would be today, but that we are basically in the same situation we were in after Wasting those six months. The basic structure of the health care reform plan has remained essentially unchanged for months, and so have the political dynamics. All the debating, shouting, protesting, concessions, and posturing has changed basically nothing. All that effort to try to win "bipartisan support" or craft some magical, 60 vote, perfect public option compromise went nowhere. The progressive bases has been fairly successful in rallying to prevent the public option from being dropped (or crippled), and stopping the bill from getting worse. They have kept the left flank from folding as expected, but equally, the same handful of Conservatives Democrats remains unbending. The stalemate remains.

The potential sticking points months ago (overall price tag, abortion, taxes, public option, affordability, etc.), are still the same unresolved sticking points. On almost none of these issues has a final decision been reached. Politically, the overall bill remains slightly unpopular, while many individual elements, like banning pre-existing conditions and the public option, still have strong majority support. The Democrats still need to pass something, or they will end up looking like fools.

The real dealmaking and horse trading in the Senate will happen in a relatively short span of time, over the next several weeks. The more I watch the Senate, the more they remind me of a college freshman. No matter how much time they are given to write a term paper, they seem to always put off the work until the day before the paper is due, and end doing a very poor job. And like a college freshman, they need firm deadlines. If you give them an extension, they will just end up wasting that time. as well.

Maybe it is time to stop treating the Senate like some great legislitive body, and start treating it like the terribly broken monstrosity it has become. Its love affair with its own unconstitutional, arcane rules and extremely abused "privileges" has made it a practically unworkable institution that threatens the long-term success of our nation. The Senate just spent almost half a year working on health care reform, and didn't accomplish anything that couldn't have been done in three weeks if they were a functioning legislative body.

What The Senate Bill Does Better, Part 3: Starts With Greater Access To The Exchange

The Senate bill would give more small businesses access to the new exchanges quicker than the House bill. In the Senate bill, any business with 100 or fewer employees could use the new exchange. Starting in year four (2017), individual states could choose to allow larger businesses to also use the exchange.

Conversely, the House bill only allows businesses with 25 of fewer employees access to the new exchange in the first year. That is upped to 50 employees the second year, and 100 employees for year three. In year three, the new commissioner could choose to start allowing even larger employers to use the exchange.

The Senate bill would open up the exchange to more small businesses when it is first created. It would unfortunately delay the possibility of opening up the exchange to all employers by one extra year. It is important to remember that the House bill would start most reforms in 2013, while the Senate bill delays the start of the reforms until 2014, purely to make their bill look cheaper. So, in theory, there really is only one year (2015) when some small businesses (those with 50-100 employees) could not use the exchange under the House bill, but could under the Senate bill.

When/if the bills are merged in conference, I would like to see the Senate provision giving all businesses with 100 or fewer employees access to the exchange right away preserved. The three-year phase-in in the House bill seems an unnecessary delay in expanding access to the exchange and potentially the public option, which would only be available on the new exchange.

In the end, the practical effect may be very small. The CBO predicts that only a tiny fraction of eligible employers will take advantage of letting their employees select insurance on the exchange. Unless the exchange is improved, no one is really going to want to get insurance there. If you really want to increase the number of people using the exchange, you don't just need to increase potential access, you also need to give businesses and individuals a strong incentive to use it.

Read Part 1 Wavier For State Innovation and Part 2 Cantwell's Basic Health Program.

Urban Institute Think Tank Needs More Thinking; Less Being In The Tank

The Urban Institute has been searving some extra good veal lately. They have a new report out endorsing the idea of a super-hard trigger for a robust Medicare-style public option. While it is theoretically possible to design a “useful” triggered public option, it is also theoretically possible to sway Republican senators to votes for a Medicare-for-all bill with a truly beautiful haiku read on the Senate floor. (Between these two scenarios, I would advise progressive Democrats to spend their time studying the immortal style of Basho because I suspect the latter has more hope of succeeding than the former.)

I call this the “magical robust theoretically super-awesome trigger.” It is purely a fantasy of health care wonks that does not have a prayer of ever becoming law. Expect to hear more of this general idea in the coming weeks. The validators will wave around this complete fantasy trigger to help prepare the base for the eventual sellout with a completely worthless fig leaf trigger meant to kill the public option.

There is zero indication that there is sufficient support for this “magical robust theoretically super-awesome trigger” in the Senate. The handful of senators who claim to support a trigger also claim to be strongly opposed to a government run public option. They would never support a trigger with a serious change of being pulled, especially if it would produce a robust public option. In fact, most indications are that this trigger would have even less support than the current, "level playing field" public option without a trigger. Senators like Kent Conrad seem willing to accept the current public option, but are completely opposed to the idea of there ever being a public option tied to Medicare rates.

Even if this “magical robust theoretically super awesome trigger” passed into a law I have zero confidence that it would survive in the long term. If you were an insurance company, would you spend billions trying to bring down premiums and be willing to forgo billions in profits to avoid triggering the public option, or would you rather spend a few million to lobby to have the trigger quietly crippled with a small rider in some omnibus appropriations bill? I think the answer is clear.

I refuse to believe anyone following the health care debate would not know that this magical trigger has no chance. This report will not serve any useful policy function. The Urban Institute must know that the only use of this report will be to allow people to say “even the Urban Institute thinks the trigger is a good idea.” This is what it sounds like when veal moos.

Is Dan Pfeiffer Ashamed Of Nationwide Plans? Because He Should Be

Dan Pfeiffer wisely went after Charles Krauthammer's terrible column in which he makes the absurd claim that the pillars of health care reform should be taxing benefits, tort reform, and selling insurance across state lines. (Really Krauthammer? universal coverage, community ratings, ending rescission, banning pre-existing condition exclusion, rewarding quality over quantity, etc... did not make the cut, but taxing benefits did?)

The problem is that Pfeiffer did not attack Krauthammer for being an idiot with bad ideas. He did not point out that Krauthammer is advocating for a health care “reform” that would most likely make it impossible for him to find private individual health insurance if he lost his current employer coverage. Instead, Pfeiffer went after Krauthammer by pointing out that all his ideas were already in the bill, and in the process, he indirectly endorsed his foolishness.

What is truly scary is that Dan Pfeiffer claims the Senate bill would allow for the sale of insurance across state lines by saying:

Section 1333 of the Senate bill allows for interstate health care choice compacts. Coupled with insurance market reforms to ensure individuals are not discriminated against, this policy will expand health care choices to millions of Americans.

While I think interstate health care choice compacts are bad idea, they are not a huge concern to me. If a state wants to de facto eliminate its right to set minimum benefit packages by passing a law entering into a state compact with a state with lower standards, at least the state actively chose to do that by passing a law.

The real concern with section 1333 is that it also includes the terrible "nationwide plans" provision wanted by AHIP. If a state does not actively opt-out of this program, insurance companies would get to start selling insurance plans in the state which do not need to follow state law. This provision in effect guts all state regulations about coverage, and the worst part is that it would require states to actively pass a law to prevent this from happening.

If states don't pass a new law soon, their current laws about health insurance will be shredded by the Senate bill. States with strong insurance laws but that happen to currently have Republicans governors (Vermont, California, Hawaii, Minnesota, etc...) could easily see their insurance regulations eliminated if the Republican governors refuse to sign a law opting out of the “nationwide plans.”

I don't know why Pfeiffer did not mention nationwide plans in his article. It goes way farther in terms of allowing the sale of insurance across state lines than the interstate health care choice compacts provision. Pfeiffer must either be unaware of them, or the White House is actively trying not to draw attention to this radical provision. Either way, it sends a cold chill up my spine.

Really, Peter Orszag!?! Your Critics Have No Ideas For Controlling Cost?

During a conference call with reports Peter Orszag defended the Senate health care reform bill's minor cost-control measures:

Orszag suggested that others who have questioned the bill haven't been as thorough as Brownstein. He noted that The Atlantic reporter identified specific pages of the bill while interviewing him for the piece.

"I would say to folks in the looser range, 'What specifically else would you do?'" he added.

This must be a joke. Roland Brownstein's pathetic article was “thorough” because he listed page numbers and he talked to the experts Orszag wanted him to talk to. But an critical reading of the piece reveals that Brownstein knows almost nothing about health care.

It is one thing that the Obama administration decided not to try to pursue many proven cost-cutting solutions because they are too politically difficult. I understand you need to pick your battles, and governing is the art of the possible. But pretending these proven cost-controlling ideas don't even exist is governmental malpractice.

Since Orszag asked, “What specifically else would you do?” I'll give him 13 very specific proven solutions:

1. A minimum medical loss ratio for insurance companies mandating that they spend at least 90 cents of every dollar they take in as premiums on health care. This is based on the crazy idea that health insurance should insure people's health instead of corporate profits.


2. Turn all health insurances companies into non-profits. Most countries that are not single payer (Switzerland, Germany, Belgium) require all basic health insurance plans to be non-profits.


3. On the new exchanges, create a much stronger risk adjustment mechanism, like in the Netherlands, to encourage competition on quality and cost effectiveness, instead of the cherry picking of healthy customers.


4. Allow undocumented immigrants to buy health insurance on the new exchange with their own money. It will increase the size of the risk pool and reduce the cost of uncompensated care in this country.


5. On the new exchanges, use more tightly defined benefit packages, and define plan levels based on deductible and copay size, instead of actuarial value. This will simplify comparison shopping and encourage the selection of more cost-effective HMO's, instead of PPO's


6. Allow for drug re-importation. People in every other first world country pay much less for the same prescription drugs. Let Americans buy these cheaper drugs from Canada or Europe.


7. Allow Medicare to directly negotiate lower drug prices. Medicare Part D was one of the biggest corporate giveaways in American history. Allow Medicare to use its size (as the VA system does) to directly negotiate for lower drug prices for seniors.


8. Eliminate direct-to-consumer drug advertising. It only increases the unnecessary use of medicine.


9. Follow the FTC recommendation by providing shorter exclusivity periods for biosimilars. The current bills create an extremely long 12-year exclusivity period. Going with the FTC recommendations will increase the availability of much cheaper generic versions of life saving biologics.


10. Create a robust public option that can use Medicare rates and Medicare's provider network.


11. Create a single provider reimbursement negotiator like basically every other industrialized nation. The lack of this is the single biggest reason why, as a nation, we pay several times what other countries do for the same procedure.


12. Create a fully integrated, government-run health care HMO, based on the VA health care system, which would be an insurance option for all Americans.


13. Finally, adopt a Medicare-for-all single-payer system for everyone in the country.

These ideas are not radical or untested. All of them (except the exclusionary period for biosimilars) are being used in this country and/or other countries to reduce cost. These are all proven cost control solutions. Implementing all or most of these ideas would save our country trillions on health care over the next decade.

I know the Obama administration is aware of these cost saving ideas because several of them (drug reimportation, direct medicare drug price negotiation, robust public option) where part of his campaign's health care plan. Obama traded away most of these cost saving reforms to PhRMA and other industry lobbies in exchange for campaign ads. If you trade away most of the cost controlling reforms to bring the different industries on board, you have no right to go around complaining when people say your reform plan does not do enough to control cost.

Ron Brownstein is Completely Uninformed; Rahm Emanuel is a Fool for Thinking Otherwise

Rahm Emanuel is making practically every staffer in the White House read Ronald Brownstein's completely uninformed article about the great “free market economagic” cost saving solutions in the Senate bill. This explains a lot about why the current health care reform proposals are so bad. This is probably the single worst piece of news I have heard during the entire health care debate. If someone as powerful as Rahm thinks there is any value in Brownstein's writing, reform is in very bad shape.

The problem is Brownstein just doesn't understand health care systems. Take for example this jewel:

And, with only a few exceptions, that's just about all the systemic reforms analysts from the center to the left have identified as the most promising strategies for changing the economic incentives in the medical system. (The public competitor to private insurance companies championed by the Left would affect who writes the checks in the medical system, but not what the checks are written to pay for.) Most of the other big ideas for controlling costs (such as medical malpractice reform) tend to draw support primarily among Republicans.

This one paragraph should show you how completely Brownstein lacks even the most basic knowledge about health care reform. The CBO concluded the Republicans' “big idea” for controlling cost, extreme medical malpractice reform, would save/generate $54 billion for the Federal government. (I would challenge Brownstein to name another single Republican idea that would actually reduce cost, because they did not include any in their alternative bill two weeks ago, and I have heard of no others from them.) Let's compare this to the public option.

According to the CMS, the strong public option (which paid Medicare rates plus 5%) promoted by House progressives would have costs 18% below that of private health insurance companies. The CBO concluded it would have saved $110 billion. This public option design was still considered weak by reform activists. Mandating that Medicare providers take part in the public option would have saved another $91 billion. If the public option could pay Medicare rates instead of Medicare rates plus 5%, that would have saved roughly another $50 billion. These savings are with the public option only being available to the small number of people on the new exchange.

Allowing every company to buy into this super-robust public option would give them a choice that would be roughly 20% cheaper than their current insurance plan. If even some of those savings were passed on to employees in the form of higher salaries, that would translate into hundreds of billions in increased tax revenue. This one progressive idea, which could save about $250-800 billion, is bad mouthed by Brownstein, yet he claims the Republicans continuous screaming about tort reform, which would save only $54 billion, is one of the “big ideas” for controlling costs.

The Senate bill would make some cost saving baby steps away from fee-for-service medicine, but this is not the real way to get serious about cost control. This is just "reform" to make believers in “free market economagic” happy. If Brownstein really wants to know why the rest of the industrialized world spends about half of what we do on health care (on a per capita basis), I have a nine step solution:

Step 1: Call the German Ministry of Health.
Step 2: Ask why they spend so much less on health care.
Step 3: Call the French Ministry of Health.
Step 4: Ask why they spend so much less on health care.
Step 5: Call the Japanese Ministry of Health.
Step 6: Ask why they spend so much less on health care.
Step 7: Call the Belgian Ministry of Health.
Step 8: Ask why they spend so much less on health care.
Step 9: Repeat Steps 1 thru 8 with as many countries as needed.

What these countries all have in common is a single reimbursement rate negotiator. It is either a government agency or regulated cabal of all insurance providers that set most reimbursement rates. That is why they pay so much less for everything. They pay 30%-500% less for doctor visits, hospital stays, drugs, lab tests, procedures, etc. Our insane system of hundreds of insurers secretly negotiating reimbursement rates individually with thousands of providers and manufactures is a recipe for administrative waste, inefficiency, higher prices, and more expensive care.

The number one reason we pay so much more for health care has nothing to do with overusing care because of a fee-for-service system. It is just that the "fee" we pay for those services is so dramatically higher than any other nation's.

It is not just what the public option's "checks are written to pay for." The hope was the public option could negotiate better rates, and therefore write smaller checks. It could create system-wide change if other insurers followed suit.

This line from Brownstein is just comically wrong:

And, with only a few exceptions, that's just about all the systemic reforms analysts from the center to the left have identified as the most promising strategies for changing the economic incentives in the medical system.

Take, for example, the sweetheart PhRMA deal preventing almost any savings from the drug industry. We spend about $200 billion a year on prescription drugs in this country. We spend roughly 20% more per capita on drugs than the second highest country, France, and roughly twice as much as most european countries. If we implemented progressive solutions like drug reimportation and allowing Medicare to directly negotiate for drug prices, that would save at least a hundred billion bucks. If we allowed the government to negotiate drug prices for everyone in the country, like most countries do, we should at least be able to get our per capita spending on drugs to a level similar to Canada. That would be roughly half a trillion dollars in savings on drugs over only the next 10 years.

There is a wealth of progressive cost control solutions that were not even considered in Congress. All told, they would have saved our country trillions over the next decade. On the other hand the Senate bill makes only tiny steps to slightly reduce over-utilization. Brownstein does the nation a disservice by publishing this article while completely ignoring the real cost issue. Rahm Emanuel commits a near-criminal act by making people at the highest levels of our government read this article as if it had any value. No wonder the health care reform plans have been so bad so far. With the reform effort led by fools who don't even understand the nature of the problem, it is no wonder existing proposals contain almost no real solutions.

Harry Reid Plays A Game Of Shoots And Ladders Instead Of Saving American Lives

Imagine I sat you down in front a Shoots and Ladders board game. I tell you all that you need to do is get the red piece onto the finish square. You could spend half an hour rolling the dice, moving up ladders and down shoots until you get your red piece to the finish square. But you don't need to. You could have saved yourself half an hour by just picking up the red piece and placing it on the finish square. I never said you needed to follow the made up rules to the board game.

That is what the filibuster is like in the Senate. It is not part of the Constitution. The founding fathers had no intention that a minority should be able to stop the majority from passing any law with a simple up or down vote (treaties being the one exception).

The rules for the filibuster are completely made up and have been changed repeatedly. At any time, a simple majority can just eliminate the filibuster if they really want to. Whenever the filibuster became too much of a problem, the Senate has just changed the rules. There use to be no cloture vote to stop the filibuster, so they eventually created a cloture vote requiring a two-thirds majority of members. It was later changed to a three-fifths vote when they threatened to eliminate the filibuster. Reconciliation was then created to help get around the filibuster on budget matters. The important thing here is that a majority of senators can just vote to eliminate the filibuster and pass all the bills they'd promised.

The problem is Harry Reid and his little club likes playing shoots and ladders. They enjoy the game. They are grateful that they can use the made up rules to explain why they are not delivering on their promises.

The problem is made even worse because Republicans don't feel any need to play by these make believe rules. When Bill Frist was Senate Majority Leader, he did what he wanted to do. When a member of the caucus got out of line, he would threaten to take away their chairmanship. When he wanted to pass a bill, Frist used reconciliation if he needed to circumvent a cloture vote. If the Democrats threatened to filibuster a top priority, he would just threatened to use the “nuclear option” and get rid of the filibuster.

The only reason Reid thinks there is a problem with using reconciliation is because he is unwilling to truly go to the mat to help the people of Nevada get health care reform. He does not even need to use reconciliation. Reid can do anything with a simple majority if he were willing to give up some of his silly, made up Senate privileges.

Remember, there is nothing stopping Reid and the rest of the Senate Democrats from passing a decent health care bill with a simple majority. There is nothing stopping them from passing EFCA, or global warming legislation, nothing stopping him from repealing don't ask don't tell, or passing a second stimulus bill with a simple up or down vote. The Senate Democrats have to decide if keeping their fun, made up rules is more important to

What The Senate Bill Does Better, Part 2: Cantwell's Basic Health Program

Cantwell's “basic health program” (section 1331 page 210) is one of the better ideas found in the Senate bill but not in the House bill. I support the basic health plan not because I'm a huge fan of the idea, but simply because I know the idea can work. It is clearly better than putting people on the alternative which is the state-based exchanges created by the Senate bill--these I know, in their current structure, will be pretty bad.

The new exchanges are too loosely regulated and allow way too much variation in insurance plan design. They foolishly divide the risk pool in two at the state level. The plans on the exchange should not be categorized actuarial value levels. The minimum actuarial value of a “qualified health plan” on the exchange is also way too low. It will leave millions of Americans dramatically underinsured. The exchanges will lack strong enough risk adjustment mechanisms and a minimum medical loss ratio. This combination means the exchange will be a very confusing marketplace, ripe for gaming the rules and cherry-picking the healthiest people. If they drop the public option, these exchanges would become an even worse place to buy insurance.

As I have explained before, the basic health program is much closer to how sensible countries have designed their regulated health insurance marketplace or exchange (see here and here).

If a state decided create a basic health program, everyone between 133%-200% of federal poverty level who does not have health insurance must take part. The program will be funded by the money the federal government would otherwise give the individual as affordability tax credits. The state designs a good “standard health plan” with set benefits, deductibles, co-pays, etc. The state then accepts bids from health insurers and/or establish provider networks that are willing to provide this well-defined standard health plan. The state uses economies of scale to negotiate the best deal possible.

The state accepts the best bids and allows everyone in the basic health program to select from the different approved insurers. There is no confusing array of choices based on different deductibles, actuarial values, and co-pays. The individuals know all the plans are very similar and are all decent. All insurance companies taking part must have a minimum medical loss ratio of 85% for their standard health plan. This ensures people are getting value for their health care coverage.

There are several problems with the basic health plan which limit the idea's scope. The biggest problem is that if a state sets up a basic health plan, it would only get 85% of the money the federal government would have otherwise spent on tax credits in that state. I understand this was done for political reasons to show the basic health program would be a money saver, but I still think it is unfair. If a state implements a better program to provide health insurance for less money, they should be able to pass those savings on to their citizens in the program instead of sending most of the savings back to the federal government. At the very least, the basic health plan should get to use more of the money, say 95%. The other problem with the basic health plan is that it is only for individuals between 133%-200% of FPL.

There are several changes I would like to see made to improve the idea. First, I would like to see the reach of the program allowed to expand. I would prefer if the state had the freedom choose a higher limit for participation than 200% of FPL. It would also be a good idea if people above 200% of FPL could choose to buy into the program, or if insurers offering standard health plans as part of the program must offer the same exact plan on the new exchange.

I think it is very important to make sure that the new co-ops and public option could apply to be eligible insurers in the program. Currently, the proposed law technically restricts them to only offering coverage on the exchanges. Not being able to access the potential pool of customers could be very crippling to the co-ops and public option in these states.

Most of my concerns about provisions that limit the scope of the basic health program could ironically be solved by “Section 1332 Waiver For State Innovation.” In theory, starting in 2017 the state could switch from getting a waiver under the basic health program to a broader waiver under section 1332. The state would get all the money (not just 85%) that the federal government would have otherwise spent on tax credits. The state could essentially offer the same basic health program, but now with no income limit and more money to spend on the program. I guess the best hope right now is that 2014-2017 would be a transition period in some states proving how much better the basic health program is than the current exchange idea. Seeing how much better the basic health program works, starting in 2017, states with the program would redesign their whole exchange to be more like the basic health program.

Is PhRMA Afraid Of The Progressive Block?

PhRMA is now running ads in Connecticut targeting Joe Lieberman to support the current Senate bill (via Ben Smith at Politico).

Obviously, PhRMA wants the Senate bill to pass because it contains so many sweetheart deals for the drug industry. Even though PhRMA would like to see the public option eliminated, it is a low-level priority compared with maintaining all the other great giveaways for their industry in this bill .

I suspect if PhRMA were 100% confident Joe Lieberman could successfully remove the public option and still ensure the rest of the bill would pass intact, they would be supporting his efforts. The fact that PhRMA is asking Lieberman not to fight indicates to me that they actually fear the possibility that the progressive block might kill the current bill because if it lacks a public option. Whether health care reform dies completely or is forced to go through reconciliation, both would be equally bad news for PhRMA. This is the first indication I have seen that an industry player fears a possible revolt on the left and is starting to take the progressive block seriously.

The Difference Between Really Trying and Pretending to Try: Will Reid Do All Possible to Preserve Public Option?

Gerald F. Seib at the Wall Street Journal wrote,

How? Mr. Lieberman says he has made his position absolutely clear to Mr. Reid. And Mr. Reid, all agree, is a wily tactician. So does he think Mr. Lieberman, and the two or three conservative Democrats who share his inclination, will give in at the end? Or is there some artful compromise that can be seen as including and not including a public option at the same time?

Here's another possibility: Maybe Mr. Reid plans to push as far as he can with a bill including a public option, to show his party he has done all humanly possible, before yanking the public option just before the whole effort goes off a cliff. We've proven that a bill is possible, he might say then, but also that a public option isn't.

I think Mr. Seib may be right. It is definitely within the realm that Reid will try to act like he did everything “humanly possible.” The problem is that it will not work and his party's base will not buy it.

Putting a public option in the bill, only to drop it the first time Lieberman throws a hissy fit on the Senate floor, is not everything humanly possible. It is barely any effort at all. Harry Reid as Senate Majority leader has tools at his disposal to get the public option if he really wants to pull out all the stops.

The easiest solution is horse trading and mild threats. Reid can try to bribe the reluctant members of his caucus with some home town pork. Failing that, he could try threatening them with killing their pet projects, or even taking away their chairmanships.

And, failing that, Reid can always resort to using reconciliation to pass a bill with only a simple majority. He can try to pass the whole bill using reconciliation, or just some parts, like the public option. Reid probably would not even need to use reconciliation. The mere threat that he would use a procedure that would completely strip the conservative Democratic hold outs of all their leverage would probably convince them to relent.

If reconciliation is unworkable, Reid can still play super hardball by threatening to use the “nuclear option” to completely bypass a filibuster. Three years ago, Republican Senate Majority leader Bill Frist threatened to do the same thing. Then, the mere threat of possibly losing their filibuster power convinced reluctant senators to give in.

These are just some of the options available to Reid. If he fails to use all these tools, he will not even come close to doing everything humanly possible. If Reid really wants a public option he can get one. Right now, the plan B buzz seems to be courting Snowe with a worthless trigger instead of going for reconciliation. That is definitely not how you actually try to get the public option.

What The Senate Bill Does Better, Part 1: Waiver For State Innovation

I have been very negative about the Senate health care reform bill. Frankly, it is a bad bill that is only likely to get worse. It has many problems; I outlined only some of the problems with the Senate in an earlier post.

Still, the bill is not all bad. There are a few parts of the Senate bill that are actually better than the House bill. I will be doing a series explaining each of the Senate provisions I hope eventually make it into the final conference bill, and also offering suggestion on how they could be improved.

Part 1 – SEC. 1332. WAIVER FOR STATE INNOVATION. (page 212)

Section 1332, allowing a waiver for state innovation, is the provision of the Senate bill likely to generate the most interest from the progressive community. Starting in 2017, states could apply for a waiver to replace the new health care system created by the bill with something else.

To qualify for a waiver, the state's replacement plan would need to meet a variety of qualifications. In effect, the state would need to create a new health care system that would provide the same or a greater level of insurance coverage for the same or a cheaper price. It must also not increase the federal deficit.

If the state qualified for the waiver, it could take the money that would otherwise have been granted for health care reform to individuals as affordability tax credits, and use that to pay for their new state-based health care system. The waiver would be good for only five years, but the state could apply for a continuum on their wavier.

Unfortunately, the Secretary of HHS cannot waive “any Federal law or requirement that is not within the authority of the Secretary.” I believe this means the waiver could not be used to create a pure, state single-payer system due to ERISA law, but I could be wrong. What is meant by “authority of the Secretary” leaves much open to interruption.

Overall, I'm fairly happy with the design of this state innovation provision. I think it does a good job ensuring it could only be used to create a better health care alternative at the state level. Even though it might not be usable to create a single payer system, there's plenty of room for dramatic improvement over what this current bill will do.

My biggest problem with the provision (besides the possible issue with ERISA laws) is that it does not start until 2017. This is a very foolish delay. Most of the reforms will not begin until 2014. It seems wasteful to put in place one system in 2014 only to possibly replace it in 2017. If states can come up with a better plan between now and 2014, they should be able to implement it without further delay, and thus avoid going through two different health care transitions.

Another minor change that would be good to see is if there were some short term loan or grant program, or front-loading of funding provisions. The money the state would get instead of the affordibility tax credits would be provided annually. I can easily picture a possible health care system that would require a larger upfront investment in the first year or two, but would save money in the years after that. Being able to get some extra money upfront should help.

Given how bad the Senate bill is and how much room there is for improvement, it is not surprising section 1332 would be a favorite among health care reform activists. Clearly, pushing health care reform at the national level is very difficult. On the other hand, there are some states which are ready to push for more progressive reform, but lack the funding. Getting that money from the federal government will be critical. I don't think many states will apply for the waiver, but the few states that do successfully implement a better alternative will be good examples for later national pushes for greater reform. It is a good idea with basically no downside.

Menendez Is Jumping On The Trigger Bandwagon

NJ.com caught Sen. Robert Menendez (D-NJ) pushing the trigger:

Speaking inside the Hoboken University Medical Center emergency room, Menendez said today a modified public option could draw support from U.S. Sens. Bill [sic - should be Ben] Nelson (D-Neb.) and Joe Lieberman (I-Conn.), who announced their opposition to the elements of the bill over the weekend.

Menendez suggested adding a so-called trigger clause, which would only put the public option into effect if certain conditions are not met in the future. These conditions could include expanded competition in the marketplace or a decrease in insurance premium costs.

"There are other public options possible," Menendez said. "They have only said they oppose the public option in its current version."

First of all this is simply not true about Joe Lieberman. He has stated that he will oppose a public option and even opposes the trigger.

The trigger is not a modification of the public option. It is not like a public option. It does not serve the same function as a public option. It is the same as simply having no public option at all.

The trigger will be designed to make sure it is never pulled, so there will never be a public option. That is the only reason senators who are threatening to kill any bill that contains a public option will support the idea of a trigger. They know supporting a trigger is the same as dropping the public option all together.

Let's make this clear for Sen. Menedez. Supporting a “trigger” is no different than supporting the elimination of the public option. The progressive base will not be fooled. The trigger is a worthless piece of theater; its only function is to trick the American people. If you want to drop the public option, don't use some silly gimmick like the trigger to lie to your consituents. If Menedez really supports a public option, he should push for one of the ways to get the public option with a simple majority vote.

You Can't Be A Progressive And Support The Filibuster

A simple fact of politics that is not stated enough: The Senate's relatively new and insane rules about the filibuster are the complete antithesis of the small “p” progressive movement. You cannot claim to be a progressive and support the weird, unconstitutional, 60-vote threshold for legislation in the Senate. It does not matter how liberal a senator's voting record is, or how left-leaning their ideology, if they support the idea of a filibuster, then they are opposed to progressivism. . . and are inherently a conservative.

The filibuster stands for everything that progressives should stand against. It is a tool to thwart the will of the people. It is the great maintainer of the status quo. It prevents even the possibility of progressive legislation ever being passed by "mandating" that it is watered down to a dramatically right-of-center bill.

I have heard only one defense of the filibuster from the “left.” It is people who claim, “but what if we lose Congress, we will then need it to stop the Republicans.” This is not the argument of a progressive. This inherently the argument of a staunch, small “c” conservative trying to wrap themselves in progressive clothing. Fearing the future, fearing change, saying that it is better to keep what we have now instead of taking a risk to try to get something better is the arguments of a conservative. They have no place in the progressive movement for this fear of a change.

An elected representative may ideologically claim to agree with the progressive movement, but as long as they support the single greatest obstacle against change, they are at their heart a conservative. There will never be progressive legislation passed until there is a systematic change to our system of government, which has been perverted to maintain the status quo. Eliminating the filibuster is just one of the biggest and easiest changes that must be made.

If you really want to see progressive change, you need to start holding your elected officials to a higher standard. It is time to stop accepting this myth that the Senate needs 60 votes to pass a bill. At anytime, this rule can be eliminated by a point of order and a simple majority. If a senator claims to support something, but says it will not happen because it needs “60 votes,” he or she doesn't really support it. If Senators really supported something, we would expect them to do everything in their power to make it happen. If a senator decides maintaining a stupid, worthless tradition is more important than the needs of the regular Americans, they are no progressive. There is no excuse. A simple majority is all our Constitution requires for a bill to pass the Senate.

What An Amazing Difference A Primary Makes

It is amazing what a difference a serious primary challenge can make. Representatives in Congress who have serious primary challenges never seem to buck their party. The Politico wrote,

[F]inally, today's study in contrasts: moderate Sens. Michael Bennet and Blanche Lincoln, both of whom face tough races next year. Lincoln, the final hold out on Saturday, has threatened to withhold her support going forward. Bennet on Sunday candidly pledged to support the bill even if he knew it would cost him his seat.

What is the difference between Bennet and Lincoln? Bennet is currently facing a serious primary challenge from Andrew Romanoff, while Lincoln is not currently facing a primary challenge.

Romanoff is the former speaker of the Colorado House of Representatives. This gives him some statewide name recognition and a history of successfully running political campaigns, unlike the political novice Bennet. It is possible Romanoff could beat Bennet in a primary, so Bennet is worried about angering the Democratic base. Bennet claims that he will support health care reform, even if it could possibly cost him his seat, and this may well be true. But what Bennet left unsaid was that he knows opposing health care reform would definitely cost him his seat--thanks to his credible primary challenger.

We have seen the same pattern from Arlen Specter in Pennsylvania that we see from Micheal Bennet in Colorado. It is amazing how quickly a serious primary challenger turns a senator into a reliable vote on the important issues.

Blanche Lincoln's Unprincipled, Cowardly Trifecta of Awfulness

The problem is not that Blanche Lincoln opposes the public option because she has a serious policy concern. If she had real policy concerns, I would be happy to debate the merits of the ideas, and I'm sure the progressive community would be willing to keep an open mind if she were willing to offer a serious alternative. (Hint: Replicate the German system by turning all private insurance companies into highly regulated non-profits run like public utilities)

We know that Lincoln does not have serious policy concerns about the public option because she supported it before she was against it. Before it became the center of a heated political battle, Lincoln endorsed the idea, in fact she still has her endorsement of the public option up on her website. Now that Lincoln thinks the “centristy” position is to be against the public option, she is against the public option. This is pretty much the definition of "unprincipled."

Lincoln decided on Saturday to make a big show of opposing the public option on the Senate floor. She did so because she was afraid that Republicans would attack her. Opposing any idea you once claimed to support because you are afraid of possible political attacks against you is the definition of "coward."

Finally, Lincoln must know how important the public option is to the majority of Democrats in the House and the Senate. She must know it has overwhelming support among the Democratic base and the American people. She must have read the CBO letter that predicts the public option will help reduce health insurance premiums across the board on the new exchange for individuals and small businesses. She must know the public option will help millions of Americans--who would have otherwise been treated poorly by private insurance companies--get quality health insurance.

Blanche Lincoln knows all this and has decided to flip-flop on the public option in hopes of improving her “centristy” street cred. She is willing to force tens of millions of Americans to pay higher premiums for the small possibility it could gain her some political advantage. The way I see it, this is the definition of a jerk. Way to go Blanche, you managed to pull off the trifecta of awfulness.

Really Bad Trade Off Ideas

Nate Silver believes progressives should trade the public option away, but what he wants in return is far more useless and an even tougher political battle.

And the public option, as currently constructed, would only enroll 3-4 million people, according to the CBO. It's a relatively minor provision, and one that, in its present, already-compromised state, I'd happily trade off for more comprehensive subsidies for the working poor, or a more robust Free Choice Amendment.

First the only reason CBO and CMS thinks so few people will sign up for the public option is because they admit that the new exchanges and the other reforms will not work properly. The regulations and the risk adjustment mechanisms are too weak to prevent the private insurance companies from gaming the system. They will still try to cherry pick the healthy and drive away the sick. The only reason the public option will need to charge higher premiums (causing few people to sign up for it) is because it will be the only plan trying to be socially responsible and not treat Americans with health care needs horribly. Even though the public option will need to charge higher premiums because of the lack of a strong risk adjuster, by being a good option for less healthy Americans the CBO says it will still bring down the cost of premiums across the board on the exchange.

Remove the public option, and the exchange goes from a bad place to buy health insurance to an awful, even more expensive place to get health insurance. Why anyone thinks it is a smart trade-off to make the exchange a much worse place to get health insurance (by removing the only socially responsible plan), but increasing the number of people who have access to this terrible insurance market, is a good idea is beyond me.

Both the House bill and the Senate bill have simple mechanisms in place to greatly expand access to the exchange after only a few years. If the exchange is a great place to buy insurance, businesses will quickly flock to it. The reason the CBO says so few people and businesses would use the exchange is not because they can't but because they wouldn't want to. There is no need for the free choice amendment if you can get the exchange right. If people like the exchange, it is designed to grow quickly.

The point of the public option is to make the quality of health insurance on the exchange better and to bring down premiums. The more appreciate trade off, then, would be for things which could serve a similar function; for example, a medical loss ratio of 90%, only allowing non-profit insurance on the exchange, a single reimbursement negotiator, and/or a much stronger Dutch-style risk adjustment mechanism. (The insurance companies and their partners in the Senate will fight these changes equally as hard, and they are even more difficult to explain to the general public.)

Increasing subsidies in exchange for dropping the public option is an equally terrible potential trade. Dropping the public option should increase the overall bill's cost by roughly $20 billion and increase the premiums on the exchange. Therefore, getting more generous subsidies would require a massive increase in price of the bill. Finally, I don't trust the long-term stability of the current subsidy levels in the bill. I can easily see that in 2015 the tax credits would be seen as too low, and Congress would approve a modest expansion. I can equally see a Republican congress in 2015 deciding to slightly cut the size of the tax credits. Either way, I am confident the current level of tax credits in the bill is the one thing most likely to change in the coming years.

Finally, dramatically increasing the price of the bill with more generous tax credits or blowing up our current employer health care system with the free choice amendment would be huge political battles. Neither is likely to poll as strongly as the public option. Nor does either have support among the conservative Democrats opposed to the public option. These changes would be an even bigger political lift than the public option. The progressives chose to fight for the public option because it is the most popular tool to ensure more people get better quality and lower cost health insurance.

Most importantly there is no deal or trade off possible. The conservative Democratic senators are not asking for progressives to compromise, they are demanding the capitulate to prove who really has the power in Washington. If progressives give in, it will prove that they have zero power in Congress, and they would end up with nothing in return.

Why Does The Senate Bill Create Two Exchanges?

Unlike the House bill, the Senate bill creates not one but two exchanges. In each state there will be an exchange for individuals and a “Small Business Health Options Program” (SHOP) exchange. What is important is that these are not just two different portals or websites where people can buy health insurance--the two different exchanges will be two distinct markets with two separate risk pools.

(c) SINGLE RISK POOL.—
(1) INDIVIDUAL MARKET.—A health insurance issuer shall consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer in the individual market, including those enrollees who do not enroll in such plans through the Exchange, to be members of a single risk pool.
(2)SMALL GROUP MARKET.—A health insurance issuer shall consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer in the small group market, including those enrollees who do not enroll in such plans through the Exchange, to be members of a single risk pool.

This is a very bad idea. First it is unnecessary administrative featherbedding--it is wasteful to have two governmental entities doing the exact same thing in one state.

More importantly, this further divides what was already a small market (those eligible for the exchange) into two smaller markets. This reduces the size of the risk pool, and the purchasing power of the people on the exchanges. A major justification for creating the exchanges was to get a large number of people together where they can collectively get a better deal. Creating both an individual and a SHOP exchange with two separate risk pools would likely end up increasing individual premiums. Long term, it also inhibits the country from moving to a single, unified marketplace where most people select their own health insurance plan. There is no good policy reason to create two exchanges instead of one in each state. There are are plenty of good reasons not to crate a dual-exchange system.

The bill will allow states to merge the two exchanges and two risk pools into one if they want.

(3) MERGER OF MARKETS.—A State may require the individual and small group insurance markets within a State to be merged if the State determines appropriate.

That is good, I guess, but it should be that way by default. I have been unable to find a good reason why the decision was made to create two separate marketplaces.

I have some theories but none are particularly satisfying:

• They may have done it because at one point they planned on limiting something to only the individual exchange where people got affordability tax credits. They may have once planned to only offer the public option on the individual exchange or thought of putting in place more restrictive abortion language for just the individual exchange.


• It is also possible that the two exchanges were done at the request of some small business group. There could be some fear that the previously uninsured people on the new individual exchange would have higher medical costs for the first few years. Some small business group may not have wanted these sicker people in their risk pool.


• There might have been hope that states would start the relatively cheap SHOP exchanges right away, and then create the individual exchange in 2014. This would not cost the government much money because their would be no need to provide affordability tax credits to anyone on the SHOP exchange. Of course, if this were the plan, it could have easily been accomplished in a much better manner.

I honestly don't know why the Senate Democrats are planning to create two separate exchanges with two separate risk pools. It is a bad policy idea, and I have heard no justification for it. It could simply be a poorly thought out design decision. There might be some great reason that I've completely missed, but nine times out of ten, when a strange, bad policy decision makes it into a bill, it was at the request of some lobby. Just one of the dozens of things in the bill I need to watch as this legislation progresses.

Why The House Bill Is Much More Conservative Than The Senate

While the House health care reform bill is the one favored by progressives, it also happens to be more small “c” conservative than that Senate bill. This is not about the public option, the size of government subsidies, or regulation. The House bill is more small “c” conservative because it would do a better job of maintaining a health care system similar to the one we currently have. The reason for this is the employer mandate.

The House bill has a mandate that large businesses provide their employees health insurance or face a penalty. For large businesses, the penalty for not providing health insurance is 8% of payroll. That is a serious penalty. Employers would also now have a new and very easy way to give their employees “employer-provided health insurance.” They would be able to simply provide their employees with vouchers to use toward the purchase of any plan they wanted on the new exchange.

The ease of providing insurance, the size of the penalty, and the tax-free status of employer-provided health benefits combine to create little financial incentive for companies to stop providing health insurance. I suspect if the House bill were to become law, we would still have a health insurance system built primarily on employer provided and funded health insurance for years to come. This lack of radical change is what makes the bill so small “c” conservative.

The Senate bill does not have an employer mandate. It has a very weak modification of the “free rider” provision. In practice, if a large company decided to stop providing health insurance, they would face only a $750 per employee fine. This is a pittance compared to the House's employer mandate, or the cost of providing health insurance.

If reform works properly and everyone is able to get decent, relatively affordable health insurance on the new exchange (this a big "if," given how poorly the reform bill is designed), businesses are going to start rethinking why they are providing incredibly expensive health insurance. Why keep paying for your employees health care if the government will help make sure they get health insurance anyway?

I can easily picture a mass dropping of employer-provided health insurance in the future if the Senate bill becomes law. It will not happen right away. Businesses are still stuck in their old ways, and no one really knows if the exchange will work. But during the next economic downturn, the cost-cutting solution by businesses might be a massive dropping of health insurance benefits instead of massive layoffs. Because the Senate bill has the serious potential to undermine our current employer provided and funded health insurance system, the Senate version is the truly radical bill.

I'm no defender of employer-provided health insurance--I want to see it eliminated--but passing a bill that will encourage its collapse without a real plan to replace it in a fiscally sound manner seems like pure madness. (And it is going to be a real fight when Congress needs to pick up the pieces.) Big business doesn't want to be forced to provide their employees health insurance, but also doesn't want the country to move away from the employer-provided health care system. It is a schizophrenic catch-22. The House bill would at least encourage us to gradually move from an employer-selected insurance system to simply an employer-funded insurance system (like many industrialized nations).

While Senators like to claim their bill is more “moderate,” in reality, they are refusing to adopt the most small “c” conservative health care reform idea: a strong employer mandate. The Senate also expands insurance coverage 12% less cost effectively than the House bill. The Senate bill is not more moderate, it is only more beholden to wishes of big business.

Washington Post Reporters Don't Know How To Read Simple Reports On The Public Option

It appears the crack team of reporters at the Washington Post don't know how to read. They make the ridiculous claim that the public option would not be able to keep down costs:

The decision to permit states to opt out of the public plan is partly to blame for the Reid proposal's lack of reach, as it would leave about a third of the people in the country without access to the program, according to the CBO's calculation. But even the national plan approved by the House this month would attract only about 6 million people, the nonpartisan group has said, primarily because it would lack the tools to keep costs and premiums down.

This is not really what the CBO said about the public option in the House bill. It said:

The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the “risk adjustment” procedures that would apply to all plans operating in the exchanges.)

If that is not clear enough, here is what the CMS said about the public option in the House bill. They are the government's experts on health care:

We estimate that the public plan would have costs that were 5 percent below the average level for private plans but that the public plan premiums would be roughly 4 percent higher than private as a result of antiselection by enrollees.

...

The impact of antiselection is estimated as the amount remaining after risk adjustment is applied.

The problem here is not the public option. The weaker negotiated rates public option would still have the tools to keep cost down. It would need to charge higher premiums because every other part of the reform plan is broken. The whole goal of reform was to prevent private insurance companies from cherry picking only healthy people and dropping their sick customers. That will only happen if there is a stronger risk adjustment mechanism. It is critical for a managed competition health care system.

A well designed risk adjustment mechanism makes sure there is no profit in trying to only sign up healthy people and taking steps to drop sick customers. Since it redistributes money based on the cost of covering each person with a set of conditions, an insurance company has equal reason to sign up a healthy thirty-year-old or a fifty-five-year-old with diabetes.

Unfortunately, the risk adjustment mechanism in all the bills is too weak. Even after reform, it will still be more profitable to only sign up healthy people and avoid the sick. Instead of competing on quality or efficiency, the private insurance companies will compete on risk selection. They will game the system and skirt the regulations. They will design plans to only attach young healthy people and hassle their unprofitable sick customers until they switch to another company. These are the "tools" to keep the down premiums that the Washington Post is referring to, and it is a good thing the public option would not be using these "tools."

The public option will attract these sicker people treated poorly by the insurance companies because it is trying to be socially responsible and play by the rules. The risk adjuster will not probably redistribute funds on the exchange, so the public option will need to charge slightly higher premiums.

The problem is not that the public option lacks the tools to keep down costs. It would have the tools to keep down cost.

The real problem is that reform does not take away the “tools” private insurance companies will use to keep down premiums. The bill will ban rescission and denying people coverage because of pre-existing conditions. Unless there are stronger risk adjustment mechanisms, the CBO and CMS are promising us that the private insurance companies will come up with a whole new bag of tools to screw over unprofitable sick people.

Is Harry Reid Laying The Ground Work To Betray Progressives For Snowe's Vote?

The more I look at the merged Senate bill, the more I'm afraid that Harry Reid might have been laying the ground work to betray progressives on the issue of the public option, and gain the support of Olympia Snowe. Many of Snowe's top demands managed to make their way into the bill.

Harry Reid decided to take the terrible “free rider” provision championed by Snowe from the Senate Finance committee bill instead of the employer mandate from the HELP bill. Reid went with a very much weaker individual mandate more in keeping with the wishes of Snowe. He also kept the terrible “nationwide plans” from the SFC bill. Snowe strongly backs the nationwide plans and claimed it was one of the reason she voted for the bill in committee.

Reid did not just go with the provisions from the SFC bill strongly favored by Snowe. He took the unusual step of even further watering down provisions that Snowe wanted changed. He dramatically reduced the minimum requirement for what qualifies as insurance. He reduced the actuarial value of bronze level plans to 60%. That is even lower than it was in either of the committee bills. The merged bill would also allow people up to the age of 29 to buy extremely low value catastrophic plans. The SFC bill would only let people 25 and younger buy these low value plans. Both changes were championed by Snowe.

The other issue of concern is the design of the public option's opt-out provision. It does not seem well thought out. There is no restriction on when states can start opting out. At the very least there should have been a clause, so that people currently on the public option would get to remain on it, at minimum, until the next open enrollment period if their state opts out. Reid may not have put a lot of work into designing the opt out provision because he did not plan for it to remain.

Tom Carper has recently began working with Snowe to bring back a new, re-designed trigger. Reid is aware of these efforts. Even if Reid has not directly endorsed Carper's plan, he doesn't seem to be trying to put a stop to it either. Just today, Reid took the very strange step of taking reconciliation off the table.

It is possible I'm just being paranoid and reading too much into these changes. They may have nothing to do with Snowe. It could also be that Reid has made these changes in the hope of convincing her to at least not filibuster a bill with a public option. He might think that by giving her 90% of what she wants, she will be willing to accept the opt-out public option.

Either way, this is something I plan to keep a very close eye on. If progressives find out that Reid's support of the public option was purely for show, while at the same time he secretly worked with Snowe to kill it with a trigger, that would not go over well with the base. Reid does have the power to get a public option passed, there is no good excuse for failure.

Carper Working With Snowe To Bring Back The Trigger

Like a monster in some B horror movie, the trigger is a terrible idea that just will not die. I guess as long as you have a massive heath insurance lobby willing to spend millions to keep your pet creature alive, it will never truly meet its end. Tom Carper is now working with Olympia Snowe to bring back the trigger, which he has comically named the “hammer.”

Indeed she and Carper have discussed his plan, but she remains pessimistic that it'll ever be adopted.

"Tom and I have been working on it, we've had discussions and so on, but, you know, we haven't got down in concrete terms, and he'd like to have my affordability language and so on," Snowe said. "But nevertheless it's still going to require 60 votes so I don't know when that would happen, and frankly I would have preferred that to happen at the outset of this process, rather than going through this convoluted procedural gymnastics."

Carper's worthless trigger is nothing more than a fig leaf to pretend that they did not kill the public option. But killing the public option has always been the whole point of a trigger. If someone opposes the idea of a public option for some reason, then they should be equally opposed the idea of a real trigger that would put the public option in place a few years later. The only reason politicians who oppose a public option claim to support a trigger is because they know the trigger will be designed to never be pulled. Supporting a trigger is therefore the same thing as completely opposing a public option.

The fact that Carper felt the need to give the “trigger” a new, stronger sounding, rhetorical name, the “hammer,” only proves how worthless it really is. The only hammer his proposal calls to mind is the bright blue hammer that comes in the Fisher price “laugh and learn toolbench.”

How The Senate Abortion Language Differs From Stupak

The language on abortion in the original version of House health care reform bill, before it was amended on the floor, and the Senate language on abortion are very similar. Both say that:

• No federal funds will be used to pay for abortions, but as provided by the Hyde amendment, exceptions are made for rape, incest, and the life of the mother;


• Any plan that covers abortion must use money from a special segregated account funded only with private premiums to pay for the procedure;


• In every region, there must be at least one plan on the exchange that covers elective abortion (the so-called "pro-choice option") and one plan that does not (the so-called "pro-life option");


• There could be no discrimination against an insurance plan that does not cover abortion;


• Abortion could not be mandated as part of the minimum coverage requirements for an insurance plan.

The original House language and the Senate language did differ slightly on how the public option could cover abortion: While both would require that no federal funds are used by the public option to cover abortion beyond what is allowed in the Hyde amendment, the Senate bill does take additional steps to ensure that if elective abortion is covered by the public option, no federal funds are used and the government would bare no insurance risk.

The Stupak amendment, which was voted into the House bill, is a radical departure. It goes beyond original House and Senate language, mandating that no federal funds pay for an abortion (except those allowed by the Hyde amendment). It does not accept the idea that funds can be segregated. It prohibits federal funds from being used in any way to help operate an insurance plan that does cover abortion. If a plan uses even one federal dollar to help pay for any aspect of its overall operation, it can not cover abortion.

The Stupak amendment would technically allow for the sale of insurance plans or riders that cover abortion on the exchange--but only if no federal money even tangentially helped pay for their administrative functions. In effect, this restriction would make it practically impossible for any insurance provider to offer abortion coverage on the exchange for a variety of financial and legal reasons.

The broad language could also force many large employer-provided health insurance plans to drop the abortion coverage they already provide. The bills would provide a small amount of federal money to many large employer plans to help them pay for for things like wellness programs. Because of the Stupak amendment, this tiny drop of federal money could taint the entire insurance plan.

House Health Bill 12% More Cost-Effective Than Senate’s

While a lot is going to be made of the fact that the Senate bill's price tag for expanding coverage is smaller than the House's ($848 billion vs $1,052 billion), this does not even begin to tell the full story. The Senate bill is cheaper simply because it does less. It covers many fewer people, and for less time. The Senate bill is not a good bargain.

On a per uninsured person gaining coverage per year basis, the House bill is a substantially better value. The House plan is 12% more cost effective. Over the next ten years, the House bill expands the number of people who will have coverage in a given year, and does so for an extra year, so the number of person-years of coverage expands by 226 million [PDF warning]. On the other hand, the Senate bill starts its coverage expansion one year later, and covers fewer people each year. It will only expand coverage an a per person per year basis by 161 million [PDF].

The House bill is spending, on average, roughly $4,650 per year per individual who gains health insurance. The Senate bill is spending 12% more. It costs roughly $5,270 per year per individual to expand coverage under the Senate bill.

The Senate bill's price tag maybe smaller, but that should not fool anyone. Its cheaper price tag is simply due to the fact that it helps fewer people, helps them for less time, and gives them less help obtaining affordable health insurance. The House bill is a much better bargain, and provides much more health insurance per dollar. When looked at in this light, the Senate bill is clearly the fiscally irresposible way to expand health insurance.

At The Request of AHIP, Senate Bill Guts State Health Insurance Regulations

The Senate bill contains a provision long sought by the health insurance industry lobby AHIP. It would allow for the sale of “nationwide plans.” Theses plan would not be required to follow the state laws regarding what medical treatments must be covered. It is described as:

Allows insurers in the individual and small group markets to offer a qualified health plan nationwide, which is subject to only the State benefit mandate laws of the State in which the plans are issued; but requires such plans to provide the essential benefits package. Allows States to enact a law to opt out of allowing the offering of nationwide plans.

That sounds just like what AHIP has been strongly lobbying for:

Adoption of an “Essential Benefits Plan”: Small firms would benefit from the establishment of an essential benefits plan (outlined below), available nationwide, that provides coverage for prevention and wellness as well as acute and chronic care, and that is not subject to varying and conflicting state benefit mandates.

These nationwide health plans will, in effect, gut state health insurance regulations and create a race to the bottom. What will likely happen is what happened with the credit card industry: all the card companies moved to the two states with the absolute lowest regulations.

I can easily envision a scenario in which insurance companies stop selling in-state plans that meet the state benefit requirements laws, and only offer nationwide plans in those states. States that don't opt out will lose their ability to make sure insurance companies cover what the people of those states think is essential.

This is a dramatic move by the federal government, forcing states to deregulate their health insurance markets. It forces states to pass another law just to make sure all the previous laws they passed will not be nullified.

I fear for the millions of Americans who will lose their current health insurance coverage because of this law. If you have a medical condition that your insurance company must cover by state law, but is not part of the new essential benefit package, you are in serious danger of losing that coverage. Unless your state opts out of the “nationwide plans,” there is a very high probability that your insurance company will “leave the state” and drop your coverage. That company will just move to another state and start selling a “new,” less regulated, nationwide plan in your state.

This provision completely breaks Obama's promise that you will "be able to keep the health insurance coverage you have now." How long do you think insurance companies will keep offering the coverage you have when the insurance companies are given a way to avoid your state's regulations regarding what they must cover? The inclusion of this provision was a huge victory for the lobbyists from the for-profit health insurance corporations.

CBO: Opt-Out Will Deny The Public Option To A Third Of The Country

The CBO has concluded that the design of the opt-out provision will end up denying the public option to roughly a third of the population in this country.

CBO’s analysis took into account the probability that some states would opt not to allow the public plan to be offered to their residents. Rather than trying to judge which states might opt out, CBO applied a probability recognizing that public opinion is divided regarding the desirability of a public plan and that some states might have difficulty enacting legislation to opt out. Overall, CBO’s assessment was that about two-thirds of the population would be expected to have a public plan available in their state.

This estimates sounds a bit low to be honest. There are currently eleven state governments completely controlled by Republicans. (AZ, FL, GA, ID, NE, ND, SC, SD, TX, UT, VA) Roughly 79 million people (26% of Americans) live in these states, and I would not be surprised if everyone of them opt-out of the public option right away, or at least sometime before 2014. In addition to these eleven, there are easily another dozen conservative states where I suspect the Republican party can gain complete control of the state government for at least some period of time in the next 4 years. Add to that that not all Democrats fully support the public option, and I estimate it is more likely that over 40% of the country will be opted out of the public option before it is ever made available.

It's great to see that the Democrats have put the health care of the people of Texas at the tender mercy of Rick Perry. I guess the new motto is: Universal affordable quality health insurance for everyone lucky enough not to live a red state.

Pretty Bad So Far: Eight Things Wrong With The Senate Health Bill

I've began my preliminary examination of the new, merged Senate health care reform bill. So far, my first impression is pretty negative. There are many bad provisions that I think need to be changed or removed. Here are eight I noticed last night:

1) Delays Start Until 2014 - One of my biggest criticisms is the delayed timing. The House bill starts most of the reforms in 2013; I already thought that late start was both a moral and political disaster. Many Americans desperately need reform now, not several years from now. I also would not want to be a Democrat who voted for health care reform trying to explain why there were still so many uninsured Americans during both the 2010 and 2012 elections. To make the Senate bill appear cheaper, Reid made the disastrous decision to push back the start date until 2014! In effect, his bill is not really cheaper than the House bill, it is just scored over only six years instead of seven years.

2) Pre-Reform Public Option Opt-Out - I'm relatively pleased with the general design of the public option, but I'm very disappointed with the design of the opt-out provision. It allows states to opt-out right away, years before reform begins. It basically insures that many red states will opt-out sometime between now and when public option would be made available. This problem is made even worse because reform is pushed back until 2014.

3) Multiple Exchanges - The bill would create two exchanges per state. There would be an exchange for individuals and a “Small Business Health Options Program” know as the SHOP exchange for businesses. This is, pure and simple, a dumb idea. The more customers using one exchange the larger the risk pool and the better the bargaining power. Creating multiple exchanges is unnecessary administrative waste. It also does not move our country towards one, single, integrated health care system. States would be allowed to merge the individual and SHOP exchanges, but that should already be the default.

4) Nationwide Plans Gutting State Regulation - The merged bill still has the “nationwide plans” (formerly “national plans”) from the Senate Finance Committee bill. They are a top priority of the health insurance lobby. National plans would not be required to follow the minimum benefit laws in the states in which the policies are sold. These "nationwide plans" effectively gut state law regulating insurance coverage.

5) "Free Rider" Provision - Instead of the employer mandate there is the terrible “free rider” provision. The CBPP does a good job explaining why this terrible provision would disadvantage many low income Americans.

6) Incredibly Low Actuarial Value - The minimum actuarial level of the lowest level qualified health insurance is 60%. This level is far too low. This is even lower than the requirement in the Senate Finance Committee bill, which was 65%.

7) No Coverage For Undocumented Immigrants With Their Own Money - Undocumented immigrants will not be able to buy private health insurance even with their own money. This policy is not just cruel, but also bad fiscal policy. Undocumented immigrants will be forced to go to the emergency room for their medical care. Everyone else will be forced to pick up the tab for this uncompensated care. If an Undocumented immigrant wants to buy health insurance with their own money, so as not to be a burden on our health care system, that is not something we should discourage.

8) Sell Insurance Outside The Exchange - Health insurance companies will still be allowed to sell health insurance outside of the new exchanges. Until you get every insurance company playing by the same rules, in the same marketplace, you are never going to address the cherry-picking and efforts to game the system.

Reid's Public Option Is Nearly Identical To The Senate HELP Committee Public Option

Harry Reid took the public option nearly unchanged from the Senate HELP committee Bill and put it in the merged bill. It is called the “Community Health Insurance Option.” Besides the addition of a very bad, unlimited, pre-reform opt-out provision, Reid made almost no changes.

The only changes besides the addition of the opt-out provision are as following: Reid decided to not include three provisions that were found in the HELP bill. They dealt with creating an ombudsman for the plan, a risk corridor for contracting agencies, and a provision dealing with the issue of physicians collectively negotiating rates. The provisions removed are listed below:

`(D) PHYSICIAN NEGOTIATED RATES- Nothing in this paragraph shall prohibit the application of a State law that permits physicians to jointly negotiate with health plans. In such State, physicians may jointly negotiate with a community health insurance option concerning rates paid by the option.
...
`(9) OMBUDSMAN- In establishing community health insurance options, the Secretary shall establish an ombudsman or similar mechanism to provide assistance to consumers with respect to disputes, grievances, or appeals.
...
`(3) RISK CORRIDOR PAYMENTS-

`(A) IN GENERAL- In any case in which the Secretary has entered into a contract with a contracting administrator, the Secretary shall use amounts contained in the Start-Up Fund to make risk corridor payments to such administrator during the 2-year period beginning on the date on which such administrator enters into a contract under subsection (e). Such payments shall be based on the risk corridors in effect during fiscal years 2006 and 2007 for making payments under section 1860D-15(e) of the Social Security Act.

`(B) SUBSEQUENT YEAR- In years after the expiration of the period referred to in subparagraph (A), the Secretary may extend or increase the risk corridors and payments provided for under subparagraph (A).

`(C) AMOUNT USED TO REDUCE COSTS- The Secretary shall deposit any payments received from a contracting administrator under subparagraph (A) into the Start-Up Fund.

Overall the changes are minor, and may have zero effect. I believe other provisions in the bill made “physician negotiated rates” unnecessarily redundant. Removing the ombudsman provision doesn't really make sense, although I guess there is nothing stopping the public option from creating such a position if it wanted.

Besides the bad design of the opt-out provision, the actual structure of the public option is stronger than I feared it might have been. It is good to see that Reid decided to keep the administrative structure of the HELP public option nearly unchanged.

Since the public option in the merged bill is indeed nearly identical to the HELP public option, my side by side comparison of the Senate public option and the House public option is still valid. They both have a very similar administrative structure.

Ben Nelson Unlikely To Block Motion To Proceed, Fears Reconciliation

Ben Nelson is unlikely to block allowing debate to proceed on health care reform. His justification is that he fears what kind of bill would result if he did vote no:

If opponents prevent consideration of the revised Senate Finance Committee legislation, Nelson said, Democratic supporters "most likely" would turn to the budget reconciliation process to consider health care.

That maneuver would reduce the number of votes required from 60 to a simple majority of 51, he said. In effect, that would remove any need to respond to the concerns of centrist Democrats or independent Sen. Joe Lieberman of Connecticut.

…
"If the three of us voted against the cloture motion," Nelson said, "we don't stop health care reform."

Instead, the Obama administration would decide whether to try to negotiate an amended bill, he said, or the Senate leadership could "go right to reconciliation."

If Harry Reid is unable to get the 60 votes for a motion to proceed, it is indeed possible that he would turn to some parliamentary tactic like reconciliation to pass health care reform with a simple majority. Whether leadership directly told Ben Nelson that they would use reconciliation, or Nelson is just using the specter of reconciliation to justify his vote, we will probably never know. Either way, this does stress the importance of having a simple majority option like reconciliation on the table.

If the Democrats were completely unwilling to pass health care reform using some method that only required a simple majority, members like Ben Nelson, Joe Lieberman, and Blanche Lincoln would have complete power. They could force the caucus to change the bill to exactly fit their desires, or threaten to bring it down. With Reconciliation, there is at least the possibility that if they reject the compromise offered by progressive Senators, they will end up with an even more progressive bill passed using reconciliation--since Harry Reid does not really need their votes, and so does not really need to let them have any input at all.

Ben Nelson is still threatening to vote against the final cloture:

If the bill is not amended to his satisfaction, he said, "you can be sure I will not vote for the motion to end debate. I'm not going to do that."

Ideally, when the time comes, the possiblity that his "no" vote will simply result in an even more liberal bill getting passed using reconciliation will give Ben Nelson (and other conservative Democrats) the justification needed to vote to end debate.

The Capps, Ellsworth, Stupak, And Senate Finance Language On Abortion

The Capps compromise in the House was supposed to be the compromise which would have kept health care reform “neutral” on the issue of abortion.

Capps Compromise--The Capps proposal would have made sure that abortion was not part of the minimum benefit requirement package for health insurance plans. It would have guaranteed that in each area there was at least one plan that covered abortion and one plan that did not. No federal funding could be used to pay for abortion. Any abortion services covered by an insurance plan (exceeding what the Hyde language says can be covered) would need to be paid for from a special segregated fund. This fund would need to be made up of only private money. The public option could decide whether or not to offer abortion services, but if it did it must also create a special segregated fund to pay for them.

Senate Finance Language--The language dealing with abortion in the Senate Finance Committee bill is very similar to the Capps proposal. (Harry Reid is expected to include the Finance Committee's language in the merged bill.) Abortion services would need to be paid for by segregated funds. Depending on state law, every region of the exchange must have at least one plan that covers and one plan that does not cover abortion. The Senate Finance Committee bill is, of course, silent on how the public option would handle abortion because it did not contain a public option.

Ellsworth Compromise--From what I've seen reported on the Ellsworth compromise (actual legislative language was never made public) of the Capps compromise, it could best be described as Capps on steroids. It would have created clear and strict rules governing the separation of funds, and would make sure no federal funds were used to pay for abortion. There might have been some type of a board to insure that funds are indeed properly segregated. It would mandate that there was always a “pro-life” health insurance option available on the exchange, and that pro-life insurance plans could not be discriminated against in anyway. The public option could only cover abortion if it hired a private contractor to handle ever aspect of that coverage, and then only with private dollars.

Stupak Amendment--The Ellsworth compromise was still based on the principle that there are public funds and private funds and abortion coverage could only be paid from specially set aside private funds. The Stupak language refuses to accept the idea of segregated funds. Stupak claims that money is fungible. It not only prevents federal funds from being used to cover abortion, but prohibits federal funds from being used in anyway to help operate an insurance plan that does cover abortion.

It would technically allow for abortion coverage by plans or riders that are completely paid for in every way by private dollars. But if any health insurance plan or rider received even a single dollar of federal money from HR 3962 to somehow pay for any aspect of operating that health plan, it could no longer cover elective abortion. That single federal dollar would be like a drop of dye tainting a risk pool made up of potential billions of private dollars. The extremely broad language could force millions of women to lose their current abortion coverage.