Cantwell Vs. Baucus, Battle of The Exchanges

As I get more information about Cantwell's “basic health plan” amendment the more I like it. (The modified amendment is available here.) I really wish Cantwell would stop calling it a public option. It is not a public option. I think it is an idea which should be debated on its own merits and not get drawn into the battle for a real public option.

As I have said before, what Cantwell's amendment would do is allow states to create a much better exchange for those under 200% of FPL. It is an exchange with well-defined minimum benefit package with fixed co-pays, out-of-pocket limits, and deductibles. It would allow real economies of scale to affect negotiations, and mandate a minimum medical loss ratio of 85% for participating insurers. Insurers would be required to meet “specific performance measures and standards,” and their performance would be publicly reported. The basic health program must provide a choice of at least two or more similar plans.

This is closer to a Dutch-, Belgian-, Swiss-style, well-regulated, private system. You get to choose from several similar well-defined plans, knowing all of the plans provide sufficient coverage. It is like Medicare Advantage without the option of Medicare. (It would still be dramatically improved if one of those plans was a public option. Medicare Advantage plans cost noticeably more without providing better coverage.)

The main exchanges in the Baucus bill will likely be confusing, loosely regulated marketplaces with dozens of incomprehensible choices. They will lack mechanisms that might engender the best possible bargain or drive down cost. I wish that Baucus's exchanges could be more like Cantwell's “basic health plan” exchanges.

Judging from an interview Cantwell did with Ezra Klein, I don't think I'm alone.

Why only go up to 200 percent of poverty? A lot of the concern right now is for people between 200 percent and 400 percent of poverty because they don’t have as much in the way of subsidies.

Because right now, that’s where 75 percent of the uninsured population lives. They need the health insurance. You create models within our system that are efficient. I’d be willing to do more, but that’s a different question.

What about me? I make more than 200 percent of poverty. What if I want to join your plan?

That’s for another day, Ezra. This is a big mountain to climb. We’ve got to get a foothold and this is the foothold.

It sounds like Cantwell also doesn't have a very high opinion of Baucus reform plan. I think it is clear that she sees expanding her “basic health plan” as a way to slowly replace Baucus's terrible exchanges with a much better ones.

It sounds like Cantwell also doesn't have a very high opinion of Baucus's reform plan. I think it is clear that she sees expanding her “basic health plan” as a way to slowly replace Baucus's terrible exchanges with a much better ones.

Cantwell's amendment is a good but sadly insufficient idea. It is really at best a “foothold.” It is how all the exchanges should be run, not a small subset for some people in some states. If the current Senate Finance Committee bill was passed into law, Cantwell probably hopes progressives will fight hundreds of smaller battles using her amendment to gradually marginalize Baucus's terrible exchanges. I appreciate the effort represented by Sen. Cantwell's amendment; like Wyden's state experimentation amendment it could be a tool progressives might use to fight for real reform at the state level. But I think it is far too early to begin a strategic retreat, to prepare to fight another day. Now is not the moment to accept defeat. This is a perfect time to fight, if only elected Democrats can be forced to remember what the party stands for.

Co-ops, Exchanges, Gateways, and The Need For A Public Plan

In 2000 the General Accounting Office did a study of health insurance purchasing cooperatives. This study should shed important light on the issue of insurance co-ops pushed by Senator Conrad and the problems of health insurance exchanges without a public option. The study found that:

Despite efforts to negotiate lower premiums, cooperatives have only been able to offer premiums that are comparable to those in the general small group market. The cooperatives we reviewed typically did not obtain overall premium reductions because (1) their market share provided insufficient leverage, (2) they could not produce administrative savings for insurers.

These purchasing co-ops may or may not be part of the co-op proposal promoted by Senator Conrad. (Note: Conrad has repeatedly refused to provide any concrete details for his co-ops idea.) The study makes it clear that collective purchasing co-ops will be useless at reducing premiums or controlling the spiraling cost.

The five purchasing co-ops that the GAO investigated work in a manner very similar to the state based health insurance exchanges that are likely to be a part of health care reform. Like the state based exchanges, they pool together health insurance purchases for small employers.

The California and the Florida co-ops at one time were both larger than many of the state based exchanges are projected to be. The CBO calculates that roughly 11% of the Americans will get health insurance from an exchange. The California co-op once had more members than that 11% that state exchanges are expected to enroll. While state based exchanges should give individuals and small businesses greater choice, they are unlikely to do anything to reduce premiums.

Another model of how new health insurance exchanges are likely to work is the Federal Employee Health Benefits Program. The FEHB is a health insurance exchange for federal employees. It does a great job of offering many choices but a terrible job at controlling cost. From 1985-2002 the premiums in the FEHB program grew only 0.1% slower than the rest of the private insurance market. The FEHB does not include a public option.

Finally, there is the example of Massachusetts. They implemented reform that would be similar to what Baucus is proposing. It also created a new health care exchange for small businesses (called the Commonwealth Connector) which did not include a public option. Massachusetts' reform did a good job at reducing the number of uninsured, but failed to control the spiraling cost of health insurance. Now Massachusetts is looking at some massive structural reforms to control cost.

There are only two “successful” health insurance companies which are co-ops, Group Health Cooperative in Washington and HealthPartner, Inc. in Minnesota. Conrad wants to replicate these instead of a public option. Even the National Cooperative Business Association admits that competition drove most of the health insurance co-ops out of business or forced them to abandon the co-op structure. While Group Health Cooperative provides a good quality of care, its premiums are still spiraling out of control.

Whether it is the Federal Employee Exchange, Commonwealth Connector, gateways, or state based purchasing co-ops; efforts to pool individuals and small businesses in a single health insurance marketplace does not help control cost. State based exchanges should help provide individuals and small business employees with greater choice. But without a public plan or massive structural changes, they will do basically nothing to arrest the devastating increase in cost of health insurance.

Time Spreads Confusion About Health Care Reform

Joe Klein published an article in Time magazine which does more to confuse his readers than inform them. He does not seem to understand the basics of the current health care debate. In his article he states:

Most important for long-term reform, a system of health-care superstores — the wonks call them "exchanges" or "co-ops" — where individuals and small businesses can go to buy a plan, could be included.

This statement is dangerously uninformed. The “exchanges” and the “co-ops” are two radically different proposals. They are in no way similar.

An “exchange” could be described as a health-care superstore. It would be a single place where an individual or business could compare the prices and benefits of several plans. An “exchange” is like a highly regulated Orbitz for health insurance.

The “co-ops” being proposed would be non-profit health insurance companies. They would be health insurance companies that are member owned and operated. They would sale health insurance plans just like Aetna, Humana, Cigna, etc. The “co-ops” could be described as the equivalent of a credit unions, but for health insurance instead of banking.

The “exchanges” are where you compare all the insurance plans. The “co-ops” are non-profit insurance companies that would sale insurance plans. An “exchange” is a marketplace, while a “co-op” would be just one of the many companies selling health insurance policies in that marketplace.

61 Most Important Words In The HELP Health Care Bill

The goal of many reformers is for the majority of Americans to get health insurance from something similar to the Federal Employee Health Benefit Program. It is an exchange where federal employees choose between several good insurance plans which meet a strict set of minimum criteria.

While this may be a good idea, it is politically impossible because it would cause the CBO to conclude that "millions of Americans would lose their current health insurance". (Even though the vast majority would get a better insurance plan of their own choosing, that is one of the many finer points that will be lost in the political attacks against reform.)

As a result, the HELP committee wanted to write a bill that would allow most Americans to get their health insurance via an exchange without the Congressional Budget Office (CBO) saying as such. They wrote the bill so that only individuals without insurance and employees of "qualified employers" can buy health insurance in the exchange. In the bill the "default" definition of a "qualified employer" is a business with 10 employees or fewer.

Using this default definition, the CBO determined that ten years from now only 27 million Americans will get their insurance through the exchange. But there is an very important clause dealing with the definition of a “qualified employer”: It gives states and the Secretary of Health and Human Services the power to change how few employees a “qualified employer” must have.

According to the HELP Bill, “the term 'qualified employer' means an employer that … meets criteria (including criteria regarding the size of a qualified employer) established by such State; or” by the Secretary of HHS defined as

NUMBER OF EMPLOYEES.— (i) ESTABLISHMENT.—The Secretary may by regulation establish the number of employees described in subparagraph (A)(ii)(II)(aa).
(ii) DEFAULT.—If the Secretary does not establish the number described in subparagraph (A)(ii)(II)(aa), such numbers shall be deemed to be 10.

I have no doubt that once the exchanges are up and running successfully that number will dramatically be scaled upward by individual states and/or the Secretary of HHS. While the CBO claims only 27 million Americans will get health insurance through the exchange 10 years from now, if things go as planned that number will probably be closer to 127 million. This is a fairly brilliant piece of CBO slight of hand.