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Health Care "Reform" 2009: The Fallacy of Affordability and Cost Containment

Despite some useful provisions, it is wishful thinking to believe that health care "reform", as projected by current proposals being considered in Congress, can actually make health insurance more affordable and make a real difference to people already burdened by their spiraling costs.
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Now that we're into the recess period of bitter and distorted controversy over the shape of health care reform when Congress re-convenes in September, it is timely to reassess the extent to which legislation this year may or may not meet the goals for reform. Recall that the three major objectives are to provide near-universal access to affordable health care, contain health care costs, and improve quality of care.

It seems certain that the House bill (H.R. 3200) will be the most generous bill to come out of Congress to help people afford medical care. The Senate Finance Committee opposes a public option, favoring instead co-ops, which are unlikely to work. The Senate is also more likely to restrict eligibility for subsidies to help lower-income people purchase health insurance under the individual mandate. And we can expect that any conference committee between the House and Senate bills will further attenuate whatever comes out of the House.

But even H.R.3200 in its present form, even if it could overcome strong opposition by Republicans and Blue Dog Democrats, will not make health insurance more affordable or contain health care costs, two of its essential goals. How can we say that? Here are some of the reasons:

1. It leaves a dying private health insurance industry in place. The nation's 1,300 plus insurers are mostly for-profit and investor-owned, are beholden to shareholders to maximize their revenues, limit their "losses" (payments for medical care), and provide the best returns to investors. They take about one-fifth of the health care dollar for providing mostly administrative services, with overhead and profit-taking five to nine times larger than public financing through Medicare's three percent overhead. The two largest insurers, WellPoint and UnitedHealth Group, made profits in 2007 of $3.3 and $4.6 billion, respectively. Annual compensation for insurer CEO's in 2007 ranged up to $23 million (Aetna).

As described in my recent book, Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It, we have never been able to effectively regulate this industry, which has many ways to game any system by cherry-picking the market. In exchange for their pledge to stop denying patients coverage on the basis of pre-existing conditions, the industry gains employer and individual mandates, together with new federal subsidies, to increase its market by up to 50 million people. AHIP and its lobbyists have already succeeded in neutering the public option to a small program without enough potential market share or flexibility to set its own premiums to effectively compete with private insurers. Moreover, the industry has been lobbying behind the scenes to restrict whatever definition of minimal coverage benefits ends up in any final reform package. Thus, private insurers stand to gain millions of new enrollees, many subsidized by government. We can also expect that coverage will be limited and that premiums, cost-sharing and out-of-pocket costs for patients and their family will continue to go up.

2. None of the reform bills have effective mechanisms to rein in costs of health care in our market-based system. Reimbursement policies are not likely to be changed enough to reduce incentives for providers and hospitals to provide unnecessary or limited benefit services. Providers and facilities will still have wide latitude to set their own prices. And although H.R. 3200 does include a provision to establish a Center for Comparative Effectiveness Research, an E & C Committee amendment prohibits the use of comparative effectiveness findings "to deny or ration care or to make coverage decisions in Medicare."

3. Government subsidies to prop up the private insurance industry come at a high price. If the House bill's eligibility criteria prevail (subsidies for people making less than 400 percent of the federal poverty level), the CBO estimates that their costs will be $773 billion between 2013 and 2019. In addition, the CBO projects that Medicaid expansion for families of four with incomes up to $33,000 a year would cost about $500 billion over ten years. On the other hand, if the Senate and a House-Senate conference committee further limit eligibility for subsidies and levels of coverage, as seems certain, we can anticipate that patients and families will pay even more for health insurance and care than they do now. Recall that the average costs of insurance and care already exceed 19 percent of family income for a family of four, considered by the Commonwealth Fund to be a hardship level.

4. If anything, we'll end up with a mandate for underinsurance, whether through employers or individuals. H.R. 3200 already calls for four levels of coverage to be offered through the Exchange, ranging from 70 to 95 percent of the costs of benefit costs). In an effort to shave costs of a reform package, Senate committees are considering coverage plans down to only 60 percent of benefit costs. So people will end up paying more for less coverage.

5. Though touted by their advocates for their potential to save money, there is solid research that tells us that programs emphasizing prevention and wellness, as well as expanded use of information technology, are instead likely to add to the cost of health care.

To be fair, H.R. 3200, as a work in progress, still has some potentially very useful provisions. For example, the recent amendment to H.R. 3200 passed by the House Energy and Commerce Committee would allow the government to negotiate the prices of drugs for Medicare patients. This came as a shock to PhRMA and the White House, who thought that assurance of no price controls would be the quid pro quo for the industry's pledge to kick in $80 billion over the next 10 years toward health care reform. As another example, H.R. 3200 calls for the Secretary of Health and Human Services "to limit health plans' medical loss ratios to a specified percentage, to be enforced through a rebate back to consumers." But if you think that the battle over health care reform is wild now, just imagine the response from AHIP if such a goal is established at five or ten percent (compared to three percent for Medicare)!

Despite some useful provisions, however, it is wishful thinking to believe that health care "reform", as projected by current proposals being considered in Congress, can actually make health insurance more affordable and "bend the cost curve" sufficiently to make a real difference to people already burdened by their spiraling costs. That raises an interesting question as the political forces advance to the next stage in the battle:

Since there is a paygo bill in the House with 85 co-sponsors, H.R. 676, the Conyers bill) that would assure universal coverage and save money for government, employers, taxpayers, patients and families, and since Speaker Nancy Pelosi has promised that it will come to a floor vote in the House this Fall, can we imagine that it could be passed with bipartisan support of fiscally conservative Republicans, Blue Dog Democrats, and other liberal and progressive
Democrats? If the debate is all about saving money (either for the government, taxpayers or patients) that's a logical question that we'll consider more in our next post.

John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press.

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