Misguided fixation on premiums
Health savings? No one knows
By Carrie Budoff Brown
Politico
November 11, 2009
Barack Obama ran for president on a promise of saving the typical family $2,500 a year in lower health care premiums.
But that was then.
No one in the White House is making such a pledge now.
It’s one of the most basic, kitchen-table questions of the entire reform debate: Would the sweeping $900 billion overhaul actually lower spiraling insurance premiums for everyone?
Jonathan Gruber, the favorite economist of the White House, said the bill “really doesn’t bend the cost curve.”
Reminded that Obama demanded a bill that lowers health care spending, Gruber said: “That is what he would like to do. But he’s not doing it.”
If premiums are the benchmark by which reform is judged, “we are setting ourselves up to fail,” Gruber said.
http://www.politico.com/news/stories/1109/29421.html
Comment:
By Don McCanne, MD
From the very start, the two most important goals for reform allegedly were to cover everyone and to control health care costs. But the precondition that reform be based on an expansion of private health plans within our dysfunctional, fragmented financing system immediately eliminated universal coverage as a goal. It proved to be impossible to balance all of the variables in this dysfunctional system to ensure that everyone would be covered. So they gave up.
Efforts were then directed to creating policies that would slow the growth in health care costs, again with the precondition that the role of private insurers would be protected and expanded. This led to the profusion of magical thinking - pretending that numerous vague innovative concepts included in the bill would somehow slow the growth in health care costs. Since the Congressional Budget Office does not have a data base on magical solutions, they were unable to score any of these innovations as effective instruments to control costs. As Jonathan Gruber said, the bill “really doesn’t bend the cost curve.”
So they decided to forget about universal coverage and to forget about total costs, but they still had a problem unique to our financing system based on private health plans. In a high cost system like ours, how do you make premiums affordable?
More magical thinking. Pretend that there is a “basic” level of insurance that will take care of all of our basic health care needs. Gold, or platinum, or Cadillac tiered health plans should be made available for wealthier individuals who want more comprehensive plans and are willing to pay for them. But do those more comprehensive plan cover services that the rest of us really don’t need?
It is almost impossible to sort out health care products and services based on whether or not they are essential. For a person with a disabling osteoarthritis of the hip, is a hip replacement essential? Or should the surgery be reserved for those with platinum plans? A wheelchair for gold plans? A walker for the silver plans? And for the bronze plans, an instruction sheet on how to carve a cane out of a stick of wood?
Since they really couldn’t establish tiers based on the specific services provided, they based them on the actuarial value - the percentage of costs that the plan would pay for. Basic plans have been defined in the legislation as having an actuarial value of 65 or 70 percent. The patient is responsible for 30 or 35 percent of the costs. You can see how “basic” these lower tier plans are when you consider that the average employer-sponsored plan has an actuarial value of 80 percent and some are as high as 88 percent.
Designating this basic plan as the standard created two more problems. The premiums would still be unaffordable for the majority of us, and the out-of-pocket expenses would bankrupt those who developed major medical problems. The answer? Subsidize the premiums and the out-of-pocket expenses with two more administratively complex programs that attempt to match the subsidies to ever-changing income levels. Now do that within a $900 billion ten year budget that has to meet many other demands.
It doesn’t work. Low income individuals who would be mandated to purchase private plans (those not qualifying for Medicaid) do not have the discretionary income to pay even the very modest out-of-pocket expenses required. For moderate and moderately-high income individuals, the portions of the premium and out-of-pocket spending would create financial hardships, especially for those with health care needs.
Only the wealthy would fare well, and they’re the only ones who could afford the highest tier plans. The concept of tiered health plans allows the wealthiest of us to eliminate financial barriers to care, protecting the wealth of the wealthy, while leaving the majority of us with financial barriers that have been proven repeatedly to impair access to essential health care services. What a sick concept!
The precondition of building reform on an infrastructure of private health plans has resulted in a fixation of trying to make premiums and out-of-pocket expenses affordable when it is an impossibility under this model.
Even Jonathan “let’s-get-everyone-covered-and-then-figure-out-how-to-pay-for-it” Gruber says that if premiums are the benchmark by which reform is judged, “we are setting ourselves up to fail.”
It’s not too late to do it right. We can strip down the current legislation to the important beneficial features, including ending private insurer abuses, and pass it as a temporary emergency measure, codifying “temporary” and “emergency.”
We can include in the legislation language that the process must move forward immediately with reform that will ensure that health care is universal, accessible, comprehensive, portable, and publicly administered. That would set us up for success.