A Plan for Universal Coverage, Private Market Competition -- And Reduced Deficits

Re-read that headline.

I am not making this up.

A health care bill exists that would accomplish what the headline says.

Moreover, it has been verified by the Congressional Budget Office (CBO), in a letter signed in May 2008 by the office's then-Director Peter R. Orszag, who now directs President Obama's Office of Management and Budget.

It's called the Healthy Americans Act (the HAA). It has been fully vetted for years, written in legislative language, scored by the CBO, and has substantial bipartisan support.

In my previous columns, I explained the two basic, simple concepts of the HAA:

• Universal coverage, attracting liberal support -- i.e., all Americans are required to purchase health insurance just like auto drivers are required to purchase car insurance.
• More consumer choice and private-market competition, attracting conservative support - i.e., permitting everyone to purchase their own insurance policies in open, competitive "state exchange" marketplaces, each of which must include the Blue Cross/Blue Shield "Basic" policy, the lowest-tier option available to all federal employees and members of Congress or its functional equivalent.

Under all current Senate and House bills, more than 150 million non-elderly Americans who have employer-paid for insurance are left with no choice at all -- no access to a "public option," if there is one, since these employees would be stuck with the employer-provided insurance policy, which they lose as soon as they get laid off.

But under the HAA, all Americans would have a choice - they can stay with their employer's policy, if there is one, or they can choose another they consider better. And all would own their own policies, which travel with them wherever they go, whether employed or unemployed. Every individual American, including all poor people, would have access to their state's public exchanges, giving them the purchasing power of huge pools of customers, just like federal employees and members of Congress have, with guaranteed coverage, better rates and expanded choice (not just the health insurance the boss picks).

Private insurance companies will have to sharpen their pencils and offer better benefits and services or lose customers and even go out of business -- the power of competition and the private market applied to the insurance industry!!!

So how is it possible the HAA is deficit-neutral in the first two years and reduces deficits thereafter? Mr. Orszag wrote the following in a May 2008 CBO letter on the HAA proposal:

"Overall, our preliminary analysis indicates that [the HAA] would be roughly budget-neutral in 2014 [the first full year of operation after a two-year phase-in].

That is, our analysis suggests that your proposal would be essentially self-financing in the first year that it was fully implemented. That net result reflects large gross changes in the Federal Revenues [increased outlays minus increased savings] that would roughly offset each other."

He offered three reasons.

First, there are the increased revenues from a new payment, called "Employer Responsibility Payments." (OK, I am going to call a spade a spade: It's a new tax.) Those employers who currently are insuring their employees would be exempt from this new tax for the first two years. This is because, under the HAA, during the first two transition years, these employers must give each employee an annual salary increase equal to the cost the employer pays for the employee's health care. But all other employers who did not provide health insurance for their employees would begin immediately to pay the tax - but it is a modest one. It is not an income tax or a flat excise tax. Rather, is a progressive tax -- ranging from 3% - 26% -- based on the average national health insurance premium costs but tied to revenue generated per employee and the size of the firm. So a small firm at the lowest tier of revenues/employee would pay only 3% of the average national health insurance premium - but a large corporation at the top tier of revenues/employees would pay the top 26% of the national premium average.

Second, the federal government under the HAA would receive increased tax revenues owing to the conversion of the current $250 billion-per-year tax exemption on employee health insurance premiums to the proposal's standard deduction or tax credit. This is simple math: The exemption of $250 billion worth of income costs the federal government more because higher income-tax brackets are using it, rather than shifting these higher level of deductible premium payments to the lower standard tax deduction or credit provided for under the HAA.

Third, Uncle Sam will save from $150 billion to $200 billion by exchanging paying for Medicaid and SCHIP to allowing poor people to purchase their own private insurance programs at least as good as the Blue Cross basic federal employee/congressional plan.

However, federal and state governments would still provide any benefits currently under Medicaid/SCHIP not currently provided under such Blue Cross basic plans, so no poor person under Medicaid or SCHIP will receive anything less under the HAA. But they will be treated the same as rich people when they seek medical care - a revolutionary concept that both liberals and conservatives are embracing!

So how does the HAA produce a net surplus of revenues, and thus, reduce the federal deficit, after the first two years?

First, Uncle Sam gets more revenues under the HAA because the amount of the new health insurance "standard" deduction under the HAA would grow at the rate of the general consumer price index (CPI) price inflation, and not at the 2%+ higher medical inflation rate that increases the cost to the federal government of the current non-taxed insurance premiums paid on behalf of employees.
Second, the value of covered benefits under the minimal requirement of the Blue Cross federal employee/congressional plan would be increased only as does the rise in the per capita gross domestic product (i.e., in the Senate version scored by the CBO), rather than the higher level of health care inflation. Minimally, experts say that would slow the growth of health spending by 1 percent to 2 percent per year. Remember, Mr. Obama said even if we reduced the inflation in health care costs by "one-tenth of 1 percent per year," that could result in trillions of dollars of savings.

Finally, additional savings for Uncle Sam and the rest of us in health care costs would come from significant structural reforms under the HAA. These include requiring insurance for wellness and chronic-disease management; requiring all insurance companies to maintain electronic medical records; and transparent state market exchanges, with customer-friendly "help" agencies in each state.

If it is too late to adopt the full HAA because none of the House or Senate committees gave it serious consideration (for reasons that utterly escape me), then the full Senate should consider the "Free Choice" amendment from Sen. Ron Wyden, Oregon Democrat.

Mr. Wyden's amendment is quite simple: It would allow the 150 million employees who are stuck with the plan offered by their employers to opt out, get a cash payment or voucher, and go shopping, knowing that, at the very least, they can purchase a federal employee/congressional-type plan.

My question to all House and Senate members and specifically, to Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi:

Why not let this Free Choice amendment be debated and voted on?

Everyone reading this column should ask their members of Congress that question.

This article has been cross-published at the Washington Times and at TheHill.com.

Lanny J. Davis, a Washington lawyer and former special counsel to President Clinton, served as a member of President George W. Bush's Privacy and Civil Liberties Oversight Board. He is the author of "Scandal: How 'Gotcha' Politics is Destroying America."

 

 

Comments

[swlewis57]

Insurance companies are basically as good as a coupon that you get from the Sunday paper.

All they do is give you a slight discount on services provided. The rest comes from your pocket.

[Oldchef]

Gee thanks, Lanny; require everyone to buy insurance! A total giveaway to the insurance industry. I remember when car insurance was first required back in the late 1960s. Before the requirement, one could pay $35 extra when renewing one's tags if you had no insurance and the cost for insurance was around $90/yr. When insurance was required by law and they had and enormous number of new customers, spreading their risk, rates jumped to $90/month, a huge windfall for the insurance companies. I fear the same thing will happen with health insurance. Requiring people to buy the insurance with no meaningful regulation and no Medicare-like option, will just mean a huge windfall for insurance company profits and a painful hosing for citizens.

[sueinmn]

Does anyone here really believe congress will do anything for the people? Just like other every bill they pass, it is so watered down they are gifts to corporations. Were better off not having a bill if a strong single payer or public option is not in there. Apparently the insurance companies are too big to fail just as the banks and will recieve subsidies, loop holes in the end. Take away the HC that congress has and let them have what we have! Nothing except payments for profit! I just bet these CEOs dont even pay taxes on their incomes and bonues........

[JXJASON]

Dear Mr Davis.

I am against any law that would require me to buy health insurance. I favor the public option.

However, I would rather have the system that the Canadian people have.

My personal experience with the auto insurance mandate has not provided me with competitive, inexpensive auto insurance . I have been buying auto insurance for 45 years and I have had five or six different insurance companies because each company raised my rates to earn more money. I have been accident free for 46 years. Every crash I or my ex-wife was in was caused by the other driver.

It was reported on Huffpost this week that the CEO of Wellpoint earns a salary of ten million dollars a year. She is grossly overpaid. She (and others like her) is/are part of the problem. For what it is worth, this woman earned more money in one year than my mother, father, brother and me have earned in our lifetimes.

I will not buy any mandated health insurance policy.

[justobserve]

Strongly agree! Mandatory insurance without a public option for people to choose in a real competitive market is just another way to pay the insurance industry more money. Any conditions imposed on them WILL be overcome by their horde of lawyers. Their aim is to make profit on people's health. Period! Who can trust them now when they have the market for themselves for decades and the costs keep rising and insured people have been dropped off and let die by the Death Panels (insurers)? "Basic cover" is just a way for insurers to get the money without paying out anything. Who need health care for only the basics? It's a false sense of security! It's the uncertainty of health insurance that made people not to have them. And is health insurance just like car insurance? Yes, but you must multiply it by ten times! That's really the trouble why people don't get insurance now. Fifty millions of them! That's one in six Americans! The impass now is the conservatives DON'T accept part of this (private insurers) and part of that: (public option) to give people the choice. To them, my way of highway, no public option, is the solution !

[Uchenna Oguekwe]

What we need is a provision on next years election ballots that allows the American people to vote on whether or not they want their state to have a public option. This way blue dogs and other representatives in Congress who are nervous about voting on a bill with a public option would have that decision taken off of their hands and into the hands of the American people. It would also eliminate the silly argument of a government takeover because the final decision is left up to the people. Let the American people have their say with a vote.

[sueinmn]

I agree that we should be able to voteon these things ourselves but next year is too far off. We need this now.
Next year I would like to see a vote about lobbying and campaign reform. This influence peddling must end as corporations control government and control must be passed back to the citizens.

[justobserve]

I agree this is the thing that they MUST DO! Now the congresspeople are just working for their pockets, not for the people's interests. We must write to the congress! Will they listen to our wish?

[redkim]

You lost me at "requirement". I am completey against the government requiring anyone to carry any type of insurance,whether it be car, house, health...doesn't matter.

Drop the requirement and I might consider the plan. Keep it in and it's a loser for me.

[MiddleRoadLiberal]

Same here. I refuse to buy insurance at all. It's a scam. I'm not paying hundreds or thousands a year just to get dropped when I actually need the care. I go to the doctor maybe once in five years. Last time was strep throat. The doctor fee was $100 and the antibiotics were absolutely free. And to think I could have spent hundreds of dollars a year for that kind of coverage! A few years before that was a tetanus shot required for a job, and before that it was strep throat again -- seven whole years apart. You can say, "Well you never know when you're going to have something more serious and without insurance you'll be screwed financially," but my reply will be, "If I get something more serious, the insurance company will find a way to screw me financially anyway." So what the hell is the point. I'd rather pay a fine to the gov't than give insurance companies any money. It would just make more sense if that money went towards a public plan instead.

[justobserve]

You don't pay "hundreds" for health insurance. You pay THOUSANDS!

[treetracker]

First I would want to see the full bill - what are the deductibles & co-pays? How is the premium determined?

But beyond all that - as long as you keep insurance companies as part of the equation, you will still be paying too much. The public option should be single payer coverage for everyone. If we can't have that, then our tax dollars should not be spent giving a profit to private carriers. Any subsidies for insurance should require that the only choice is the public option.

Why do we always have to do everything incrementally in this country? We used to do things in a bold way. Now Congress cowers in a corner letting the minority run roughshod over them. We will never reduce costs until we eliminate insurance profits first and then take a new approach to the delivery of health care. These bills are on the right track for some of that, but it's time to take back health insurance that add absolutely nothing to health care.

[TRYKER]

You're so right.
IF we don't eliminate the Ins. cos from the part that is mandated - and subsidized by OUR tax money, we aren't seriously trying to cut costs...and we're getting screwed.
We aren't seeing any sweeping change in the Rules the Ins. Ind. goes by. Hello?
What says they will automatically be paying bills that they deny 20% of the time, to assure their obscene profits?
It is estimated that 50% of the costs now are because of the middlemen in the Ind. We could do a lot with that 50% to ensure that all would be covered. We are spending over $2 Trillion now.
Cutting out $1 Trillion !! is about as big a reward as any President could hope for, and wouldn't the citizens be well served and happy at last?
The Health Insurance Bs. should go the way of the Horse and Buggy Industry, sorry but times have changed and that is an out-dated non-solution ( and often-times a crime) to a civil problem. Middlemen do nothing but stand in the way...patients hate them, Doctors hate them..only politicians love them...$$$ ahhhh.
We have to face REAL facts.
We have to do the right thing.
We can't play games now.
Show the liars the door.
This is a national crisis.

[treetracker]

But alas, we only have 83 in the House who support single payer and until that number increases to 218, we're not going to get it. Most people don't even realize they won't be eligible for the public option. If they knew that, they would be pushing for a single payer plan.

The message has been lost and too many have caved to the public option plan that won't do anywhere near what people think and hope it will do.

When that hits home, this war on health insurance will begin again. In the meantime, we have to keep pounding away at it and keep educating people that single payer is truly the only solution. This is only the first battle, but we will win the war.

Just keep electing single payer supporters.

[redkim]

I agree with everything you said except for the part about money going to the government. While I don't want to waste my money with insurance companies, I also don't want to give my money to the government. So, I am completely against the public option.

[treetracker]

I'm not trying to be snide here, but I don't understand your logic. Insurance does have a place in that people pay into it and, therefore, share the risk. So those members who need it get reimbursed for their loss - no matter who they are. There has to be a place to pool the money in order to share the risk, otherwise everyone is on their own and you might be the one stuck with catastrophic bills and no way to pay them. For profit insurance has no place in health care, but there must be a non-profit risk pool to cover everyone. The only real solution to that is a single payer risk pool.

[treetracker]

The public option is a very limited pool that 85% of us won't be eligible to participate in, but those who can will receive some benefit. It will, however, still not cover everyone. And probably will not do as much as we hope to bring down premiums (unless the Wyden Amendment passes). So, in that respect, I am also against the public option, but not because it is a government plan. There are many government plans that work better than private insurance - Medicare, VA, Tri-Care. They're not perfect - no system ever is. They only way everyone will get coverage and the premiums will be controllable is through a single payer risk pool (which would mean you pay the premiums to the government and they disburse them to the providers).

HR 676 is a single payer plan that offers no deductibles, no co-pays, vision and dental and would cost a family of 4 about $2700 per year. It is still an employer based program, however. I prefer the Sanders bill (S 703) which is a 2.3% tax to cover your premiums. Again no deductibles, no co-pays and includes vision and dental. We need to eliminate employer based health insurance so wages can go up and businesses can be competitive with the rest of the world.

[keostrove]

If this plan also prevents insurance companies from denying policies for pre-existing conditions and prevents cancellation of policies, it should be considered along with the other bills and proposals

[BocaMom]

Finally, some common sense and someone sticking up for the common man. WIthout universal health and a public option there is NO health reform. Everything else is just political spin!