Obama, Healthcare Reform, and the Baucus White Paper: Redefining the Center

A pattern is starting to emerge for the Obama administration's governing style: Look into all viewpoints on major issues, listen to as many perspectives as possible, then attempt to synthesize them and find common ground on which to build its initiatives. If that's true, then one way to get a glimpse of its healthcare reform plan is to look for the center, the ground on which consensus can be built, and project from there.

Sen. Max Baucus, the centrist Democrat from Montana who chairs the powerful Finance Committee, issued a health reform white paper this week. Some are calling it the Baucus "plan," but he disagrees with that label and so do I. It's a statement of positions of key health policy issues, and overall it's a compendium of some of the best "center-to-moderate-left" thinking on those issues. That means it's politically achievable, and would be a significant improvement over what we have today. The Baucus paper may represent grounds for a new bipartisan consensus, and therefore may give a glimpse of what we can expect to see proposed in 2009.

Here are some of the key points raised in the Baucus White Paper:

Health reform can't wait. Sen. Baucus makes clear that meaningful reform will cost money in the short run, but that the cost of inaction would be far greater in the long run. It's implicit throughout the paper: Act now. That would please nonpartisan groups, the AARP, business/labor coalitions, and fellow Democrats who are urging President-Elect Obama to move quickly on health reform.

Eliminate Exclusions for "pre-existing coverage." The Baucus plan eliminates limits on enrollment for people with pre-existing conditions, which suggests that a consensus is forming against this practice.

Press for "individual responsibility," but only after costs come under control. I was one of the few health analyst types arguing against emphasizing health mandates during the election season. Sure, the logic for it is sound - if health insurance isn't mandated, only sicker people will buy it, thus undercutting the solvency of the system. But without careful analysis and design, such mandates are likely to be inherently unfair to the middle class - a regressive tax that's unfairly distributed among working people based on who they work for, not income or ability to pay. (To a large extent that happened in Massachusetts, which many thought would be a model for the nation.)

Still, unless we're ready to create a tax-based system of national health coverage for all (here's how I'd like to see that work), we're going to need some sort of requirement sooner or later. The Baucus paper suggests that cost control efforts be put in place first, with mandates reserved for a later period when the costs become affordable to all that might be required to participate. (Lower-income people would receive subsidies.)

This is a reasonable consensus position.

Emphasize primary care, preventive care, and wellness services: This is good common sense, sound thinking translated into policy. The Baucus paper calls for improved reimbursements for primary care through redesign of the Medicare payment system (which is often followed by private payers).

One of the Baucus paper's best features is the creation of a "RightChoices" card which would give the uninsured guaranteed access to preventive and diagnostic care, with targeted subsidies to receive treatment for some of the conditions that might be discovered as a result. This is a discussion I've had with Washington types before, especially when there has been discussion of having the Federal government assume responsibility for catastrophic medical care. That may be worthwhile idea, depending on how its designed, but there's a greater impact to be made by moving proactively to find and treat diseases before they become catastrophic.

Redesigning Health Delivery. The Baucus paper endorses integrated health systems, also know as accountable care organizations (ACOs). This is a good idea, too. But the language used to describe ACOs is virtually identically to that used thirty-five years ago when Richard Nixon signed legislation that created the HMO industry. For the ACO concept to succeed, further reflection and analysis of the successes and failures of the HMO concept will be needed.

Addressing the Underinsured. The Baucus paper raises the issue of the underinsured - those who have health insurance but still suffer from the costs of medical care - but offers no concrete suggestions. (The 25 million figure is from the Commonwealth Fund, but others would argue the number is low. As the Baucus paper notes, 47 million insured Americans with insurance are unable to pay their medical bills.)

One barometer of the "underinsurance" problem is a PriceWaterhouseCoopers survey which found that companies with slowed profit growth are more likely to offer "high deductible insurance plans" that provide no coverage for the first several thousand dollars of treatment. Another is a Kaiser Family Foundation study which showed that 36% of people nationally are skipping or delaying needed medical treatments because of cost (which can result in even greater costs down the road.)

Presumably the problem of underinsurance would be addressed by the institutions Sen. Baucus proposes, the Health Insurance Exchange and the Independent Health Coverage Council. But a similar institution was created in Massachusetts (the "Connector"), and was forced to dramatically reduce coverage requirements in order to make plans affordable enough to make a mandate feasible.

Which gets us to the issues the Baucus paper - and perhaps the new consensus view - don't address. Statements of principle are worthy and important. But where health reform is concerned, the devil is very much in the details. I think it's wise to say that mandates won't be imposed until coverage becomes "affordable" - but who decides what that means? Some policy analysts have used 10% of income as a reasonable ceiling for premium costs before insisting that people purchase healthcare. But picture using the tax system to require a family of four earning $75,000 a year to pay $7,500 for healthcare. That could be burdensome - and politically unfeasible.

I would prefer an "open-source Medicare" approach. The Baucus paper allows people aged 55-64 to buy into Medicare. Why not allow all Americans to buy into it? I've supported that idea for a while. And I would strongly endorse Dean Baker's "healthcare stimulus" package, which combines that Medicare option with tax incentives to subsidize near-universal healthcare coverage.

President-elect Obama isn't likely to back such a plan, however, unless a new consensus forms around it. My guess is that he will take a rapid but incrementalist approach - call it "all deliberate speed" - built around a consensus (which the Baucus paper may represent). A number of these initiatives may well be put forward early in his Administration. Will they be presented as individual pieces of legislation, or as some sort of overall health package? Will they be introduced by the new President first, or by influential Senators like Max Baucus or Ted Kennedy (health permitting)? What is the likelihood of success?

The crystal ball is hazy. But it's a good guess that consensus and collaboration will drive efforts in the first half of 2009.

The Sentinel Effect: Healthcare Blog

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Comments

[ModeratePoliticalJunkie]

Here is an excellent paper on healthare reform:

http://www.brookings.edu/papers/2007/~/media/Files/Projects/Opportunity08/PB_HealthSpending_Rivlin.pdf

[phoenixbc]

This is a very good analysis. It covers many alternatives which usually are omitted from consideration, such as increasing competition between providers.

It makes a debatable presumption, however, that patients actually choose the care that they receive, inasmuch as it suggests that patients should bear more of the cost so that they'll make more responsible treatment choices. The problem is that the cost passed on to patients is by way of insurance premiums. Hospitals are insulated from that choice, because insurance pays regardless of who pays the premiums. Hospitals encourage doctors and their patients to elect more care by imposing "treatment protocols". Patients, and especially inpatients, are at the mercy of protocols, which often dictate testing and treatment. In most cases, physicians have admitting privileges and are not employed by the hospital. Failure to follow hospital-imposed protocols often results in loss of privileges. The doctors make the required recommendations to the patients, who follow them. What patient, faced with illness, will reject recommended care? This is one way that hospitals increase the cost of care. Rivkin wisely suggests greater oversight by the Federal Trade Commission and other regulatory agencies.

[phoenixbc]

The question of "healthcare" cost always focuses on insurance and not on hospitals which continually increase the cost of treatment. True, insurance costs are high because of inelastic demand and states' failures to encourage competition. The missing analysis, however, is what hospitals charge and how healthcare dollars are allocated.

Hospital administration costs have skyrocketed from 10%-13% of each healthcare dollar in the 1970s to more than 60% today. Non-profit 501(c)(3) hospitals spend millions on commercials, as though no one knows where the hospital is located. They invest millions on luxury features to attract upscale patients, which raises the cost to the uninsured. Their offices resemble those of Fortune 500 corporations, and the administrators are paid hundreds of thousands in salary, while complaining about treating the poor. Many receive federal grants for equipment and capital improvements, and then close those urban hospitals and move the equipment to suburban facilities.

It is time to focus attention on 501(c)(3) hospitals and their cost structure. Instead of believing their press releases of their financial condition, their audited financial statements should be made public. Independent studies show that uninsured patients usually account for a single-digit percentage of total hospital revenue.

Much legislative effort has gone to curb fraud by physicians. Virtually no attention has been paid to waste and excesses of major hospitals, which are paid 3 and 4 times what a doctor is paid for the same procedure. It is time for everyone, including tax-exempt hospitals, to act responsibly.

[bthechangeyouseek]

One barometer of the "underinsurance" problem is a PriceWater­houseCoope­rs survey which found that companies with slowed profit growth are more likely to offer "high deductible insurance plans" that provide no coverage for the first several thousand dollars of treatment. Another is a Kaiser Family Foundation study which showed that 36% of people nationally are skipping or delaying needed medical treatments because of cost (which can result in even greater costs down the road.)

Most are offering this plan to keep costs of insurance down. Most HDHP include preventative coverage at no charge to the insured. Unfortunately it is when a diagnosis is made or an accident happens that this type of plan becomes unaffordable to the insured.

None of these plans take into consideration that insurance is currently priced by the underwriting that includes: pre existing conditions, (which by the way are covered usually after 12 months on group coverage, but do not allow for coverage under individual plans) step therapy, mandated generics to name a few.

Average family cost of group insurance with a $1000 ded, is about $10,000. I would like to hear from an actuary underwriter on how we will be able to contain costs while introducing these types of reforms, instead of universal health care. I don't think it can be done because these types of underwriting practices help contain costs.

[Maxiesid]

Why are we even considering healthcare in this frame of reference? It is ridiculous. If I am just making enough to cover my bills, and put food on the table, it doesn't matter how you package it, or how you explain it, demanding that I pay one more thing is just not going to cut it. Besides, we all know how this works. For example, in PA we are mandated to have auto insurance, so I have to buy the insurance at the rate the insurance company sets. I am over 50, have never had a traffic fine, and the only claim I have ever had was deer damage once from an unavoidable collision between myself and a deer that plowed into the side of my car. No mattter, my premiums on my vehicle are nearly a thousand dollars a year, and have been for years, that is with a 500 dollar deductable, and they cover what they want up to a certain amount. Basically I am being ripped off by the insurance company under the mandate by the government. Translate that into healthcare and you can see what we are facing. All this so that AIG and their ilk can continue to party hardy on the taxpayers dime on top of bilking people out of money for premiums etc? Single payer, universal health insurance. Wipe out the middle man, we can't afford to carry them any longer.

[knowBuddhaU]

Very well said, Maxiesid. Just one hour's pay for one of these gluttons would clear all my debts, and then some. At the rate I'm able to pay, I'm a de facto indentured servant for life aka debt slave.

The fact that the same people (not just financiers, but also Rumsfeld, Cheney, and all the throwbacks to Nixon's regime) keep hijacking our shared vessels, is my greatest frustration. Isn't this the MO of Perkinsian Economic Hit Men? Aren't they the ones who implement Klein's Shock Doctrine? Just who exactly has been involved in developing this method? Who are the current EHMs, and who's giving them their marching orders?

IMO, BushRoveCheneyCo are feudalists, not democratic republicans. It's the ideology! Focusing only on the external arrangement of things is reminiscent of choosing the "nature" side in the old 'nature vs. nurture' false choice dilemma.

Cosmogenesis is Joseph Campbell's term for "making s#1^ happen." Our intentions materialize our realities, just as my intentions are materializing these words. Into the inchoate ocean of my intentions, I am dipping these words like cups; over to you, I'm passing them; as you pass your eyes over them, they self-empty into *your* ocean of inchoate intentions, like rain falling back into the body of water from which it first arose.

Without their ever being spoken aloud, o reader my Reader, you now hear them within you. Where is the Center? Within each and every one of Us.

Explain THIS with reductive mechanism! ;-}

[Raven]

You're right, RJ, the devil's in the details of the Baucus plan.

And no matter how you cut it, no matter how it's not supposed to happen until insurance becomes affordable, it's still a mandate.

And a mandate to enrich the same folks who got us into this whole mess to begin with.

That just doesn't seem like a good plan to me, no matter how much consensus anyone is able to build around it.

i am not a car. I can't just decide to park myself and take the bus. No one should legislate that because I breathe I must purchase insurance, no matter how "affordable" they think it's going to be.

Healthcare is a right, not a privilege. And, as such, it's never going to be fair or universal as long as the insurance companies are the centerpiece.

But you know that, don't you? Crystal balls and all.

[Doofus]

Almost as if the Democrats want to avoid the first major catastrophe
of the Clinton administration, going up against Big Healthcare AND
Big Insurance. That would be most astute, except for the part about
going up against Big Progressives.

Hard reality is that, in the Good Ol' USA, Big Wealth, Big Insurance,
Big Investment are all BFF with Big Healthcare & Big Pharma. It's a
system we are most likely stuck with til the next millennium.

[TRYKER]

Unless we get single payer and eliminate the insurance companies, we aren't going to improve or move ahead.
There is a bill in Congress, I don't remember the #, but some say it has real possibilities - with about 100 sponsors already .
The real crime is that those with insurance, but don't get coverage for a myriad of questionable reasons...how can this be legal? What a racket - taking money under false pretenses.

[freshnotbitter]

Incremental approach will create problems which will be manipulated to condemn the entire system to failure.

You say it is unfair to have mandates and use the example of a family paying too much for insurance because they make more money.

Here is what you do:

If you have insurance now and you like it you keep it.

If you can't declare, on your tax return, that you had private insurance for the calenday tax year then you pay a percentage of your AGI and are automatically enrolled in a quasi medicare plan.

Thus the people you cite who make a lot of money could just keep their private insurance. Indeed, all those rich people who are afraid of socialized medicine will simply keep their private insurance - people like Rush Limbaugh, Hannity, etc. otherwise they might be paying fifteen percent of 20 millions or three million dollars a year for health care. This system leaves the private carriers with the clients they love, the high income people. Get it???

[fishgirl26]

As a Montanan, Mr. Baucus is already serving the great people of this state. His injection into the area is great not only for those in Montana but for the country. Thanks Sen. Baucus!

[NationalTreasure]

the consensus process will mean that the insurance industry will walk away with a program similar the the Medicare RX legislation that screws over the American public

[SCG]

Public consensus or industry ?

[knowBuddhaU]

Count me among the 47 million, who have some insurance but can't pay my bills.

I cut my hand with a table-saw and BAM! 7 grand in the hole, just like that.

I've read that some Wall Street execs get $35K an hour. How can one person possibly add that much value to the world every hour?

Obviously, it's not about human values, only about how much energy you can sequester, as measured in dollars. The term I was taught for this is "social Darwinism." Greenspan's ideology, his religious belief in the infallibility of mythical free markets, has delivered us into this Waste Land.

Until we experience a collective epiphany, that we are beings, not machines, and start acting like the divine vessels of the divine flow that we are, I see us wandering in this Waste Land forever.

It's not the economy, It's the mythology! The power of myth is that it shapes the cosmos in which we enact the theater of life. Acting within the same mythos that intended the Newtonian cosmos that grew the social Darwinian psychos who drove us into this catastrophe won't get us any nearer to the Promised Land.

[RoloTomassi]

This issue is my primary difference with Obama. I cannot see how we improve the situation much at all with this approach; eliminating the pre-existing condition rules would help, but a strong-arm approach would be required to keep insurers from reassigning the costs back to the insured by other methods.

The healthcare insurance industry is so inefficient and corrupt that, unless the government essentially takes over the industry, we will end up with more people covered by insurance in the short term, but a diminishing number of people insured over time as the HC insurers continue to raise premiums to the point that even subsidies cannot make up the difference.

To me, nothing presented so far beats the HR 676 Medicare for All bill. We are waisting our time with this kind of half-assed approach; when this system proves to be too problematic for long term continuation, the "political will" for a true UHC system will have been used up, and we will be back to square one, with rabid right declaring that they knew UHC couldn't work in this country.

Anything less than a single-payer UHC system is a well intentioned step, but a wrong step nonetheless.

[BarryS]

Until we figure out how to let people buy "insurance" nothing else can be done. Manditory open enrolments with no pre-existing conditions are absolutely essential. A buy-in for medicare would scare the "insurance" companies into compliance.

[RJ Eskow - Huffpost Blogger]

This is a feature of the Baucus proposal. I've amended the post to include that. I wasn't able to describe all its provisions here because of space limitations.

[FearlessFreep]

How is this approach different from the Clintons' ill-fated "managed competition"?