What the Senate health-care deal would mean for consumers
Thursday, December 10, 2009
While confusion reigned on Capitol Hill on Wednesday over the prospects and details of a Senate deal to replace a government-run insurance plan with other measures, it is not too soon to ask what the proposal would mean for regular people.
The short answer -- subject to Senate revisions -- is that those without employer-provided insurance would have more options for buying coverage, but if they are younger than 55, their money would go to a private insurer, no matter what. Rates would be more competitive than what they are offered now, but possibly less so than under a "public option." And if they are between 55 and 64, they might be able to buy into Medicare early, though at what prices remains to be seen.
The new deal would leave the fundamental structure of reform in place -- both the Senate and the House have always envisioned expanding coverage by creating a new marketplace, or "exchange," where people without employer-based insurance and employees of small businesses could buy coverage with the help of income-based subsidies.
The Senate and House bills had included a government-run plan as a choice on that new marketplace. The thinking was that it would reduce the cost of coverage across the board -- and the cost of the government subsidies needed to make insurance affordable -- by forgoing profits, reimbursing doctors and hospitals at lower rates, and exerting competitive pressure on other insurers. But insurers and providers are opposed to an aggressive public option, and to win support Democrats softened it, which meant it held less potential to contain costs and probably would be taken up by fewer people.
That brought the Senate to this deal. Instead of a public option, it would offer people the choice of two national, nonprofit plans that would be run by private insurers but selected and overseen by the Office of Personnel Management, the federal agency that manages the Federal Employees Health Benefits Program.
The advantage of such plans, proponents say, is that they would be national in scope, which ideally would give them leverage with providers in setting payment rates, particularly if the OPM was forceful in seeking competitive rates from insurers.
The Senate bill always sought to have people choose plans from separate state-based exchanges, and skeptics worried that many states would offer poor oversight. Laying two national plans over those state-based marketplaces is designed to guarantee some well-regulated options for consumers everywhere.
"It's good to have the federal government in there negotiating with plans because of the possibility that states will do a very bad job of regulating insurers and managing insurers," said Paul Starr, a Princeton professor of public affairs. "This is a very important protection against poor implementation by states."
But other health policy experts are doubtful about what additional benefit the national plans would offer. As it is, they note, the House bill proposes a nationwide marketplace of plans, though insurers would not have to offer every plan in every state. Aside from the 50-state reach, skeptics say, it is unclear how the new national plans would differ from the plans that private insurers would already be offering.
The nonprofit status of the proposed plans would not necessarily guarantee low costs -- many private insurers today are technically nonprofit. Nor would the plans' nationwide scope and oversight by the OPM guarantee better rates -- premiums for the federal employee benefit plans, which serve 8 million people (including the members of Congress), increased by nearly 9 percent this year.
"I don't know what it does beyond provide some political cover for somebody," said Robert Berenson of the Urban Institute. "It'll be the same insurance companies applying to the national exchange as would be in the state exchange."
His colleague John Holahan says the new national nonprofit plans would accomplish one of the public option's goals: providing consumers with more choices, especially in markets dominated by one or two insurers. To further goad insurer behavior, the Senate deal would also require that insurers pay out 90 percent of the revenue they collect in premiums on reimbursements for medical care -- a much higher rate than many now pay out.
But the plans would not address the other, and in Holahan's mind more crucial, goal of the public option: exerting pressure on doctors and hospitals, especially in places where providers dominate the market. "If your view is that the problem is not having enough insurers, then it would help. But if you think the problem is about not having enough leverage over providers, then this doesn't work," he said.
To console public-option supporters, the deal would also allow the roughly 3 million people between ages 55 and 64 without employer-provided coverage to buy into Medicare. Liberals have long talked up this idea as a way to gradually expand public insurance. And it faces stiff opposition from doctors and hospitals on the same grounds that they opposed an aggressive public option -- that it would reimburse them at intolerably low rates.
"It changes the game completely," said Henry J. Aaron of the Brookings Institution. "It would be far more significant, potentially, than the kinds of public options that the two houses have been reduced to."
But its practical impact depends on the fine print. Would some people, particularly those who have the hardest time finding coverage, be allowed to buy in before 2014, when the reforms would take effect? Would the premiums be more or less than the estimated value of basic Medicare, around $8,000 per year? Would drawing people in that age group help Medicare's finances, because they are younger, or hurt, because they might be in relatively poor health? And how would Medicare's rules square with those of the exchanges -- for instance, Medicare does not limit out-of-pocket costs for doctor's visits, but the exchanges would.
"The whole Medicare thing raises 100,000 questions," Holahan said.