As rising unemployment swells Medicaid rolls, the Bush administration issues a new federal rule that would allow states to “deny care or coverage to Medicaid beneficiaries who do not pay their premiums or their share of the cost for a particular item or service.”

In what the New York Times describes as a “sea change” in Medicaid, states will now “charge premiums and higher co-payments for doctors’ services, hospital care and prescription drugs provided to low-income people under Medicaid“:

The administration acknowledged that ‘some individuals may choose to delay or forgo care rather than pay their cost-sharing obligations’…The Congressional Budget Office has estimated that 13 million low-income people, about a fifth of Medicaid recipients, will face new or higher co-payments. Most of the savings result from “decreased use of services,” it said.

Rather than the Bush administration’s approach of forcing poor Americans to pay more for health care during an economic crisis, the federal government should increase FMAP — the percentage the federal government reimburses states for Medicaid — and expand the program to allow more Americans to buy affordable health coverage.

Growing health costs are now “the primary driver of the fiscal challenges facing the state and local sector over the long term.” At least 27 states are facing budget gaps and most are simultaneously experiencing an increase in Medicaid enrollment. A survey by the Kaiser Foundation concluded that “Medicaid enrollment across the country grew 2.1 percent in fiscal year 2008″ and “states expect to see even larger increases in Medicaid enrollment and spending” in fiscal year 2009.

But as more Americans are relying on government safety net programs for health care — or forgoing care altogether — the Bush administration is banking on “reduced use of services” and co-payments to help recipients become “more educated and efficient health care consumers.”

In a post titled ‘Why big reform won’t happen in 2009,’ Joe Paduda of Managed Care Matters responds to our argument that the economic crisis demands health care reform. While recognizing, to some degree, that Congress cannot help American families or address the economic woes “in a lasting, meaningful way without health care reform,” Paduda argues that a lack of cost containment measures render comprehensive health care reform unaffordable:

While I applaud their motives, perspective and logic, I would also note that their piece completely misses the big point, a point they themselves explicitly acknowledge. None of the health care reform initiatives presently before Congress (except for the Wyden-Bennett bill), nor President-elect Obama’s health reform platform address costs.

A recent analysis of Barack Obama’s proposal by PricewaterhouseCoopers’ Health Research Institute priced Obama’s plan at $75 billion a year, with over one-third of the costs coming from existing funding for the uninsured. The group did agree with Paduda, noting “unless successful cost containment strategies were put into place, growing health care costs will increase the costs of Obama’s plan.”

Fortunately, Obama did not leave cost contain containment out of his proposal. In fact, just this summer CAPAF released an analysis of Obama’s cost-containment strategies. The report recognized that while universal health care reform would require an upfront investment in coverage and health care infrastructure, Obama’s containment measures would also help bring down health care costs and make covering all Americans more affordable.

Here are the specifics:

- Expanding Access Contains Costs: By extending coverage to all, Obama can achieve efficiencies, end cost shifting and rationalize
financing mechanisms. As Bookings Institute economist Henry Aaron points out, broadly expanding coverage is “a precondition for effective measures to limit overall health care spending.”

- Harness Market Power of Group Purchasing: Through Obama’s proposed insurance exchanges, small purchasers and individuals achieve greater clout vis a vis insurance companies. Small purchasers would enjoy greater choice of health plans, greater choice of provider networks, and lower premiums than they experience today.

- Emphasize Prevention: While the United States spent $132 billion in 2002 treating Americans with diabetes, just $70 billion went to the prevention of all diseases. It can be difficult to quantify the possible savings from expanded prevention efforts, but experts estimate that just ensuring that every child receives every routine vaccination could reduce direct and indirect health care costs by up to $40 billion over time.

- Improve Information On Effective Treatments: Today, Americans are likely to receive the appropriate care just half of the time, and approximately one-third of individuals seeking care are likely to experience a medical error such as a medication mistake or the wrong lab results. Improving quality could help save lives and contain costs. Estimates of savings go as high as 150,000 lives and $100 billion every year.

- Greater Use Of Information Technology: Less than 25 percent of hospitals, and less than 20 percent of doctor’s offices, employ health information technology systems. Estimates vary, and real-life experience is limited, but one group of researchers finds that implementing health IT would result in mean annual savings of $40 billion over a 15-year period.

- Better Management Of Chronic Disease: Treating the 90 million Americans with chronic conditions costs about $1.2 trillion a year, or approximately two-thirds of national health care spending. Better care for individuals with these conditions can translate into substantial savings. If every diabetes patient received the appropriate primary care for their condition, for instance, then national health care spending would fall by $2.5 billion.

The Washington Times fired off two separate editorials today criticizing incoming Health and Human Services secretary Tom Daschle’s Federal Health Board initiative and progressive health care reform. Universal health care “would also reduce consumer choice and drive many private insurers out of the market,” the Times claimed:

Although his board would technically have no say on the 68 percent of health care that is provided through the private sector, Mr. Daschle modestly adds: “Congress could opt to go further with the Board’s recommendations. It could, for example, link the tax exclusion for health insurance to insurance that complies with the Board’s recommendation.” Those last 19 words would spell the end of independent private-sector health care in America. [Tony Blankley]

It would result in massive increases in federal spending, higher federal taxes and taxpayer debt being passed on to our children and grandchildren. It would also reduce consumer choice and drive many private insurers out of the market, leaving all but the wealthiest Americans with little choice but to receive care from the resulting government monopoly. [Washington Times]

The attacks are certainly reminiscent of the conservative effort to mischaractarize President Clinton’s health care reforms. In 1993, the Heritage Foundation labeled Clinton’s plan “a massive top-down, bureaucratic command-and-control system that would meticulously govern virtually every aspect of the delivery and the financing of health care services for the American people.” An influential editorial published in the Wall Street Journal by the Manhattan Institute similarly described the Clinton plan as a “coercive” proposal that “takes personal health choices away from patients and families.” [Health Plan's Devilish Details, WSJ, 9/30/1993]

Fifteen years later, conservative talking points — however consistent — still don’t match reality. In truth, Tom Daschle supports the breadth of progressive health care initiatives: 1) an insurance exchange that allows private plans to compete with a new public plan 2) expansion of Medicaid and SCHIP 3) subsidies for Americans who can’t afford to buy insurance.

Rather than relying on the government to provide care, progressive prescriptions are rooted in the philosophy of shared responsibility in which every player in the health-care arena — the government, employers, doctors and hospitals, insurers, and individuals — help support a rational, sustainable system.

Daschle’s Federal Health Board that would resemble the current Federal Reserve Board for the banking industry. The Board would ensure harmonization across public programs of “health-care protocols, benefits, and transparency” and would set “evidence-based standards for benefits and quality for federal programs” in the hopes of lowering the complexity of different insurance regulations and ultimately lowering costs. “These standards would apply to federal health programs and contractors and serve as a model for private insurers,” Daschle writes in his book.

Reigning in unsustainable health care spending and providing a model for private insurers is far from a doomsday conspiracy. Consider Massachusetts’ landmark health reform law. The legislation built “upon the existing health care system, with expansions to Medicaid, subsidized coverage for people with low incomes, and reform of private insurance markets.” Far from forcing bureaucrats into consult rooms or spelling “the end of independent private-sector health care,” the legislation increased access to meaningful coverage. In fact, since the program’s launch in June 2006, 439,000 more people have enrolled in health insurance, and nearly half of them signed up for private insurance not funded by taxpayers.

Without offering any alternatives, ideological conservatives are now gearing up for another health care fight. Unfortunately for them, things have changed since the 1990s. This time around, “what’s really exciting about the stakeholders is no longer are they saying that the second-best choice is to do nothing.”

Bob Laszewski points to an article by John Sinibaldi, a “well-respected health insurance agent in St. Petersburg, FL , [who] has become prominent in Florida’s broker community.” Sinibaldi argues that many small businesses would now accept some sort of government intervention in health care:

Across the board, the 100+ businesses I represent, all of them two to 50 full-time employees, have received increases between 13 percent and 75 percent this year. The average has been around 20 to 24 percent. That’s on top of more than 15 percent average increases last year, the year before, and the year before…So an increasing percentage of small businesses now feel that governmental intervention of ANY kind is preferable to the present untenable situation. In the small group marketplace, the pinch has been here for a long time, and has turned into a hard squeeze. Soon, it will squeeze the life out of the markets — at which point the small group market will implode.

The acceptance of “any kind” of government intervention is a departure from the rhetoric of 1993/1994, when the National Federation of Independent Businesses (NFIB) misrepresented Clinton’s employer-mandate as a crushing financial burden that would cost thousands of jobs.

Under Clinton’s proposal, “most small businesses that currently insure would have seen significant declines in cost.” Clinton’s plan capped total health care costs for companies participating in the new state-based alliances at 7.9 percent of payroll — dropping as low as 3.5 percent for the smallest businesses — provided discounts for the smallest low-wage companies and offered 100 percent tax deductions of health costs for the self-employed and independent contractors. But as Paul Starr explains, “few small employers understood that this obligation was limited to a share of payroll” and most “business simply did not trust the administration.”

Fifteen years later, small businesses may be more trusting of comprehensive reform. In fact, small business owners and their employees account for the largest share of the uninsured population—an estimated 27 million of the 47 million Americans without health insurance. Generally, small businesses have three major disadvantages when it comes to providing insurance:

- Risk is shared by a smaller number of workers, which makes them more expensive to insure as a group

- Small businesses lose economies of scale, which makes their administrative costs more expensive

- Small business premiums can vary more from business to business and year to year, making premiums unpredictable and, in some cases, exorbitantly expensive.

Progressives have long maintained that insulating small businesses from growing health care costs would require “all interest groups — business owners, employees, the health care community and government” to contribute through the concept of shared responsibility. Such an approach would save small businesses from the inadequacies of the current system.

President-elect Barack Obama proposes establishing a health insurance exchange to connect individuals and employers to affordable insurance options. The plan establishes a large risk pool, spreads the cost and risk of insurance across a broad population, reduces the administrative costs of purchasing coverage, and ensures that premiums are set fairly and consistently. Small businesses would compare private coverage options with a public plan and purchase the most appropriate policy.

On Friday, the 13 co-sponsors of Sens. Ron Wyden’s (D-OR) and Bob Bennett’s (R-UT) Healthy Americans Act wrote a letter to President-elect Barack Obama outlining their shared principles for reform:

Ensure that all Americans have health care coverage;
Make sure health care coverage is affordable and portable;
Implement strong private insurance market reforms;
Modernize federal tax rules for health coverage;
Promote improved disease prevention and wellness activities, as well as better management of chronic illnesses;
Make health care prices and choices more transparent so that consumers and providers can make the best choices for their health and health care dollars; and
Improve the quality and value of health care services.

Most progressive champions of health care reform — Kennedy, Baucus, Clinton, Obama and grassroots organizations — warmly embrace Wyden’s principles but oppose the crux of his plan. As Ezra Klein explains, Wyden’s plan would dissolve employer-based insurance and mandate every employer who had covered his employees to “convert the total they spent on insurance into salary increases creating, in one day, the single largest pay raise America has ever seen.”

Individuals would be required to purchase health care from “one of the options offered by their state’s newly formed Health Help Agency (HHA). The HHA’s will have a menu of private insurance plans, all of which must provide coverage equal to or better than the Blue Cross Blue Shield Standard Plan used by Congress. All plans will be community rated by the state, meaning an end to adverse selection and preexisting condition problems,” the government would offer subsidies of “up to 400 percent of the poverty line,” and “employers will contribute through a set equation related to business size and yearly profits.”

Conversely, the Baucus, Clinton, and Obama health care proposals all build on the employer-based model, thus ensuring that workers keep the insurance that they currently have.

This position is quite popular. According to a recent Gallup poll, for instance, 67 percent of Americans said that they were either completely or somewhat satisfied with the health insurance benefits that their employer offered and businesses seek to build on the employer model.

For these reasons, Wyden’s proposal is politically tricky. Congressional forces for reform and the various coalition groups that are pressuring Obama to make a major push for universal coverage, are all rallying around the employer-system. Wyden’s plan does have bipartisan support, but as other more employer-friendly plans start to wind their way through the new Congress, expect some Democrats and moderate Republicans — who may have signed up for his plan to be “for” something — to support a more mainstream version of reform.

This summer, Republicans argued that curbing the excessive federal reimbursements to Medicare Advantage plans would undermine choice and strip millions of enrolless of insurance. Conservatives also claimed that the private insurance plans that participate in Medicare Advantage provide better care than traditional Medicare and should not be cut.

Responding to these arguments, the Wonk Room pointed out that while Medicare Advantage plans “are paid 13% more than traditional Medicare pays for similar seniors,” there is no evidence to suggest that they deliver “a better cost/quality result” than traditional Medicare programs. Today, three studies published in Health Affairs concur, finding that private plans “have increased the cost and complexity of the program without any evidence of improving care.”

One paper by Carlos Zarabozo and Scott Harrison explains that private plans were intended to “achieve efficiency through care coordination.” The initial design “called for plans to be paid 95 percent of projected fee-for-service spending for each enrollee — generating a 5 percent savings to Medicare.” Policy makers hoped to encourage private plans to compete on efficiency and offer extra benefits to enrollees. However, since “payment increases have been so large that plans no longer need to be efficient to offer extra benefits,” Medicare now pays “an average 12.4 percent more per enrollee in 2008 compared to what the same enrollee would have cost in the traditional Medicare fee-for-service program”:

The higher MA payment rates have financed what is essentially a Medicare benefit expansion for MA enrollees, without producing any overall savings for the Medicare program, and with increased costs borne by all benefices and taxpayers…the additional benefits have not resulted in improved quality among MA plans.

Insurance companies pocket the extra dollars. In fact, according to a Government Accountability Report (GAO) released just in June, private plans participating in Medicare Advantage earned greater profits and spent less on benefits:

Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected…Nearly two-thirds of beneficiaries were enrolled in health benefit plans offered by MA organizations for which the percentage of revenue dedicated to profits was greater than projected and the percentage of revenue dedicated to expenditures (medical and non-medical combined) was lower than projected.

Fortunately, President-elect Barack Obama has promised to eliminate this subsidy to insurers and use the extra savings ($62 billion over 5 years, $169 billion over 10 years) to finance comprehensive health care reform.

Earlier this week, America’s Health Insurance Plans (AHIP) and the BlueCross BlueShield Association issued statements agreeing to offer every applicant health insurance if all Americans purchased coverage. Insurance profits aside, a universal mandate makes sense. If the young and healthy avoid preventive care and only enter the health care system at the onset of sickness, they will require more expensive treatments or develop costly chronic diseases. To contain costs, better manage chronic diseases and improve preventive care, everyone has to be part of the system.

But while the insurance industry has shrewdly co-opted the rhetoric of universal coverage, they have not adopted the necessary affordability measures that progressives typically advocate for. For instance, while most progressives support community rating — everyone pays the same prices for coverage, regardless of health status — and a new health care exchange in which private plans are forced to compete with a public option, the insurance industry would be happy to see the government subsidize coverage for those who can’t afford it.

Since insurance companies will likely conflate universal coverage with affordable coverage and resist cost-containment measures that could undermine industry profits, progressives need to clarify their goals for reform and delineate the differences:

Community Rating:

- Progressive argument: Replacing underwriting with a “community rating” system would set premiums based on age and location instead of the health status of the individual. This would bring down the cost of insurance for higher risk populations and guard against radical changes in premiums from year to year.

- Industry argument: Looking at the experience that states have had who have done guarantee issue, who have done community rating…they’ve had some prices increase, individuals have actually had a reduction in coverage in their market.

- Industry debunk: The problem with community rating is that if all health plans in an area don’t stick with it, it falls apart. If insurance companies to underwrite healthy applicants, the plans that are still community rating will be left with sicker populations and higher premiums. Community rating only works if underwriting is restricted and universal coverage is extended.

Competing Public Plan:

- Progressive argument: A competing public plan would use the administrative efficiencies of government-run health insurance plans, as well as the purchasing power of government to control costs. Insurers do not have (or are unwilling to use) the market power to counter the pricing power of many hospital systems or physician specialties.

- Industry argument: Where there’s a public option where they got to set the rules when competing with private companies, that would not achieve the type of goals on improving coverage and improving access, and making healthcare coverage more affordable.

- Industry debunk: Allowing private insurers to compete with a new public plan will lower costs and force companies to compete on quality and value instead of risk.

You know the time has come for health insurance reform when the President of American Health Insurance Plans (AHIP), the lobbying arm of the insurance companies, is taking her talking points from progressive proponents of comprehensive reform.

Here is AHIP President Karen Ignagni on PBS’s NewHour with Jim Lehrer, linking the economic crisis to the health care crisis:

There’s an economic reason to move forward on health care reform, which is why I think it makes sense right now to talk about it. It’s the most expensive thing to do nothing at all, because people don’t have prevention, they don’t have early intervention, and they’re entering the system through the doors of the emergency room.

As former Clinton adviser Chris Jennings points out, things have changed since the 1990s. This time around, “what’s really exciting about the stakeholders is no longer are they saying that the second-best choice is to do nothing.”

Last week, Congressional Quarterly reported that a “broad-based stimulus favored by Democrats” that includes additional federal Medicaid funds for states “seems highly unlikely” to pass this week during a lame-duck session of Congress” and would have to wait until next year.

According to Roll Call, Republicans would likely object to Sen. Harry Reid’s (D-NV) request for unanimous consent on a stimulus package. In the House, “any stimulus package that reaches the floor would include additional federal Medicaid funds for states, although the increase would remain small in an effort to prevent a veto by President Bush.”

This blog has pointed out, however, that growing unemployment has translated into an increase in Medicaid enrollment, straining state budgets across the country.

In fact, according to a new Government Accountability Organization report, absent policy changes, “state and local governments would face an increasing gap between receipts and expenditures in the coming years“:

Growing health costs are “the primary driver of the fiscal challenges facing the state and local sector over the long term”:

The insurance industry recently reiterated its support for a health insurance mandate. Since healthy folks could no longer wait until they’re sick to buy health insurance, the insurance industry has agreed to end its practice of cherry-picking the healthiest applicants and denying coverage to individuals with pre-existing conditions.

Affordability, of course, is a different issue altogether. The New York Times writeup notes, “while insurers would be required to sell insurance to any applicant, nothing would guarantee that consumers could afford it. Rate regulation promises to be a highly contentious issue, since it pits the financial interests of insurers against those of consumers.”

Most progressive proposals guarantee affordability by forcing private insurers to compete with a new government plan, limiting premium discrimination of sex and age, and ensuring that nobody spends more than a certain percentage of income (for example, 5–7.5 percent) on health insurance premiums.

As Tom Daschle, the incoming Health and Human Services Secretary, writes in his book, “the government would provide financial help on a sliding scale so nobody has to pay more than a certain percentage of their income for health insurance. Administered as a refundable tax credit, this protection would apply to employer-based health insurance as well as private insurance obtained through the pool.”

Still, the industry’s concession is significant, since some insurers remain profitable by excluding sick people from coverage. One of the biggest opponents to the individual mandate in California, for instance, was the for-profit Blue Cross plan, which found the underwriting process particularly profitable and played a major role in defeating reform efforts.

But now, the industry that brought you the infamous Harry and Louise ads of the 1990s — warning Americans that they would be forced to purchase health insurance they could not afford — may force President-elect Barack Obama (who proposed requiring insurers to cover pre-existing conditions but not creating a mandate for adults to buy insurance) to adopt a health insurance mandate! It will be up to progressives to push hard for affordability guarantees and comprehensive benefits.

In a sign that he may adopt a comprehensive approach to solving the health care crisis, President-elect Barack Obama has chosen former Sen. Tom Daschle (D-SD) to head the Department of Health and Human Services.

Ezra Klein points out, “you don’t tap the former Senate Majority Leader to run your health care bureaucracy. That’s not his skill set. You tap him to get your health care plan through Congress.” Earlier this year, during an address at the Families USA Action Conference, Daschle concurred with the need to ‘think big’ on reform:

Incremental change in our system is no longer a viable option. Instead we need comprehensive reform. In growing numbers the American people are demanding that we do something. Our goal should be to build what current and retired members of Congress have today, and make that available for all Americans.

Daschle is a Senior Distinguished Fellow at the Center for American Progress and is the author of Critical: What We Can Do About the American Health-Care Crisis.

The book lays out Daschle’s vision of achieving reforms through a framework shared responsibility, in which “every player in the health-care arena — the government, employers, doctors and hospitals, insurers, and individuals — should help support a rational, sustainable system.” Some of Daschle’s proposals:

- Expand the Federal Employee Health Benefits Program (FEHBP), or create a group purchasing pool like it: Participants could choose their own provider and would have the security of knowing they could never lose their coverage. Employers could let their employees get coverage through a FEHBP plan only if they enrolled all of their workers, not just ones with health problems. The FEHP pool would also include a government-run insurance program modeled after Medicare and would have tremendous clout to bargain for the lowest prices from providers and push them to improve quality of care.

- Subsidize coverage for those who need it: The government would provide financial help on a sliding scale so nobody has to pay more than a certain percentage of their income for health insurance. Administered as a refundable tax credit, this protection would apply to employer-based health insurance as well as private insurance obtained through the pool.

- Strengthen Medicaid: Simplify and extend Medicaid to cover everyone below a certain income level. The federal government should pick up the tab for this expansion, and ensure that states don’t’ cut off people when the budget gets tight.

- Concentrate on the value of care: Strive to get more for our health care money by promoting research that compares drugs and treatments to determine which ones deliver the best bang for the buck. Daschle also proposes promoting prevention that would reduce the number of chronic conditions.

- Improve health care infrastructure Adopt health information technology to lower expenses and allows rural residents to connect electronically with medical providers. Increase the number of community health cetners and government-funded clinics that provide basic care for the poor and uninsured.

Aside from supporting the basic principles of progressive reform, however, Daschle also proposes a Federal Health Board that “would resemble our current Federal Reserve Board for the banking industry.”

The Board would ensure harmonization across public programs of “health-care protocols, benefits, and transparency” and would set “evidence-based standards for benefits and quality for federal programs” in the hopes of lowering the complexity of different insurance regulations and ultimately lowering costs. “These standards would apply to federal health programs and contractors and serve as a model for private insurers,” Daschle writes.

Cross-posted at ThinkProgress.

Fresh from campaigning for Sen. John McCain’s health care proposal, self-appointed conservative health care spokesperson Rep. Michael Burgess (R-TX) is making straw-man arguments against progressive health care proposals.

After reading Burgess’ editorial in today’s Washington Times, for instance, one would falsely conclude that comprehensive reform efforts would force patients into government-run programs that ration care and limit coverage:

The idea of government-run health care sounds appealing to many Americans. Really what that means is limiting freedom – the freedom to choose a doctor, to take your health care with you when you switch jobs, to make personal medical decisions…As a Republican and a physician, it is critical for us to offer a clear and credible alternative to a one-size-fits-all system that puts bureaucrats in charge of health care decision-making.

Burgess has either ignored most comprehensive health reform legislation or misunderstood it, because nothing could be further from the truth. Consider Sen. Max Baucus’s (D-MT) proposal: the patient has the choice of staying with employer-based coverage or buying comprehensive insurance from a new Health Insurance Exchange.

The Exchange offers more options, not less. Individuals and small businesses will be able to “compare private coverage options and a public plan and to purchase the policy that would work best for them.” Plans purchased through the Exchange would be portable, allowing Americans to, as Burgess requires, “take your health care with you when you switch jobs.”

Over at Health Care Policy and Marketplace Review, Bob Laszewski argues that Barack Obama should hold-off on comprehensive health care reform until Congress reaches some broader consensus and more money is available:

I would argue that if Democrats do go for the whole deal they are likely to run into a political buzz saw and possibly squander the ability to do a more modest bipartisan list of health reform accomplishments that could be the first important steps in a longer-term strategy.

But Laszewki’s argument that a comprehensive reform bill will be too long and divisive can apply to any major piece of legislation. Congress had a difficult time garnering support for the financial industry bail out, but pressed against conservative opposition to adopt what was largely seen as a necessary measure.

Given the burden of growing health care costs on businesses and individuals, health care reform is no less important. In fact, a new report from the New America Foundation underlines the consequences of inaction:

- $207.3 billion: amount our economy lost because of the poor health and shorter lifespan of the uninsured.

- $24,000: the cost of the average employer-sponsored health insurance plan in 2016.

- 73: percentage of increase in the average deductible nationwide by 2016.

Moving health care reform to the back-burner will only exacerbate the current economic downturn. As Ezekiel Emanuel points out, “health care costs are the long-term driving force in federal and state budgets. To control the deficit and keep the country solvent, health care must be solved…The new administration must remember that health care is so big — $1 out of every $6 in the economy, dwarfing automobiles and all other economic segments. Everything is affected by health policy, and every decision should be examined for its impact on health care reform.”

But first reform must happen and the in-coming administration won an electoral mandate to transform the health care system.

Sign the petition for affordable health reform NOW, here.

New details about Gov. Bobby Jindal’s (R-LA) proposed overhaul of Louisiana’s Medicaid system suggest that the ‘new leader’ of the conservative movement is moving away from McCain-like principles of one-size-fits-all health care coverage.

Under Jindal’s proposal, patients currently receiving Medicaid benefits will have three choices: 1) the current Medicaid fee-for-service benefits package, 2) state-designed benchmark benefits package 3) or, if they live in one of the four pilot areas, a coordinated care network of medical homes (CCN).

The third choice is crucial. Jindal is looking to design a network of medical homes — a model of care that allows a patient to receive all medical treatment in one location and encourages the primary care physician to take responsibility for providing for all the patient’s health care needs by arranging care with other qualified professionals — that could lower costs and increase care quality.

While regulatory details are still sketchy, Jindal recognizes what McCain never did: sick people require more care than healthy people and can find more affordable coverage within coordinated managed care networks that operate under a pay-for-performance model.

The CCNS would be required to ensure all beneficiaries have a medical home within the coordinated system and Jindal would prefer to reimburse the network at a risk-adjusted prepaid premium that will reflect the enrollee’s health status and anticipated utilization. The plan’s network of hospitals, physicians, and specialists could then spend that amount of money on treatment. This prioritizes efficiency, and promotes evidence-based practices and improved coordination between providers

For patients with serious health needs, Jindal is proposing up to three special needs statewide case management networks that would provide intense specialty services and case management services for families with special needs.

In addition to injecting coordinated care networks into the Medicaid system, Jindal is simultaneously expanding Medicaid (government) coverage. The plan calls for “a statewide expansion of coverage to low-income parents and caretakers relatives with incomes from 13 percent of the FPL [Federal Poverty Level] to 50 percent of FPL ($5,200 in 2008). Moreover, the state will run a pilot program — Access to Affordable Care — in Southwest Louisiana that will extend coverage for parents and caretaker relatives with incomes from 51 percent of the FPL up to and including 200 percent of the FPL ($20,800 in 2008) as well as childless adults with incomes up to $20,800.

In some ways, the medical home and payment reforms that Jindal proposes fly in the face of conservative free-market dogma. Patients with more health needs aren’t left at the mercy of the market. More Louisianians qualify for insurance through government health care. But most importantly, Jindal is recognizing that with prudent payment reform, the government can play an important role in encouraging providers to deliver health care services.

The Big Three automakers are scheduled to appear before the Senate Banking Committee today to ask Congress to bail-out the struggling industry. America’s car companies are in trouble and the health care crisis is at least partly to blame.

For General Motors, health care costs add $1,525 to the price of every car that leaves the lot and the company estimates that it spent $5.2 billion on health care benefits in 2004, more than it paid for steel.

The argument that automakers will benefit from a system of universal coverage in which the government, the employer, and the individual share the costs of health insurance is fairly obvious. Since General Motors spends $71 per worker per hour on health care and Toyota spends only $47, we might consider the Japanese public-private model of health care.

Japanese companies aren’t burdened by aging retirees straining company profits. In Japan, everyone is required to enroll in a public or private employer-sponsored plan, and the government spends half as much on health care as the United States to provide care for everyone.

While the Japanese government negotiates a fixed price for every procedure and every drug with the health industry to keep costs low and requires private insurance companies to offer everyone coverage, the American system lacks electronic medical records, effective comparative effectiveness research of new technologies, and broad-based access to preventive care.

In Japan, every citizen is covered while in America, care for the uninsured adds an average $922 to family health insurance premiums.

In short, our fractured health care system inflates health care costs and expects businesses to pick-up the tab.

This is not a ringing endorsement of the Japanese model, it has its share of problems. Hospitals and doctors are underpaid and the system may face insolvency due to a rapidly aging population. But for all its kinks, the Japanese system is grounded on the progressive theory that we can lower costs by covering everyone and adopting certain cost-containment initiatives.

Japanese manufacturers are competitive in part because they are not burdened by a draconian health care system that does nothing to control health care costs or increase access to care. In America, however, the current state of automobile companies represents the cost of inaction on health care reform.

Today, Gov. Bobby Jindal (R-LA) is expected to propose restructuring the state’s Medicaid program by steering “hundreds of thousands of low-income Louisiana residents into private managed-care plans.”

The Jindal ‘concept paper’ establishes “managed care” networks of physicians, hospitals and other medical care providers to improve patient health, eliminate duplications or unnecessary services and generally reduce cost by better managing and coordinating an individual’s care.

Under the proposal, the government would “pay a per-patient fee that would vary by the health status of its patients” and “doctors and hospitals would receive incentive payments if they meet certain performance criteria.”

While Jindal’s efforts to coordinate care and reform the poor fee-for-service payment model are laudable, the governor has yet to detail his proposal.

It could go one of two ways: the governor could either be introducing a truly effective ‘medical home model‘ — as is required by a 2007 state law — or a more industry-friendly approach that allows insurers to make short-term profits without focusing on long term investments (or value of care).

Some have indicated that Jindal has chosen the latter. Louisiana Hospital Association president John Matessino, for instance, has described Jindal’s plan as “a very top-heavy, managed care’ assignment of patients” that would actually take money out of the Medicaid system to fund more insurance bureaucracy. The primary care physician would act as a gatekeeper, limiting care and keeping costs low, without coordinating patients’ care to ensure that each individual patient receives efficient, timely, and effective treatment. These plans have difficulty changing the behavior of physicians because they pay for episodic care and not value of care.

In a medical home model, conversely, health service providers help coordinate care and manage success primarily through improved health outcomes and patient satisfaction. Medical homes reconfigure the delivery of primary care to involve interdisciplinary teams of doctors, advanced information technology, care coordination, patient outreach, and other techniques designed to improve quality of and access to services.” This approach can actually reduce costs and improve health outcomes.

Pharmaceutical Research and Manufacturers of America (PhRMA), the nation’s largest pharmaceutical lobbying group, is gearing up for a “multimillion-dollar public relations campaign to tout the importance of free-market health care and undercut an expected push by the Obama administration for price controls of prescription drugs,” the Washington Times reports.

During the campaign, executives and employees of the companies — wary of McCain’s legislative support for bringing low-cost generic drugs to market, letting consumers import cheaper medicines from Canada and opposing Medicare Part D — donated “three times as much” (approximately $1.6 million) to Obama as to McCain. Now, they’re seeking a return on their investment:

“We’re going to do an ad campaign that is designed to make people aware of the importance of preserving your free-market health care system,” Mr. Johnson [senior vice president with PhRMA]said. He added that PhRMA recognizes that “some reforms are needed in order to keep that system vibrant.”

But the reforms Obama proposes — allowing for the reimportation of safe drugs when prices are lower than in the U.S., enabling Medicare to directly negotiate drug prices, increasing the use of generic drugs in government programs and prohibiting large drug companies from keeping generic competition out of the market — will likely eat into Big Pharma’s profits. According to one study, giving Medicare the authority to negotiate drug prices, “would cause the pharmaceutical industry to lose $10 billion to $30 billion in annual revenues.”

Thus, the industry will no doubt argue that reduced profits will force companies to cut back on new medical research and slow down the discovery of new medical breakthroughs. They claim that we pay sky-high prices for their drugs because of ever-rising research and development costs. Yet according to a recent GAO report, big pharmaceutical companies are failing to deliver new and better drugs to the American people. While companies are spending more on Research and Development—147 percent more by the end of 2004 compared to 1993—by the end of 2004, the number of new drug applications were down 22 percent over 1999 levels, the most recent high watermark for new drug applications. In fact, their entire ‘higher prices for better drugs’ argument is highly problematic:

- The top U.S. drug makers spend 2.5 times as much on marketing and administration as they do on research.

- At least 1/3 of the drugs marketed by industry leaders were discovered by universities or small biotech companies and are sold to the public at inflated prices.

- 75 percent of new drugs approved by the FDA are me-too drugs that can be less effective than current drugs or no better than drugs already on the market to treat the same condition.

- With a blockbuster drug, it’s not unusual for a manufacturer to budget $50 million to $100 million for advertising aimed at consumers. (In 2000, Pfizer spent $89.5 million advertising Viagra to consumers.)

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Today, during a House Commerce and Energy Subcommittee on Health hearing, CAPAF Senior Fellow Gene Sperling, Gov. Janet Napalitano (D-AZ), Rep. Frank Pallone (D-NJ), and Rep. Gene Green (D-TX) unanimously called for increasing the percentage the federal government reimburses states for Medicaid expenditures. These Federal Medical Assistance Percentages (FMAP) are based on a sliding scale and states with lower personal incomes have higher FMAPs.

As the Wonk Room has argued, helping states finance their Medicaid programs makes sense in the context of a souring economy and massive job losses. At least 27 states are facing budget gaps and most are simultaneously experiencing an increase in Medicaid enrollment. In fact, research indicates that a 1 percent increase in unemployment results in 1 million more people enrolling in Medicaid and SCHIP and another 1.1 million more people becoming uninsured. In Arizona alone, as Napalitano pointed out, Medicaid enrollment grew by 13,000 more applicants in October:

States can’t borrow money and they must balance their budgets. So how do they deal with increasing demand during a period of decreasing revenue? As Gene Sperling pointed out, “FMAP allows states to expand Medicaid enrollment without requiring other contractionary policies and has one of the highest multiplier effects of any form of economic stimulus”:

A 2004 study by Families USA found that a 2.95 percent increase in the FMAP rate would bring a return of $3.85 million in business activity for every $1 million in Medicaid investment, a multiplier of 385 percent.

An increase of $35-50 billion dollars allows states to: 1) keep up with growing enrollments 2) injects more money into the health care system 3) ensures that states aren’t forced to increase taxes or make cuts elsewhere.

In fact, in 2003, during another period when Medicaid enrollment and spending growth peaked, Congress provided a 2.95 percent FMAP increase, helping states meet Medicaid and overall state budget shortfalls and warding off potentially larger Medicaid program cuts. States used the extra cash to preserve Medicaid:

The Center for Budget and Policy Priorities (CBPP) finds that “17 states have cut or are considering cuts to low income child and family health care programs and at least 15 states are cutting care for the elderly and those with disabilities.” Without federal assistance — specifically increasing FMAP within the second stimulus — those numbers will only grow in the coming months.

During the presidential campaign, progressives criticized Sen. John McCain (R-AZ) for dismantling the employer-based health insurance system by exposing employee tax benefits to income taxes. This morning, Sen. Max Baucus (D-MT) proposed financing his comprehensive health reform plan by reforming the tax incentives for employer coverage.

So what’s the difference? Why aren’t progressives jumping down Baucus’ throat and accusing him of treason? While McCain proposed replacing the employee deduction with a one-size-fits-all tax credit without reforming the health insurance market, Baucus pairs employee-tax tweaks with market reforms that would increase access to group coverage.

Baucus proposes two changes to the tax exclusion: capping the amount of health care premiums that can be excluded from employee wages and restructuring the exclusion on a sliding scale based on income, giving people with lower wages a larger deduction. But, since the plan simultaneously expands Medicaid, Medicare and SCHIP, creates an insurance exchange, allows Americans to buy into a new public plan, and ends discrimination against individuals with pre-existing conditions, the restructuring of the tax exclusion would not leave Americans without coverage.

Most progressives recognize the regressive nature of the employee tax exemption. As the Baucus white paper points out, “current incentives are also regressive because they are, for the most part, more valuable to taxpayers who are subject to higher marginal rates. As such, they give larger subsidies to higher-income workers, instead of to the lower income Americans who need more help buying insurance.” In fact, even Obama adviser Jason Furman argued that our current tax exemption for health insurance could (or should) be revamped.

The Baucus plan also meets another progressive requirement: it builds on the current employer-system. While the employer-based system isn’t perfect, it plays a crucial role in connecting Americans to coverage by encouraging risk pooling through employer policies and guarding against adverse selection. Baucus seeks to expand and strengthen the system by requiring employers to offer a Section 125 plan which would allow employees to pay their health insurance premiums through their employer’s payroll deduction and with pre-tax dollars.

As Ezra Klein points out, “by offering something that hews closely to Obama’s principles and traces the expressed preferences of most leading Democrats, [Baucus] he’s constructed a broadly acceptable base on which to build the process. There is plenty yet to be defined, traded, added, and decided — which is to say, there is plenty of reason for other senators to take a role in the process. If his colleagues agree, then this will be, as Baucus hopes, Max Baucus’s health reform process.”

Our guest blogger is Brian Levine, a Senior Policy Adviser at the Center for American Progress Action Fund.

Last week, progressives won a resounding victory. The question is: Now what? Today, the Center for American Progress released its own recovery strategy for 2009 and beyond. The CAP report cautions against being “penny wise and pound foolish” as we confront large budget deficits in the short-term. We must invest immediately in health care, energy and education to help our economy through this crisis and lay the groundwork for future growth.

The report lays out a strategy that begins with stabilizing the economy by ensuring the solvency of financial institutions, restoring confidence to the credit and stock markets, and ending the housing crisis, while jumpstarting the recovery with an intelligently crafted stimulus package.

These steps must be accompanied by a sustained economic agenda that focuses on build­ing the foundation for a brighter future. As the report points out:

Today’s crisis is not just the failing economy but the looming barriers to future prosperity in the form of unsustainable and growing levels of health care costs, the lack of adequate clean, depend­able energy, and our inability to educate our children for the needs of our economy.

We must slow the growth of health care costs, which will require an upfront investment, partly because it requires universal coverage. In addition to covering everyone, we must incorporate new medical technologies into the system and promote more efficient delivery of care.

We need to invest in a new green energy infrastructure to create jobs now and begin the shift to clean, sustainable energy. Using energy more efficiently makes our economy as a whole more efficient. And renewable energy and efficiency are growth industries that can drive American economic leadership well into the future.

And the economic crisis must not prevent us from transforming the public education system to one that prepares our children to compete for high-quality jobs in the global economy and tackling the problem of college affordability.

After the period when deficit spending is needed to strengthen the economy, we must restore fiscal discipline as quickly as possible.