The editorial page of the Wall Street Journal took another shot at President elect Barack Obama’s health care proposal yesterday, warning readers that Obama’s appointed health care leaders — incoming Health and Human Services Secretary Tom Daschle and Director of the White House Domestic Policy Council Melody Barnes — “will ration your health care“:

People are policy. And now that President-elect Barack Obama has fielded his team of Tom Daschle as secretary of Health and Human Services and Melody Barnes as director of the White House Domestic Policy Council, we can predict both the strategy and substance of the new administration’s health-care reform.

The prognosis is not good for patients, physicians or taxpayers…. Americans can expect a quick, hard push to build more federal bureaucracy, impose price controls, restrict medicines and technology, boost taxes, mandate the purchase of health insurance, and expand government health care.

The Journal’s ‘predictions’ are as predictable as they are erroneous. Conservatives have spouted the same-old tired arguments against reform since President Clinton’s failed 1994 effort, and the Wonk Room, along with some other progressive blogs, has been actively disputing their assertions.

But this latest attack piece introduces another more potent argument. The editorial, with Rove-like precision, attempts to invert the nation’s most successful universal health care reform effort into its biggest disaster:

Mr. Daschle’s model is Massachusetts. But Massachusetts’s plan is an unfolding disaster and demonstrates how Mr. Daschle’s private/public model is merely a stalking horse for government-dominated health care.

By conflating universal health care with the challenges of the Massachusetts model and defining ‘success’ as a program that remains budget neutral — not one that extends more coverage to more people — conservatives are stalling reform.

The popular Massachusetts model has greatly reduced the number of uninsured and increasing access to coverage. Nearly three-quarters of previously uninsured Massachusetts residents now have medical coverage, half of the newly-insured “are enrolled in private health insurance and employer-sponsored plans” and “the number of visits to hospitals and community health centers by the uninsured declined by 37 percent,” saving the state an estimated $68 million.

But while Massachusetts “decided not to hold coverage hostage to the difficult decisions about cost,” Obama and his health care team have suggested that they will simultaneously address access and cost. The Massachusetts plan, for instance, “allows private insurers to sell group-style policies to lower-income Massachusetts residents who lack insurance” within a “Connector” or exchange but does not include a public plan alongside private options.

“Mr. Daschle’s ‘public/private model‘” conversely, would create a public option alongside the private plans, forcing insurers to compete on price and quality.

The Journal, however, glosses over the details and differences and attempts to discredit both the Obama team and the successes in Massachusetts by regurgitating tired attacks and pretending that the challenges of reform discredit the entire effort.

The Congressional Budget Office (CBO) has concluded that some popular health care proposals, like increasing funding for comparative effectiveness research and preventive care “would carry a high price tag and would generate only modest savings.” Still others, seem more promising. Requiring doctors and hospitals to use health information technology as a condition for participating in Medicare, for instance, saves “$7 billion in the first five years and a total of $34 billion over 10 years” and lowers “health insurance premiums in the private sector.”

In short, bringing everyone into the system, helping businesses afford health care coverage, insulating Americans from catastrophic health care bills and improving the quality of care, will yield savings but will also require a significant upfront investment in coverage and health care infrastructure.

If we fail to act, however, “health costs will continue to soar, the number of people without insurance will rise by nearly one million a year, to a total of 54 million in 2019, and spending on health care will increase to 25 percent of the gross domestic product in 2025, up from 16 percent in 2007.”

As General Motors CEO Rick Wagoner admitted, a national health care program would have helped the industry avert financial disaster:

GWEN MOORE (D-WI): Wouldn’t this have been a great time for GM to say, we need a national health care program in order to stay viable? …. Why did you stop short of saying that this kind of initiative would help our industry?

WAGONER: Well it undoubtedly would help level the playing field for the industry. … We’ve then tried to we have been very active in the health-care debate since here in Washington. … Our competitors do in most other countries have a significantly greater government role.

After all, that’s what the government does: it spends money to avert disaster. We spend billions on protecting our homeland and bailouts of financial institutions. To somehow change the paradigm in the health care discussion and argue that reform is only possible if it’s budget neutral, completely affordable, or free, is intellectually dishonest. We don’t count the pennies we spend on securing our airports or argue that if we try to secure all of them we’ll bust the budget, and we shouldn’t penny pinch for affordable health care.

As the CBO points out, certain cost-containment measures will indeed contain costs. But to avert the consequences of inaction and help its citizens, the government will have to invest new dollars into health care. As with anything else, it will have to collect taxpayer money, find savings where it can, and then spend to improve the common good.

Today, the Department of Health and Human Services (HHS) formally adopted a new ‘conscience rule’ permitting “federally funded health care providers to decline to participate in services to which they object, such as abortion.” White House Press Secretary Dana Perino explained that the new regulation simply re-affirmed existing conscience-clauses and did not re-write reproductive laws:

Over the past three decades Congress has enacted several laws in order to protect people who have a, who want to practice their health care according to their conscience when it comes to reproductive rights. And this new regulation will increase awareness of those laws and compliance with them but it doesn’t change any of the laws in regards to reproductive rights, so it’s just about people.

Watch it:

In reality, if the new regulation doesn’t explicitly re-write existing legislation, it fails to provide a clear, medically-accepted definition of abortion, expands the definition of health care providers protected by conscience regulations, and permits practitioners to deny women access to commonly used methods of birth control.

During the rule’s open comment period medical professionals rejected the new rule and expressed concern about its consequences. “Implementation of this regulation would effectively allow health care providers’ personal beliefs to override patients’ right to full disclosure of accurate information and available health care resources,” six medical associations warned in a joint statement. In a separate letter to the HHS, 13 state attorneys generals argued that “the rule was too vague about what health care procedures may be withheld.”

The new regulation has also been widely denounced by women’s health groups, “members of Congress, President-Elect Obama, the Equal Employment Opportunity Commission, and by over 200,000 individual commenters filing opposition to the regulations.”

These groups aren’t buying Perino’s “it’s just about people” argument. With no medical necessity for the rule, the new “clarification” provides one final gift to the right “people” — the President’s conservative base — and serves their political ends, forcing President-elect Obama to confront an abortion-related issue on day one.

Luckily, Obama can overturn the rule through a 3 to 6 month notice and comment process or Congress can act to reject it. Sens. Hillary Clinton (D-NY) and Patty Murray (D-WA) have already introduced legislation prohibiting HHS from implementing the new rule and Congress can pass a motion to disapprove. As RH Reality Check explains, “if the motion to disprove is passed by both houses of Congress and signed by the President, the rule cannot be enforced or defended in court.”

The New York Times is reporting that the health insurance industry is encouraging employees and ‘satisfied customers’ to attend President-elect Obama’s health care meetings:

When supporters of President-elect Barack Obama hold house parties to discuss ways of fixing the health care system over the next two weeks, they may find some unexpected guests. The health insurance industry is encouraging its employees and satisfied customers to attend….The meetings, originally envisioned as a way to make good on Mr. Obama’s commitment to “health care reform that comes from the ground up,” could thus turn into living-room lobbying sessions involving some of the biggest stakeholders in the health care industry.

There’s nothing wrong with some healthy debate. The danger comes when the health insurance industry co-opts progressive messaging to convince attendees that everyone is really on the same page about reform and that the industry really wants to provide everyone with affordable insurance coverage.

Since insurance companies will likely conflate universal coverage with affordable coverage and resist cost-containment measures that could undermine industry profits, below is a quick and handy guide for unraveling industry spin:

As the insurance industry and its conservative allies rally against competition between public and private insurance plans, a new report by Jacob Hacker argues that offering a new public insurance option to Americans who lack coverage would control health care costs and improve quality:

The core argument is that public insurance has distinct strengths and thus, offered as a choice on a level playing field with private plans, can serve as an important benchmark for private insurance within a reformed health care framework.

The Wonk Room has previously argued that ‘leveling the playing field‘ is key. But offering Americans a choice would trigger a sort of “checks on each other’s downsides” and allow public insurance to serve as an important benchmark for private insurance, while private insurance can remedy some of the problems of the public insurance.

In short, injecting a public plan — that is managed by the federal government and would pay private providers to deliver care — into a new health care exchange that prohibits cherry picking has two big benefits:

- Contain Costs: Between 1997 and 2006, health spending per enrollee grew at 4.6 percent a year under Medicare, compared with 7.3 percent a year under private health insurance. This is partly because public plans have lower administrative costs and greater bargaining leverage to negotiate for lower service and drug prices. Still, “the greatest potential cost-control advantage of a public plan is its ability to restrain the rate of increase of costs over time.” A recent study found that “since Medicare payment controls were put in place in the early 1980s, Medicare spending has grown much more slowly than in the past.”

- Improve Quality: The Veterans Health Administration has implemented a sophisticated electronic medical record systems and a quality measurement approach that focuses on preventive care and chronic disease management. Traditional medicare “has been the source of important payment innovations” that private plans have generally adopted. Conversely, “private insurance has few incentives to conduct comparative effectiveness research, and limited scope to influence the practices of provides and other insurers even when they do.”

Opponents of this kind of a public model typically argue that bargaining is unfair and would only lead to increased premiums. “A new public program similar to Medicare would exacerbate cost-shifting, which already adds $1,500, or 10 percent, to the average premium for a family of four,” Karen Ignagni, the CEO of America’s Health Insurance Plans (AHIP), told the New York Times.

AHIP recently released a study showing that lower reimbursement rates from Medicare and Medicaid cause private providers to shift the uncompensated costs to private payers. But they simply assume that “all payers should pay the same rates and the the total level of payments to providers is appropriate.” And while there is some limited cost shifting and Medicare could do a better job in setting its payment levels, “the whole point of bargaining, however is to gain volume discounts and restrain total spending.” Private insurers don’t do this, they simply pass on “rising costs to individuals while increasing their profitability.”

A public plan, however, because of its lower administrative costs and ability to bargain for better rates, lowers prices and saves Americans money. “The clearest evidence of the savings produced by the public plan is its premiums, which are estimated to be about 23 percent lower than comparable private insurance for the same set of benefits for the same population,” the analysis found.

When lawmakers approved the Medicare Modernization Act, they offered an extra subsidy to Medicare Advantage plans (MA). The deal was this: Medicare would pay about 13 to 17 percent more for beneficiaries enrolled in MA Plans, and the plans would, in turn, use the increased payments to offer more benefits, reduce beneficiary cost sharing, and “expand into geographic areas where previously plan options had been very limited.”

It was supposed to be a win-win, or so proponents of MA argued. But in recent months, a trickle of government reports and independent estimates have dampened the rational for subsidizing MA plans. The extra federal dollars don’t improve health outcomes. They pad insurers’ bottom lines, raise costs for beneficiaries in the traditional Medicare program, squeeze both Medicare and the federal budget, and drain resources from more productive uses.

Yesterday, the Government Accountability Office (GAO) released a new report that may very well break the dam of support for subsidizing certain MA plans, pushing President-elect Barack Obama to act on a key campaign pledge and re-establish parity between traditional Medicare fee-for-service and Medicare Advantage plans.

According to the report, Medicare Advantage Private-Fee-For-Service Plans (PFFS) — which are responsible for nearly half of the recent growth in MA enrollment — have exposed beneficiaries to serious financial risks:

- Beneficiaries May Be Charged For Entire Cost Of Service: If beneficiaries in PFFS plans did not contact their plans before obtaining services to ensure that the service was covered, they may have had to “pay for the entire cost of the service if the coverage was later denied.” Enrollees in original fee-for-service Medicare are not charged the entire cost of a service unless the provider warns him or her that it may not be covered by Medicare.

- Beneficiaries Charged Higher Cost Sharing: PFFS plans charged exorbitant cost-sharing to beneficiaries who did not “prenotify” a plan before obtaining services, a practice that may have violated laws governing PFFS plans. Medicare FFS plans, HMO, and PPO plans did not have prenotification requirements.

- PFFS Plans Are Unpopular: Beneficiaries are noticing the poor treatment they’ve received from PFFS plans and are voting with their feet and are disenrolling at an average rate of 21 percent compared to 9 percent for other MA plans. The Center for Medicare and Medicaid Services did not comply with statutory requirements to mail information on MA plan disenrollment rates to beneficiaries.

The editors of the Washington Times are arguing that in considering health care reform, President-elect Barack Obama should allow the marketplace to lower health care costs and improve access to care:

The overwhelming majority of Americans are covered, and for them the number one issue is affordability, with accessibility a close second. Let the marketplace answer both calls…The government cannot possibly do for Americans what the marketplace can.

But the marketplace is part of the problem; it has failed to keep costs down and increase access to care.

Rather than competing on the value of care, insurance markets have “become dominated by a small number of large insurers” that don’t use their market power to drive bargains with providers. Competing in the insurance market is “about getting the lowest risk enrollees as opposed to competing on price and the efficient delivery of care.”

In 2003, for instance, “in all but 14 states, three or fewer insurers accounted for 65 percent of the commercial market.” And “while medical care costs grew considerably faster than inflation,” “private insurer revenue increased even faster, suggesting that the market power of insurers means that they are “not only able to pass on health care costs to purchasers but to increase profitability at the same time.”

The marketplace has contributed to skyrocketing premiums, huge cost-shifts to families through higher deductibles and copayments, and has largely excluded individuals with pre-exisiting conditions from coverage. Despite the editors’ claims, the marketplace hasn’t answered “both calls” (of affordability and accessibility). It has hung up the phone and left the American people with a broken health care system.

Yesterday’s Special Report with Brit Hume had good fun with President-elect Barack Obama’s nominations to head-up health reform. After Fred Barnes suggested that universal health coverage would only increase costs, Charles Krauthammer chimed in with his own unique analysis of Obama’s health care plan.

Using smoking cessation programs as an example, Krauthammer explained that while Obama’s focus on preventive care was “a nice thing, it doesn’t save money”:

The biggest preventative healthcare success in American history is the reduction in smoking. What happens instead of dying young if you smoke, you die older, spending years in a nursing home, and the costs end up higher. I’m not in favor of dying young, but it’s more expensive if you live longer. If you die of a heart attack at 50, that’s awful, but it’s cheap. If you live into your 80′s, you will end up with Alzheimer’s or cancer or a chronic disease that’s expensive.

Watch it:

Krauthammer’s argument is this: if people forego preventive care, they will become sick and die, sparing the country the costs of long-term care. But between diagnosis and death lies treatment of chronic diseases, on which we spend the great majority of our health care dollars.

As the Campaign for Tobacco Free Kids points out, tobacco use adds billions to the national health tab:

- $97 billion: Productivity losses caused by smoking each year.

- $96 billion: Total annual public and private health care expenditures caused by smoking.

- $30.9 billion: Annual Federal and state government smoking-caused Medicaid payments.

- $27.4 billion: Federal government smoking-caused Medicare expenditures each year.

- $4.98 billion: Annual health care expenditures solely from secondhand smoke exposure.

Krauthammer blames rising health care costs on defensive medicine and “trial lawyers,” suggesting that “the way to save money in healthcare, the most immediate and effective, is to eliminate defensive medicine.” “I was a chief resident 30 years ago and a lot of our tests are entirely unnecessary and are a way to prevent lawsuits. The Democrats will never do that because of their dependence on the trial lawyers,” he explained.

Research indicates that “defensive medicine” does affect spending, but only to a point. The Congressional Budget Office concluded that malpractice costs amounted to less than 2 percent of overall health care spending in 2002. Thus, even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 percent to 0.5 percent.

In fact, the larger potential for true reform is in the area of better quality of care and more equitable compensation of those suffering large losses, not reduced health care spending.

Yesterday on Fox News Channel, Fred Barnes of the Weekly Standard argued that universal health care reform would not contain health costs in the long run:

But there was another whopper in there, and I’ll read it too you. He said his plan pays for itself over, say, a ten-year period, so that we’re actually saving money over the long term. In other words, we’re going to insure all the uninsured, and they’re going to have better healthcare. In other words, you’re going to get a lot more for less. Now, does anybody who can tie his shoes believe that? I don’t think so! Come on! That’s ridiculous. We’re going to save money. There’s going to be a lot more for you, but it will cost a lot less.

Watch it:

The short answer to Barnes’ question is ‘yes.’ Plenty of independent, self-sufficient shoe-tiers believe that if we bring everyone into the health care system, we could better manage preventive care and chronic diseases and eliminate the cost shift from the uninsured to the insured.

A third of all Americans have a chronic condition. We spend about $1.2 trillion a year, or approximately two-thirds of all national health care spending, on managing these diseases. If heart disease, cancer, stroke, chronic obstructive pulmonary disease could be prevented, the American health care system would save billions of dollars. (If every diabetes patient received the appropriate primary care for their condition, for example, then national health care spending would fall by $2.5 billion).

So by covering everyone, we can ensure that Americans have access to preventive care that saves literally billions “over the long term.” As Chris Jennings explained at a recent CAP health event, “the uninsured and the underinsured and their challenges have to be addressed not just because of the moral blight on our country, on our history, on our record… but frankly it’s a necessary condition to make our health care system more efficient“:

If people go in and out of the system you can neither prevent that problem nor can you coordinate the disease [management] well if you don’t have coverage.

The uninsured are also contributing to the nation’s health care bill. While they do pay for a significant amount of their care at retail rates, a Families USA study found that uncompensated care for the uninsured contributes an average $922 to family health insurance premiums. In the wake of the economic crisis, a growing number of Americans are also skipping preventive care and doctors visits, only adding to the country’s health care tab and driving up health care costs.

As President-elect Barack Obama suggested yesterday, rather than asking if we can afford to reform the health care system during “this moment of economic challenge,” Barnes should be wondering “how can we afford not to?”

When the cynics and skeptics of health reform argue that universal health care is financially impossible or impractical, they are partly right. As President-elect Barack Obama admitted during today’s presser, “we can’t insure everyone under the current system without bankrupting the government or bankrupting businesses or states.”

Any substantive conversation about health care reform must address cost containment. Obama, for instance, has proposed implementing comparative effectiveness research, health IT, increasing transparency and ending the government’s subsidy of private health care plans participating in Medicare Advantage.

That last point is crucial. The extra federal dollars don’t improve health outcomes, they pad insurers’ bottom lines. Eliminating the subsidy would save $62 billion in five years and $169 billion in ten.

In fact, just today the Government Accountability Office (GAO) released a report which found that “insurers offering Medicare Advantage plans made $1.3 billion more in profit in 2006 than projected“:

The report looked at the MA program for 2006, the most recent year for which data are available. MA insurers reported $50 billion in revenue that year. On average, insurers earned profits of 6.6%, compared with the 4.1% they had projected. They also spent 83.3% of revenue on medical expenses, compared with the nearly 87% that was projected.

The Wonk Room has long argued that the excessive federal reimbursements to Medicare Advantage plans raise costs for beneficiaries in the traditional Medicare program, squeeze both Medicare and the federal budget, drain resources from more productive uses, and dilute the incentive for Medicare Advantage plan efficiency— “which was one of the original reasons for including a private plan option in Medicare.”

Today, during a press conference to announce his health care team, President-elect Barack Obama linked the health care crisis to the current economic downturn and suggested that any solution requires health care reform:

This has to be intimately woven into our overall economic recovery plan. It’s not something that can be put off because we are in an emergency. This is part of the emergency.

Watch it:

Obama’s health presser comes on the heals of a new Labor Department report which found that “new claims for unemployment benefits hit 573,000 last week, the highest level in 26 years.” Rising unemployment, of course, leads to “increases in the number of individuals who are eligible for Medicaid coverage, and in declining tax revenues,” forcing states to stretch their budgets (make drastic cuts or limit eligibility or benefits) to fund coverage of additional enrollees.

To help states fund their ever-expanding Medicaid programs and stimulate their economies, Democrats in Congress are finalizing “the details of a $500 billion economic stimulus package” which currently allocates $50 billion to increasing the Federal Medical Assistance Percentage (FMAP).

As Angela Shubert of Stand Up For Health Care explains, “in addition to helping states pay for extra Medicaid costs, federal funding for Medicaid will also give state economies a jump start by generating new jobs, wages, and business activity” and “help state economies move out of recession and back into the black.”

Still, Obama and his health team seem to recognize that financial band-aids are not enough. “The time has come, this year, in this new administration to modernize our health care system for the 21st century,” Obama said at the press conference. “Some may ask how at this moment of economic challenge we can afford to invest in reforming our health care system. And I ask a different question. I ask, how can we afford not to?”

Later today, President-elect Barack Obama will nominate former Sen. Tom Daschle (D-SD) to head the Department of Health and Human Service and appoint Center for American Progress Senior Fellow Jeanne Lambrew to the position of deputy director of the White House Office of Health Reform.

As the Politico’s Mike Allen reports, the new White House health office “will be like a special-projects arm of the White House” designed to achieve “significant changes” in health care reform. Lambrew has advocated for these changes throughout her career, most notably in a 2005 Health Affairs article she co-authored with John Podesta and Teresa L. Shaw.

Lambrew’s approach builds on the two major existing sources of health coverage — the employer based system and Medicaid — and minimizes the fears that have toppled previous reform efforts: the loss of existing coverage, excessive government involvement, and limitations on choices. Obama has advocated similar reforms.

Indeed, this approach allows Americans satisfied with their plans to keep their existing coverage, while offering affordable options to those who need them:

- Americans lacking job-based insurance, for instance, could purchase affordable coverage through a new national insurance pool that would offer “the same private health plans offered to federal employees and members of Congress.”

- While the plan does not include an employer mandate, “employers would have access to the Healthy America insurance pool.” Individuals offered coverage through an employer would be free to decline that coverage and enroll in a plan through the pool instead.

- The plan would simplify and extend Medicaid to cover all below a certain income level (for example, 100–150 percent of the federal poverty level).

Under the proposal Lambrew developed at CAP, Americans would be required to have access to affordable coverage through their employer, a new health care exchange, and/or Medicaid, and the government would offer a refundable tax credit to ensure that nobody spends more than a certain percentage of income (for example, 5–7.5 percent) on health insurance premiums. During the campaign, Obama opposed an individual health mandate, but supported an employer mandate (with the exception of small businesses).

While at CAP, Lambrew also developed the idea of a ‘Wellness Trust’ to “carve prevention out of health insurance and take responsibility for a new, outcomes-oriented system.” The Trust would implement national prevention priorities, align financial incentives with effective practices for prevention, and place wellness ahead of sickness in allocating U.S. resources and priorities.

“The priority is to ensure that all Americans have affordable health coverage,” Lambrew writes. “Providing and improving health care for every American may be the current test of our country’s strength of conviction, as was enacting civil rights for all in the 1960s and the creation of the New Deal in the 1930s.”

On Tuesday, during a discussion about the significance of presidential leadership in achieving health care reform, historian Robert Dallek underscored the role of the presidency in shaping the political debate and helping voters get behind solutions to big problems.

Dallek suggested that since the nation is now “ready to think in larger terms” about health care reform, President-elect Barack Obama should “not speak to special interests, but to the national well being” — a technique mastered by President Lyndon Johnson during the struggle for civil rights:

What [Johnson] needed to do was to explain to them that segregation in the South not only segregated the races in the South, but it segregated the South from the rest of the nation…Johnson in a sense sold civil rights to the country as a program of national well being. And that’s what I think needs to be done now with national health care.

Watch it:

As civil rights served the national well being, comprehensive health care reform will, among other things, improve the nation’s current economic outlook. Growing health care costs are “straining families, businesses, and government budgets” and ultimately, Congress cannot help American families or address the economic woes “in a lasting, meaningful way without health care reform” that includes an upfront investment in coverage and health care infrastructure.

It’s up to the President to seize on the history of past reforms and help the public get behind solutions to big problems.

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Before a wiretap revealed that Gov. Rod Blagojevich (D-IL) had attempted to “strip a Chicago children’s hospital of $8 million in state money after a hospital executive declined to make a $50,000 contribution,” Blagojevich ‘s health care reform — All Kids — was the apple of every advocate’s eye.

Implemented in July of 2006, All Kids made Illinois “the first state in the nation to offer health coverage to all children.” The program “increased health coverage for children by increasing enrollment of children who are already eligible for Medicaid and SCHIP and giving parents with “higher incomes an opportunity to buy health insurance coverage for their children.”

In many ways, the initiative proved to be national model for reform. To deter employers from “dropping dependent coverage and families from dropping private coverage to enroll their children in All Kids,” the state imposed a 12-month uninsurance waiting period for children in families with income over 200 percent of the federal poverty line. All Kids set no cost sharing for preventive care regardless of income and established sufficiently high premiums for higher-income families to prevent the program from crowding out private coverage.

One component of All Kids also implemented a “primary care case management for all children enrolled in Medicaid and SCHIP,” ensuring that children had access to immunizations and regular checkups. In fact, an August 2007 Kaiser Foundation report observed that financing for the All Kids expansion came largely from from projected savings from the new primary care component and a disease management (DM) program. “Combined, the PCCM and DM are estimated to save $57 million each year, which would cover the first-year costs of the All Kids program, estimated at $25 million,” Kaiser reported.

Building on this program, “the governor proposed the comprehensive Illinois Covered plan to extend coverage to the state’s 1.4 million uninsured adults.” After the funding mechanism for the proposal (a gross receipt’s tax) “came up against opposition from the legislature, the governor scaled back the reform measures” and attempted to use his “administrative powers to add more people to the state’s FamilyCare insurance program.”

Although the governor’s expansion of FamilyCare was thrown out in court, “the state has enacted two helpful health care initiatives” expanding the All Kids health insurance program to 19-and 20-year-olds and requiring hospitals “to offer discounts to uninsured Illinoisans” below a certain percentage of the poverty line.

As progressives prepare to push for universally available, affordable, quality health care, it is worth examining the nature of the opposition to the last major push for health care reform in 1994.

A new memo from the Center for American Progress Action Fund catalogs and analyzes the tactics of the 1994 opposition, in anticipation that those individuals and organizations opposed to reform will employ many of the same methods this time around.

Read the full memo here.

In 1994, the opposition to reform generally used three tactics:

Fear-mongering: Conservatives of all stripes argued that health care reform would “limit freedom” and was “creeping socialism” or “big government.”

Denial: Members of Congress and activists opposed to reform denied that there was a health care crisis or argued that it was the wrong time to address health care.

Pushing false reforms: Industry and special-interest groups opposed to reform co-opted the term “reform” to push their own agendas and dilute support for a comprehensive solution to the nation’s health care crisis.

Today, the opposition is using these tactics already:

Read more

A coalition of health providers — AHIP, American Hospital Association, BlueCross BlueShield Association, Premera — released a new report today arguing that “annual health care spending for an average family of four is $1,788 higher that it would be if Medicare, Medicaid and private employers paid hospitals and physicians similar rates, with total provider reimbursement unchanged.”

In short, Medicare and Medicaid don’t pay enough for services, causing private insurers providers to shift the uncompensated costs to private premiums private payers. The cost shift from public to private payers is $88.8 billion, or 15% of the current amount spent by commercial payers on hospitals and physician services, they argue:

Rather directly advocating for a $90 billion government infusion to close the gap, the groups suggested that the government should subsidize the shortfall and implement pay-for-performance reforms and comparative effectiveness research in any comprehensive health care reform effort. “Tomorrow’s system has to be more economical,” Karen Ignagni — the CEO of AHIP — explained.

Point well taken. While Medicare and Medicaid underpay for some services, one-third of all health care spending — $700 billion — is spent on tests and treatments that do nothing to improve health outcomes. Cost-containment measures like comparative effectiveness research and coordinated care should help reduce wasteful spending, lower costs and improve quality.

But more importantly, the report can be interpreted as an industry effort to influence the forthcoming health care reform. While AHIP has agreed to offer insurance to every American, if everyone were required to purchase coverage, the group is trying to stave-off competition from a new Medicare-like program, which would force private insurers to compete with a more efficient public model and eat into profits.

As Ezra Klein found during his interview with AHIP, insurers oppose any such competition:

Ezra: And let me ask you about another thing that you often see in here. A lot of folks argue that one way to bring costs down would be to inject competition through a public insurance option. How would AHIP respond on that?

AHIP: We do not support that type of approach. You know, our members provide a variety of coverage options to meet the individual needs of consumers. And we think that that approach, 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. So we think that we need to get everybody in the healthcare system and that we can do that by building on what’s currently working in our system.

As Richard Umbdenstock, the President and CEO of the American Hospital Association pointed out during the press conference, the report’s backers support reform but “if it’s through a new government program that underpays, it would exacerbate the problem, that would not be good.” Expect some opponents of comprehensive reform to argue that providing a new public option or expanding Medicaid and Medicare would force doctors out of business and limit patient choice.

On Saturday, in his weekly radio address to the nation, President-elect Barack Obama proposed modernizing the health care system by investing in “cutting edge technology and electronic medical records“:

In addition to connecting our libraries and schools to the internet, we must also ensure that our hospitals are connected to each other through the internet. That is why the economic recovery plan I’m proposing will help modernize our health care system – and that won’t just save jobs, it will save lives. We will make sure that every doctor’s office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year.

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

A fragmented health care system, “difficult-to-demonstrate HIT return on investment, and first-mover disadvantage” help explain why the market has failed to deliver HIT and underscore the importance of Obama’s leadership on the issue. For instance, while insurance companies, to a greater extent than providers, “could benefit from reduced costs in moving from a paper-based system to electronic health records,” the costs of implementation are far higher for providers. An analysis by the Center for Information Technology Leadership (CITL) found that “while providers are footing the bill for HIT, they may experience only 11 percent of the potential gain. Other stakeholders, payers principally among them, may reap 89 percent of the gain.”

Until gains are distributed a little more equally, medical providers will resist adopting HIT. Fortunately, the federal government, along with several state governments, have begun investing heavily in HIT systems. The Veterans Affairs Administration’s successful VISTA system “has had a profound influence on the quality and efficiency of clinical care and data management in the nation’s veterans hospitals.”

Meanwhile, in Pennsylvania, Gov. Ed Rendell (D-PA) has established the Pennsylvania Health Information Exchange Governance Structure to develop and manage a statewide electronic health record system. Gov. David Paterson (D-NY) announced in 2008 that his state awarded $105 million in grants for the development of health information technology and Gov. Janet Napolitano (D-AZ) signed an executive order in May 2008 directing state agencies to work with the Arizona E-Health Connection to promote the expansion of e-prescribing.

Still, the greatest HIT innovations may belong to the Taiwanese. As T.R. Reid reported in his ‘Sick Around The Word‘ documentary, “Taiwan designed its new health system using state-of-the-art information technology”:

Everybody here has to have a smart card like this to go to the doctor. The doc puts it in a reader, and the patient’s history, medications, et cetera, all show up on the screen. And then the bill goes directly to the government insurance office and is paid automatically.

As a result, Taiwan has the lowest administrative costs in world, less than 2 percent. In the United States, administrative costs eat up 22 percent of health care spending.

Today, in an interview with ThinkProgress, Gov. Jon Corzine (D-NJ) argued that if Americans displayed a “sense of urgency about health care, we could get to an answer on providing universal access to affordable health care to all citizens”:

Recent events where we have been able to marshall resources for what we describe as a financial crisis, among our financial institutions, and we have been able to pull together $700 billion to spend in a given point in time, with literally trillions of dollars in back-up and loan guarantees and other things tell me that if we had the same sense of urgency about health care, we could get to an answer on providing universal access to affordable health care to all citizens.

Watch it:

Corizne is no stranger to health care reform. In July, the Governor signed a bill “mandating health-are coverage for all New Jersey’s children and expanding the state’s FamilyCare program to cover an additional 25,000 lower-income adults within a year.”

Corzine admitted that a comprehensive overhaul of the nation’s health care system would require “funding” but predicted that “in the long-run it actually may save us money, because if we get people out of the emergency rooms, we’ll stop financing charity care and start financing health care.”

“We’ve shown in the last several months that if America feels challenged by a crisis, it can come up with the money,” Corzine added.

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Speaking at a forum in Denver yesterday, incoming Health and Human Services Secretary Tom Daschle stressed the importance of moving quickly on health care reform. “The economy is going to be directly related to our capacity and our ability to reform the healthcare system in the months ahead,” Daschle explained.

After identifying the problems plaguing the system — rising costs, poor access to care, billions of dollars in unnecessary spending, lack of transparency — Daschle identified “the status quo” as “the most costly option of all” and promised to begin a “successful process” that “will ultimately bring us to a conclusive and successful effort in the not too distant future to bring meaningful health reform to people all over this country“:

And I believe that in a sense it’s really like our federal aviation system. Our job in government is to get everybody from here to there safely. You can fly coach, business or first class, but we want to make sure however you fly you get there safely. The same can be said for healthcare.

Echoing President elect Barack Obama’s campaign health care plan, Daschle envisioned a private-public partnership that lowers costs, guarantees access to affordable care, improves quality, “shift it away from sickness and on to wellness,” and invests in health infrastructure. “If you like what you have, you ought to be able to keep it. But if not we ought to pool the resources of those who aren’t in a system they like and offer them the same plan of options that members of congress have,” Daschle explained.

The former senator underscored the incoming administration’s grassroots approach to health care reform, promising to “reach out in as many ways as we possibly can…with full transparency.”

If you wish submit your own view as to what you consider “to be the biggest problem facing our healthcare system today,” click here.

If Rip Van Winkle fell asleep during the last major effort to reform the health care system and woke up today, he wouldn’t be able to gauge how long he’d been out. While he slept, opponents of comprehensive health care reform reloaded their gun, but they loaded the clip with the same bullets.

During the early 1990s, the Heritage Foundation issued a series of primers characterizing Clinton’s reforms as a “top down, 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.” A simple copy-paste job fourteen years later and Heritage is now warning that a national health board and a new public health plan — as proposed by Baucus, Obama, and Daschle — would “cancel private coverage and care“:

A new public agency–variously described as an institute, board, or council–that would make key recommendations regarding the kinds of medical technologies, treatments, drugs, and procedures that would be officially deemed “effective” …would constitute an unprecedented level of government regulation and control over the delivery of health care….The creation of a new public plan would result in millions of Americans losing their employment-based coverage coupled with a massive expansion of government coverage and financial control.

The Federal Health Board, designed to set “evidence-based standards for benefits and quality for federal programs,” would, in fact, establish independent “control over the delivery of health care.” But this reform would result in less government control, not more. Congress’ role would be limited. In the same way that it doesn’t regulate monetary policy (that’s up to the Federal Reserve) or flight safety (that authority is vested in the FAA), Congress would task health care decisions to a broad spectrum of health-care participants who would “make decisions informed by expertise and experience, much of it private sector experience.” “We would try to streamline the tremendous bureaucracy that exists today… if you think our banking system today is reasonably regulated, why not try the same type of model for our health-care system?” asks the incoming Health and Human Services Secretary.

Heritage’s claim that allowing private companies to compete with a new public program would choke private insurers, raises its own questions. The Foundation claims that “genuine market competition is not envisioned in any of these proposals” since “the government would not only be a participant in the competition but would also be setting the rules for the competition”:

With the government plan, taxpayers would presumably absorb all of the risks, losses, and liabilities of such an enterprise, while private health plans would absorb their own risks, losses, and liabilities. Consequently, from the beginning, such a competition could not possibly be fair in any meaningful sense.

Currently, insurer and hospital markets are increasingly dominated by large insurers and provider systems. These private insurers do not use their market power to “drive hard bargains with providers” and have no need to bargain with providers.

Introducing an efficient public option would force private plans to offer better services through higher levels of efficiency and force the public plan to maintain reasonable physician and hospital reimbursement rates (otherwise enrollees would exit to private plans.) Even if private plans charged higher premiums, most would still survive because they are typically more responsive to consumer demands for choice. As Linda Blumberg, a Principal Research Associate at the Urban Institute, explains, “some people are going to be very willing to pay more money to stay in a private plan if they perceive that plan as being higher quality, giving them a boarder network or richer benefit packages.”

Still, Heritage’s concern about fair competition is duly noted. The playing field has to be leveled. Baucus has explained that under his plan, the “public option must offer benefits similar to private plans in the Exchange.” Others have proposed a “two-fold structure” within which a public insurance plan “would be offered in the mix of competitive options and then there would be some kind of oversight board that would be in charge of overseeing that competition that would be separate from it.”