Today, the Senate HELP committee held confirmation hearings for Gov. Kathleen Sebelius (D-KS) to head the Department of Health and Human Services. Sebelius sparred with Sen. John McCain (R-AZ) — who proposed the administration adopt his hackneyed campaign health care plan — and pushed back against Republican concerns that comparative effectiveness research would tie doctors’ hands:

Watch a compilation:

Sebelius stressed that as insurance commissioner in Kansas, she fought private insurer efforts to ration care:

I can’t tell you that I’m not concerned, ultimately, not with comparative effectiveness research but ultimately reaching a point where in order to control costs there is some effort to ration health care. I frankly, as insurance commissioner where I served for eight years saw it on a regular basis by private insures, who often made decisions overruling suggestions that doctors would make for their patients that they weren’t going to be covered. And a lot of what we did in the office of the Kansas Insurance Department was to go to bat for those patients to make sure that the benefits they had actually paid for were ones that were delivered.

Six months ago, a diverse group of stakeholders — Families USA, NFIB, Business Roundable, America’s Health Insurance Plans, PhRMA, among others — began holding a series of Health Reform Dialogues to, as they put it, “create a forum outside of the political arena for exchanging views on tough policy issues.”

Last week, the group released a document spelling out “a number of policy approaches where they reached consensus” and pledged to work with lawmakers and each other to support the enactment of comprehensive reform this year.

The group called for expanding income eligibility levels for Medicaid, providing tax credits for more affordable coverage, improving prevention and care coordination and ensuring that “all Americans purchase or otherwise obtain health insurance.” But the strange-bedfellow coalition skirted some of the more controversial issues of health reform such as “whether a government-run health plan should be available to compete with private companies” or whether the government should require employers to offer coverage.

Two labor unions abandoned the coalition after the group couldn’t agree on a public option and one participant in the conversation said the group’s recommendations were “[a] day late and a dollar short.”

Yesterday, in a wide ranging discussion about health care reform, ThinkProgress asked Families USA President and CEO Ron Pollack to respond to critics who question the value of broad-based coalitions:

I don’t think this is designed to say, ‘Hey, you gave this, you gave that.’ What is at the heart of the process is to try to figure out where is there common ground that is clearly going to be part of the debate.…in the process, it I think we found that unlike past debates where you didn’t even have these conversations and you couldn’t even identify where you actually agreed, that there was this assumption one group was totally for good stuff, or another group is totally in favor of bad stuff, and there’s nothing in between. If the ultimate question is where did I hammer [AHIP President and CEO] Karen Ignagni over the head and get her to yell, ‘I give up! I give up!’ that’s not what happened.

Watch it:

Pollack argued that the group’s pledge to expand access to coverage by subsidizing coverage for poor Americans and expanding access to Medicaid could cover up-to 90 percent of the uninsured, and pushed back against critics who argue that the group’s recommendations are a boon to insurance industry profits. “I think having AHIP engage in a way that is designed to enable insurance market reform to take place in a way that fits their business model, but yet helps people who are currently shut out of the healtchare system — I think that’s a step in the right direction,” Pollack explained.

Pollack predicted an 80% success rate and suggested that the major stakeholders would not oppose the whole of health care reform (but may run ads criticizing certain aspects of the proposal). Ultimately, everyone will have to come to the table to achieve bipartisan reform, Pollack said. “The first attempt will be made to try to do this in a bipartisan fashion. But it takes two to tango. And we saw with the economic recovery legislation, we didn’t have two folks tangoing. You had one doing a tango and the other doing a break-dance, and so that didn’t quite work,” Pollack explained.

Betsy McCaughey is back. This time, she has stuffed the entire stimulus bill into a large white binder– a sort of fundamentalist bible McCaughey uses to misinterpret the intentions of the legislation. McCaughey is still preaching that the stimulus bill contains provisions that “provide less care” and tie doctors hands in prescribing procedures — but this time, she’s added to her sermon.

In her new comeback tour of Fox News Channel programming, McCaughey regurgitates insurance-industry arguments against the public plan option and argues that the government will import Canadian-style rationing into the American health system. Short: We will all end up like Natasha Richardson:

- On public option: “The public plan will pay doctors and hospitals below market rates, as Medicaid and Medicare currently do, and doctors and hospitals will have to shift those costs to the private health plans, including the one you get at work, and therefore those premiums in the private sector will go up to unaffordable levels.”

- Cost benefit killed Richardson: HOST: So she’s lying there, they have a CT scanner – and it’s my understanding that we don’t know ether or not they used it. But there’s no doubt that what you’re talking about, this cost-benefit analysis, went into that decision. McCAUGHEY: Exactly.

- Critical choice for Americans: The really critical issues here for all Americans is to think twice about whether they want to lower their healthcare costs if it will mean that they don’t get the care they need to live.

Watch a video compilation:

McCaughey’s connection between Canadian single payer health care and Richarson’s death is unclear. McCaughey quotes Dr. Saba, an emergency room doctor at Lachine Hospital, as saying that the hospital had to conduct a cost-benefit analysis before performing a CT scan. It’s unknown if a scan was performed, but McCaughey certainly misquotes the doctor. He discusses cost benefit in the context of deploying a medical rapid response unit — “You have to do a cost-benefit analysis,” Saba said. “It takes time to get the helicopter’s medical team assembled, get the helicopter to the location of the patient, pack in the patient and fly the helicopter to Montreal” — not a life-saving test. In fact, while the United States is generally better equipped to handle medical emergencies, we consider similar factors before dispatching a medical unit.

In fact, any health care system operates on criteria that are based on general characteristics, not individual patients. A fever of 101 degrees triggers a different medical response than a fever of 98 degrees. Similarly, a hospital won’t dispatch a helicopter for someone who broke his leg, but would send a rapid response unit if paramedics believed that the patient sustained internal injuries. In 2005, a study concluded that “60 people have have died in 84 air ambulance crashes since 2000 — “more than double the number of crashes during the previous five years.” The report cited “a 2002 study in The Journal of Trauma that found helicopters were used “excessively” for patients who weren’t severely injured.”

In Canada, publicly financed health insurance plans provide universal coverage to the entire population “while constraining spending and largely protecting the clinical autonomy of physicians.” Canada has lower overall costs, administrative efficiency, and higher satisfaction rates, but it is not without it’s problems. McCoughey’s modus operandi is to distort certain inefficiencies — like longer waiting lines for specialty procedures — and suggest that American reformers would simply copy-and-paste the system.

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Gov. Howard Dean (D-VT) has argued that you can’t reform the health care system without forcing private insurers to compete with a new public option. “If we only get community rating and guaranteed issue that’s great insurance reform, but that is not health care reform and nobody should mistake it,” Dean explained.

But Senate Finance Committee Chairman Max Baucus has recently indicated that the public plan is just a bargaining chip to “encourage the private health insurance industry to move in the direction it knows it should move toward—namely, health insurance reform, which means eliminating pre-existing conditions, guaranteed issue, modified community rating.”

Today, during an event at the Center for American Progress Action Fund, ThinkProgress caught up with Baucus and asked the senator if Dean was wrong in insisting that a public health plan is essential to achieving a more efficient health care system:

Let’s see what we come up with. I think we can accomplish the objective [Dean] wants without [a public plan]. We can, we’re going to have to work on it. But we may have to have it, [Dean] may be right. Just don’t know yet.

Watch it:

Dean believes that the public plan would improve system efficiency and quality, but Baucus is more interested in using the program as a political tool to bring insurers to the table and keep single payer advocates at the table. The public, however, supports the public option. According to a poll by Lake Research, “73% of voters want everyone to have a choice of private health insurance or a public health insurance plan while only 15% want everyone to have private insurance.”

Conservatives For Patients Rights, the Swift Boat Health Attack Group funded by disgraced Columbia/HCA Healthcare CEO Richard Scott, is out with a new ad attacking Congress for financing health care reform in the budget:

Isn’t it amazing? Folks in Congress were shocked the plan they passed allowed those huge bonuses for AIG. Now some in Congress want to raise taxes and spend $634 billion dollars for the President’s healthcare overhaul without even seeing all the details of his plan. They just never seem to learn. Call Congress today. Tell them not to raise taxes to spend billions messing with your health care without knowing what they’re buying first.

Watch it:

The ad misunderstands the legislative process. The ad attacks Congress for spending money without “seeing all of the details of [Obama's] plan.” But Obama doesn’t write legislation; Congress does. Obama has laid out his priorities for health care reform and has shared his principles with Congressional leaders and the different stakeholders. Moreover, the budget is not the place for policy specifics; it provides a framework for Congress to pay for reform. The Budget will allocate an unspecified amount to a health care reserve fund, allowing Congressional committees of jurisdiction to develop specific bipartisan reform legislation. Anything Congress produces must be — in accordance with Budget Committee instructions — fully paid for within 10 years.

Of course, if detailing the plan could stop the attacks, then Scott would simply click the ‘Plans’ tab on his own group’s website and download Obama’s proposal or Sen. Max Baucus’ (D-MT) 98-page vision for reform.

But the details of the plan won’t matter. The Right will continue to box Obama’s proposal (which actually incorporates the values of competition and choice) into a familiar big-government narrative or attempt to confuse health reform with a Wall Street culture of greed. The goal here is to echo the same message of attack (over and over again) and hope it sticks. Define Obama’s proposal before he can define it himself.

AHIP’s President and CEO Karen Ignagni (pronounced ig-NAH-nee) walks a tight rope when discussing the government’s role in the health care system. While rejecting direct competition between public and private insurance plans, Ignagni argues that the government should subsidize the industry’s insurance product (she calls it making health care “affordable”), provide coverage for the the poorest and sickest Americans, and require everyone to purchase insurance:

For government, then, as we think about responsibilities, our responsibility to get everybody in, to sustain coverage, to do it affordably, government, to begin to step in, require personal responsibility, but at the same time provide this helping hand or provide this assistance for people who are going to need help.

Watch it:

The government, Ignagni argues, should serve as a “helping hand” and provide peace of mind — but only so far as it benefits insurer interests. For instance, Ignagni and AHIP endorse a government-public hybrid health care system on one hand, but reject direct private/public competition on the other. Private insurers should have the exclusive right of insuring Americans under 65, because giving Americans a choice between a private and public plan would drive private insurers out of business, Ignagni argues.

But the stance is grounded in opportunism, not principle. While Ignagni is trying to keep a viable public program from entering the under 65 market, she strongly lobbied to increase the role of private insurers in Medicare — and argued that public-private competition in the over 65 market would increase patient choice. (Note that she did not ask for fair competition. Private plans participating in Medicare Advantage receive a 13-17 percent government subsidy). Here is Ignagni defending the subsidy:

- Are we going to maintain choices [in Medicare] in all markets or reduce or eliminate and the particular thing I would like to leave you with, I will be talking about the history in a moment. [Kaiser Foundation, 7/16/2007]

- But if you have the goal of maintaining choices in all the areas and if you have monopoly systems that refuse to contract with the health plans, if you are going to achieve that goal of maintaining choices in all areas, you have very few choices and that is also why private fee for service was developed. [Kaiser Foundation, 7/16/2007]

In short, Ignagni wants to play in the government’s sand-box but is desperately trying to keep the under-65 playpen all to herself.

Transcript: Read more

On March 6, 2009, the Obama administration announced that it will move to “rescind a controversial rule — adopted in final hours of the Bush administration — that allows health-care workers to deny abortion counseling or other family-planning services if doing so would violate their moral beliefs.”

During the comment period, health care professionals argued that the regulation could “effectively allow health care providers’ personal beliefs to override patients’ right to full disclosure of accurate information” and hundreds of thousands of concerned citizens saw the rule as a backdoor effort to restrict access to contraceptives.

In fact, the regulation allows doctors, nurses and virtually anyone else in the health care system to withhold relevant information from patients and deny access to sterilization contraception, fertility treatments, end of life care, and a host of other health care services

When Bush adopted the rule, he ignored the 200,000 comments that had been submitted in opposition to his proposal. Now, as the Obama administration prepares to rescind the rule, the public has another opportunity to voice its opposition to Bush’s overreaching regulation.

Submit electronic comments by clicking here or emailing proposedrescission@hhs.gov by April 9, 2009.

This morning, MSNBC’s Norah O’Donnell questioned Budget Committee Chairman Kent Conrad (D-ND) about his decision not to commit a specific amount to the health care reserve fund in the budget. “What kind of commitment is it then, that you don’t even put a number in the budget? Are you committed to health care reform and how will you pay for it,” O’Donnell asked:

What we have provided for is a healthcare reserve fund, one that we worked out very carefully with the administration, with the committees of jurisdiction. What it provides is the full flexibility to the committees of jurisdiction to write the legislation. We did not prejudge how much it would cost. We did say whatever they come up with has to be paid for, which is exactly what the administration said. Remember, the administration was providing for a down payment. They themselves did not know how much the initial cost would be. So we took note of that. We said look, we’re going to provide flexibility to the committees as to how they design healthcare reform, but, whatever they do, is going to have to be paid for. And the administration endorsed that

Watch it:

Conrad is arguing that by freeing the health care reserve fund from a specific dollar amount, he’s giving Congress more flexibility to fund comprehensive health care reform — so long as that investment is revenue neutral. And in fact, taking health care out of the main budget and placing it into a freestanding fund could make it easier for the investments to pay for themselves in a 10 year period. But some suspect that Conrad does not want to take responsibility for financing health care reform and may have given Republicans an opening to organize against a large investment.

Transcript: Read more

Today, Budget Committee Chairman Kent Conrad (D-ND) released his mark-up of President Obama’s budget. Conrad left space for Obama’s health care reform fund, but did not commit to a specific dollar amount. In doing so, he freed health care from the 5-year budget window and gave Congress free reign to invest an unspecified amount in reforming the health care system — so long as that investment is revenue neutral over 10 years.

Ezra Klein and Jonathan Cohn are reporting that some Democrats are interpreting Conrad’s decision as an opportunity for Congress to exert more control over the process and finance health reform sooner:

- Ezra Klein: “But one Senate staffer I talked to was almost gleeful about this change. ‘Remember The Godfather,” he said, “when Sonny Corleone shows up at the tollbooth? That’s been our experience. As soon as you put something specific on the table by itself you get the Sonny Corleone treatment. You get riddled with bullets. Interest groups rush out saying you cant do this to us. The only way we can ever get through the interest group craziness is if everybody gets to see the whole of the bill and decide if they’re on or off the total proposal.”

- Jonathan Cohn: “It was important that Obama put a number on his reserve fund, these people say, because his interest in making health care a priority was in doubt. That’s not the case in Congress, where the leadership has made clear its intention to move forward and the key committee chairmen have been hard at work on a comprehensive package that will, if fully implemented, eventually insure everybody while introducing changes that will ultimately make medical care less expensive. By leaving the reserve fund undefined, these sources say, congressional budgetmakers actually leave more congressional reform architects flexibility.

Indeed, Conrad’s decision to score health care reform in a 10-year budget window buys more time for “initial investments in system reform” to “pay themselves off.” A five-year budget window would have made health reform impossible. Similarly, by dismissing Obama’s revenue sources, Conrad gives Congress more flexibility to identify a broader set of off-sets and savings in order to finance reform.

But the senator’s decision to place a big undefined X on the face of the health care reserve fund also burdens Congressional reformers. Had Conrad allocated Obama’s $634 billion (or any other amount) — which the CBO found to be revenue neutral — the Congressional committees with jurisdiction over health care would have had to spend $634 billion (over 10 years) on reform. We would have been half the way there. But by allocating an undefined amount, Conrad is rolling the die: theoretically, Congress could now spend more than $634 billion on health care — provided that it can pay for all of it — but it could also end up spending less, a lot less.

So if Obama’s initial allocation provided the comfort of commitment (in other words, we won’t have everything but at least we’ll have something), Conrad’s approach not only passes the buck on financing health care reform, but it may also ultimately jeopardize the effort.

The Wonk Room’s Peter Harbage has released a paper detailing how a public health plan could compete with private insurers on a level playing field.

The paper is an effort to define the public option and push back against the growing chorus of Republican and industry critics who, without seeing draft legislation or plan specifics, have taken to characterizing the public option as a government take-over of health care.

ThinkProgress sat down with Harbage to discuss how policy makers could design a public option that addresses industry concerns of crowd out and allies providers’ fears that a government-sponsored health insurance plan would underpay doctors:

In order to stimulate the kind of competition that we’re really looking for in the public plan, it’s important to have a government entity that really does compete on a level playing field, where you’re looking at the individual market, you’re bringing in the fair payment rates, the timely adequate payment rates, that providers need in order to participate in a public plan. To be effective, and to have a network where there are going to be providers that enrollees want to use, you need a situation where the payments are going to be timely, and adequate, and efficient.

Watch it:

“If providers were sure that the public health insurance plan in Public Plan Choice would make timely adequate payments absent the paperwork gimmicks (such as pre-authorization) used by insurers today, and without undue coercion to participate, then Public Plan Choice could be seen as a major benefit to health care providers,” Harbage writes in the report.

Read Peter’s full report here.

Transcript: Read more

Yesterday, America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association formally announced that the insurance industry would be willing to charge every American the same price for health insurance coverage in the individual insurance market if the government protected its market monopoly, required all Americans to purchase their insurance product and held off on the new public health option:

Specifically, by enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe that we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market. While we support transitioning to a reformed system in which health-status-based rating is no longer used, rating flexibility based on age, geography, family size, and benefit design is needed to maintain affordability.

You’ll recall that one of the main criticisms of Sen. John McCain’s (R-AZ) health care plan was that it shifted too many Americans into the unregulated individual insurance market, where higher risk patients — women, older Americans, those with pre-existing conditions — could be charged unsustainable premiums. In December, AHIP promised to reform the market by providing everyone with coverage if everyone was required to purchase insurance, and has since argued that it supports the President’s vision for health care reform.

The media has happily amplified their message. Today, the New York Times, USA Today and the Washington Post framed AHIP’s announcement as an unprecedented concession — the industry coming to the table in good faith to reform the health care system and save the American worker from skyrocketing health care costs:

- “Tuesday’s proposal marked one of the first concrete steps forward in the process.” [USA TODAY, 3/25/2009]

- “Tuesday’s proposal, included in a letter to Senate leaders by the industry’s two main trade groups, is the latest move by health insurers to position themselves as constructive participants, rather than obstacles, in the debate over how to overhaul the U.S. health-care system.” [WSJ, 3/25/2009]

- “The industry’s flexible position on the issue came as a surprise to lawmakers, and could make it easier to reach an agreement in Congress because it narrows the issues on which insurers are ready to fight the Democrats who control Congress and the White House.” [NYT, 3/24/2009]

But it’s unclear what exactly AHIP is conceding. For one, the industry made very similar “concessions” in December of 1992, promising to “provide the standard package ‘regardless of a person’s medical history‘” and work with the government to “stabilize health-care prices” if everyone was required to purchase insurance. This latest proposal is, for the most part, just a regurgitation of past efforts — proposals the industry rejected once the administration proposed an actual plan.

And, this time, AHIP has nothing to lose. They’re asking the government to protect and even increase its monopoly over providing insurance to Americans under 65 and to strengthen safety net programs that would siphon off the poorest (read: sickest) Americans.

In turn, insurers will charge their new clientele the same rate. But the industry did not rule out charging different rates “according to age, geography, family size and plan design.” That means that a person in a wealthier area (who is generally healthier) could be charged a lower price than someone from the inner city (and in poorer health). Ignagni likes to argue that the stakeholders must show “leadership” in the health care reform debate; she doesn’t often discuss the financial sacrifices the insurance industry is willing to adopt to bring about reform.

Opponents of health reform argue that progressive proposals would require everyone to purchase Cadillac health insurance plans and drive-up the costs of insurance. As health care crisis denier Sally Pipes pronounced during a recent Congressional hearing, “because a young man of 30 wants to get a high deductible plan, Why should he pay $12 to $15 thousand to cover my in vitro fertilization?”

Well, as the New America Foundation’s Len Nichols explained during today’s HELP committee hearing, Pipe’s in vitro fertilization (which only 13 states cover) — or other so-called benefit mandates — has little impact on the price of health care coverage:

Benefit mandates don’t really add that much to costs, the serious econometric work that is in my profession suggests three to five percent, the CBO has concluded that. The state of Texas’ Department of Insurance, not a noted left-wing organization, concluded 3 percent in the state of Texas…The reason those econometric studies find that there is very little specific next impact of specific benefit mandates because they compare the small group hubs, where those things are relevant to the large group hubs. The large group hubs are uniformly more generous,and yet they have lower costs. So let’s ask ourselves, how do they do that?

Watch it:

Indeed, according to state experiences and an exhaustive study by the Congressional Budget Office, “eliminating some of the most expensive mandates — maternity, mental health, and preventive care for children — would bring” only a small reduction to health care premiums. The CBO report found that “the impact in the small group market is no more than five percent of premiums” while California’s Health Benefit Review Program “determined that eliminating all 44 of California’s mandates would reduce premiums by no more than 4.8 percent.”

“The point is this,” Nichols says, “how we pay for and manage care is far more important than the benefits that are covered.” Large employers are able to use their buying power to offer more substantive coverage and bargain for better rates. Conservatives, however, misdiagnose the cause of rising health care costs and typically propose breaking-up large purchasing pools and pushing individuals into bare bone policies on the individual market.

As Nichols explains, to lower health care costs, we need to move in the opposite direction and “extend that bargaining power and that information, that utilization potential to all of us, not just some of us.”

Transcript: Read more

When the uninsured cannot pay for the care they receive, providers shift costs to Americans with insurance in the form of higher premiums. A 2005 analysis by Families USA concluded that “in 2005, premium costs for family health insurance coverage provided by private employers will include an extra $922 in premiums due to the cost of care for the uninsured.”

Today, an updated analysis by Ben Furnas and Peter Harbage concludes that a failure to continuously cover all Americans accounts “for roughly 8 percent of the average health insurance premium“:

This cost-shift amounts to $1,100 per average family premium in 2009 and $410 per average individual premium. By 2013, assuming the cost shift remains the same percentage of premium costs, the cost shift will be approximately $480 for an individual policy and $1,300 for a family policy.

So in other words, the uninsured matter to the insured, and the latter would be well served to eliminate the former. Read the full report here.

The POLITICO reports that Republicans are turning their backs on Obama’s public health plan proposal:

Sen. Ron Wyden (D-Ore.), who has filed the only health care reform bill with Republican cosponsors, said he spoke with 85 senators as he developed his proposal over the last few years—and found no GOP support for a plan that included a government option. “From a raw political standpoint, having talked to a lot of senators, I wouldn’t have any Republicans on the Healthy Americans Act as cosponsors if we had a public option,” Wyden told POLITICO this week.

Gloomy news, but certainly not a death sentence. Part of the problem is that nobody has spent much time sketching out the details for how to foster fair private/public competition. Republicans have hijacked the concept and confused it with socialist medicine, and progressives are only now starting to push back against their rhetoric.

For instance, the New America Foundation’s Elizabeth Carpenter explained to me that Len Nichol’s recent ‘A Modest Proposal For A Competing Public Health Plan‘ “was really designed to turn the debate from “the public plan is socialism” to a more substantive conversation about how to design the public plan.” Other papers are also in the pipeline. (Next Monday, CAPAF will release a new paper by Peter Harbage titled, Public Plan Choice.)

It’s also worth noting that while Republicans have already slammed the book on the public option, the public supports the idea. A new poll released today by Lake Research found that a whopping 73% of voters “want everyone to have a choice of private health insurance or a public health insurance plan while only 15% want everyone to have private insurance.”

A small group of Democratic lawmakers who agree with the President’s domestic policies, but refuse to finance his budgetary priorities — health care reform, cap and trade, education. Budget Committee heavyweights like Sens. Kent Conrad (D-ND) and Bill Nelson (D-FL), for instance, want to dig the nation out of the economic recession with comprehensive health care reform with old shovels.

Today, when Fox News anchor Bill Hemmer asked Nelson, “what concessions would you push for in that budget proposal,” Nelson pointed to health care:

NELSON: So you have to finagle with the numbers. You want to keep on the three main themes of the president – which is the environment, health, and education – but how we’re going to pull this off, it’s going to take Merlin the Magician. Kent Conrad, our chair of the budget committee, is definitely going to have to be Merlin.

HEMMER: I didn’t hear a firm answer on there. What concessions would you push for in that budget proposal?

NELSON: Well, you’re going to have to redo healthcare so that some of its upfront costs are less, so that you bring down the cost over the 10-year period.

Watch it:

Not quite sure what Nelson is getting at. Invest less in reforming the health care system and you’ll realize greater savings down the road? On the contrary, most experts believe that we’ll have to invest as much as $1.5 trillion to really bend the curve on health care spending and save $3 trillion by 2020.

But what’s most troubling is how quickly one places health care reform on the chopping block. Deficits too high? Cut health care reform! Judd Gregg mouths off about deficits bankrupting the country? Cut health care reform! This answer is completely counter-factual. Perhaps it’s political or the vestige of Bush-era thinking. Either way, Democrats on the Budget Committee shouldn’t rely on “magic” to solve the economic crisis and they shouldn’t have have too much trouble making the case for investing heavily in health care reform to save the economy.

No matter how hard Conrad works his magic, he won’t address the real structural problems so long as Democrats only rhetorically support the initiative. As President Obama recently pointed out, “To those who say we have to choose between health care reform and fiscal discipline, I say that making investments now that will dramatically lower health care costs for everyone won’t add to our budget deficit in the long term; it is one of the best ways to reduce it.”

Transcript: Read more

Len Nichols’ “modest proposal” for a competing public health plan requires the public plan to play by the same rules as private insurers. Operating within a new framework, both plans would offer standard benefit packages, “guaranteed issue, guaranteed renewal, no pre-existing condition exclusions, modified community rating, risk adjustment.”

The public plan would also adhere to the following conditions of fair competition: it would have to be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would have to adhere to the same rules regarding reserve funds.

Today, during a conference call with reporters, the Heritage Foundation’s Stuart Butler — a vocal critic of the public option — agreed with Nichols’ framework in theory, but argued that government would rig the system in practice:

The design features are correct, this theoretical model of what you would have to do … but what I’m very skeptical if one sees this on a number of states whether one sees the federal government giving up control of public plan or whether they will just feel the impulse to manipulate it. I just can’t imagine [Rep. Pete] Stark and [Rep. Henry] Waxman and others giving up the option of giving up that plan. … I think they will start relaxing requirements on the public plan… maybe you don’t have to finance yourself completely like private plans do.. We’ll just start rewriting the rules there…They will start relaxing them, in the public interest.

“In my view, the right answer is to push or require the private sector on the state level to come up with some arrangement through private plans which is the functional equivalent of the public plan model,” Butler explained on the call.

But Butler’s argument — let the marketplace handle it — kind of misses the point of the public option. The marketplace has contributed to skyrocketing premiums and huge cost-shifts to families through higher deductibles and copayments. It’s what needs reforming. In fact, even if the private market somehow self-designs a framework of regulation, it would likely not lower costs as quickly as public/private completion.

This is because the whole point of allowing a public plan option to compete with private insurers is that if you reform the way Medicare and the public option reimburses for services (move away from fee-for-service and towards bundled payment, primary care, and care coordination) and if those programs become more efficient, the private insurers — who are now competing directly with the new public plan — would also have to adopt more efficient payment practices.

By using the public plan as a vehicle for reforming the private insurance market, you can dramatically lower health care costs. My fear isn’t that the government won’t be able to keep its hands off the public plan; I fear that without a public plan we won’t be able to lower our skyrocketing health care costs and address the economic crisis.

When MSNBC broke the news that the CBO is projecting a $1.8 trillion deficit for 2009, the very first question daytime anchor Tamron Hall asked Washington Post columnist Steven Pearlstein was: will Obama have to scale back his plans to reform the health care system?

HALL: They were talking about what hard decisions the President will have to make in his first term, if he’s obviously not elected to a second one. He wants to tackle health care, he was at that town hall, talking about his bold agenda. Will he have to soon start to perhaps give Americans the tough love that maybe it won’t all be done now?

Watch it:

Pearlstein pushed back the conventional wisdom and pointed out that the best way to get deficits under control is to slow down “the key driver of those long-term deficits,” skyrocketing health care costs.

In fact, according to the CBO report, the president’s $634 billion health care fund is entirely revenue neutral:

Therefore, the President’s budget—and CBO in its analysis of the budget—shows no net effect on either revenues or outlays from this set of proposals (that is, revenue reductions related to health care reform are assumed to offset the revenue gains from changing the rate applied to itemized deductions, and outlays for health care reform are assumed to equal the outlay savings from the proposed policy changes).

So to make sure everyone is on the same page we should just call the health care bill what it actually is: a deficit reduction act.

After encouraging AIG executives to commit suicide, but before endorsing the conservative smear campaign against comparative effectiveness research, Sen. Chuck Grassley (R-IA) indicated that he might compromise with advocates of a new public health plan:

GRASSLEY: At this point, everything is on the table. And you don’t negotiate when everything is not on the table even if there’s something that is on the table, that if it’s on the table at the end you don’t have a deal. So everything’s got to be on the table if you’re negotiating in good faith. But then let me speak to the substance of it because I think this is the most important aspect…you have a government plan and eventually it crowds out it says 118 million people. When you crowd out 118 million people, you want to have a private health insurance choice for people because we promised it to them. It becomes so expensive for the small pool thats left that eventually you end up with a single payer.

Watch it:

Several weeks ago, when Sen. Mitch McConnell (R-KY) wrote a letter to President Obama effectively taking the public option off the table, Grassley signed on. If he’s willing to compromise on the President’s proposal, then a competing public health plan would have to play by the same rules as private insurers.

So how would this competition actually work? Well, rather than allowing the new public plan to pay Medicare rates or use Medicare’s clout to bargain for lower costs, a politically viable proposal to promote competition between private health plans and a public health insurance option, will probably look something like what the New America Foundation has proposed.

As Elizabeth Carpenter explained it to me, “what makes the public plan ‘public’ in Len and John’s paper is that it would be operated by politically appointed managers and owned by the government who would also bear the insurance risk, not the private sector. The managers would be evaluated by patient satisfaction, not profits, and the people running the plan would have no incentive to stint on patient care in favor of the bottom line.”

In other words, public and private payers compete on a completely level playing field and follow all of the rules of the marketplace.The public plan would be actuarially sound, would not leverage Medicare to force providers to participate or use Medicare payment rates, and would have to adhere to the same rules regarding reserve funds. Patients who are weary of private providers would likely enroll in the public option.

Costs would be lowered through competition and system-wide reform. “The framework utilizes Medicare as a catalyst to inject value into our health system, but the overall approach to controlling costs is systematic and does not leverage Medicare’s buying power,” Carpenter writes.

The idea is this: if you reform the way Medicare and the public option reimburses for services (move away from fee-for-service and towards bundled payment, primary care, and care coordination) and if those programs become more efficient, the private insurers — who are now competing directly with the new public plan — would also have to adopt more efficient payment practices.

Budget Committee Chairman Kent Conrad (D-ND), who has recently questioned the wisdom of investing more money into the health care system, is now warning the administration that he may confine the budget resolution to five years instead of ten:

“I’m expecting significant change. It is going to require adjustments,” Conrad said after seeing some of the preliminary numbers. “I think all of us have a very good sense that they will be more adverse.” Unlike Obama, who presented a 10-year spending plan, the chairman said he will confine his resolution to just five. Conrad said he made this decision because of the uncertainty of long-range forecasts, but the end result of narrowing the window is significant in itself.

Narrowing the budget window will be unhelpful towards enacting for health care reform. The administration has consistently argued that bending the curve on unsustainable health care spending requires an upfront investment in prevention, health information technology, comparative effectiveness research, and expanding access to the uninsured. Confining the budget resolution to just five years wouldn’t capture the long-term return on the investment and could jeopardize the effort.

During recent Congressional testimony, OMB director Peter Orszag estimated that “health care reform should be deficit neutral even over the medium term [5 to 10 years]” and predicted that “savings will build over time.” Indeed, according to a Commonwealth Fund analysis, an integrated approach to health care reform “could slow the growth in national health spending by a cumulative $3 trillion through 2020, compared with current projections.” The three trillion accrues from incremental savings each year. By 2020, the percent of GDP spent on health care would lower to 18.4 percent from the projected 20.8 percent.

The Blue Dogs have endorsed Obama’s 10-year health allocation, while PhRMA, SEIU, the U.S. Chamber of Commerce, AARP, Aetna, AFL-CIO, and AHIP have all signed-on to a letter urging Congress to suspend pay-go rules when considering health care reform:

While the cost savings from improving the efficiency and quality of health care will be significant, many of the anticipated savings will be realized in the long term, and may thus not be evident in a ten year budget window…Requiring spending or revenue offsets for the entire cost of health reform within a ten year budget window, as required under a traditional pay-as-you-go rule, will significantly reduce the likelihood of enacting legislation to achieve essential reforms for long-term savings.

As Conrad himself has argued, “if we as a society fail to control health care costs, there will be a detrimental effect on our nation’s economy and standard of living.” Obama has allocated $634 billion to begin the process of reforming the system, but comprehensive reform could require as much as $1.5 trillion, a drop in the bucket compared to the projected costs of health care (estimated to reach $5.2 trillion by 2020).

Lester Feder caught up with Sen. Charles Grassley (R-IA) and asked him what he thought of the right-wing’s orchestrated smear campaign against comparative effectiveness research and electronic medical records.

Grassley, a moderate Republican voice who supports both cost-containment measures, encouraged the effort:

I think they ought to hype them right now because people’s attention needs to be brought to it, and that’s the only way you’re going to get their attention. When the dust settles, they won’t have a leg to stand on and we will have and we will have a study and a tool that will be useful for doctors to use but not to dictate medicine.

During the Kaiser Family Foundation event, Grassley also reiterated his opposition for a new public plan, and suggested that insurers should be allowed to sell policies across state lines.