Today, The Blue Dog Coalition — a group of fiscal conservative Democrats — “indicated it could accept a public health insurance plan but only if it is used as a fallback option in the face of inadequate competition and cost containment by private insurers.” In a statement, the coalition established certain conditions under which it would be willing to accept a public plan:

- The plan would not disrupt the ability of families to keep their health care coverage and see their doctor

- Medicare payment rates should not be used as the basis for reimbursement

- The public health care option would be financially stable, and that it be employed only in the absence of adequate competition and cost containment

At quick glance, the plan resembles Sen. Chuck Schumer’s (D-NY) public plan framework. But the Blue Dogs are saying that if private insurers fail to lower the growth of health care spending, then the government would allow a public plan to compete with private insurers. Their public plan would look something like this: 1) it would be self-sustaining, 2) would not accept tax revenue or appropriations from the government, 3) would pay doctors and hospitals more than what Medicare pays, 4) establish a reserve fund, and 5) provide the same minimum benefits as private insurers. (For more on how the actual trigger would work, click here.)

Most progressive reformers would certainly argue that this kind of structure does not go far enough. That is, if one of the purposes of health care reform is to lower health care costs, then we should allow the public option to use Medicare leverage to negotiate lower rates with providers. In other words, every plan should use its inherent advantage (the public plan would rely on its lower administrative costs and bargaining ability, private insurers would use their provider networks and greater responsiveness to consumer demand) to provide applicants with the highest value services at the lowest possible prices. After all, if the public plan is forced to pay prevailing market rates and act like a private insurance plan, then why have it?

Moreover, Ezra Klein points out here, and I argued here, this is precisely the kind of competition that is (should be) at the heart of the Blue Dog’s conservative fiscal values. As Klein explains, “The idea here is that the public plan will adopt effective reforms that will then lower its costs and improve its quality. In response, the private market will follow suit”:

But this deal won’t be around forever. The public plan is an effort to institute reforms through a market mechanism. But if it fails, and the health industry doesn’t manage to bend the cost curve on its own, it’s fairly likely that it will end up on the business end of some serious new regulations. And at the point that costs become a crisis, those regulations will need to work fast. That means they’ll be implemented in the government’s way, not the market’s way.”

Our guest blogger is Josh Rosenthal, Special Assistant to the External Affairs Department at the Center for American Progress Action Fund.

On Tuesday, Sen. Max Baucus (D-MT) reiterated his support for taxing employer-sponsored health benefits as a means for financing health care reform. Currently, any health insurance that an employer provides to employees, their spouses, and their children is exempt from income and payroll taxes. Sen. Baucus is proposing to limit that exemption, based on the value of the benefits, income level, or a combination of the two, while not getting rid of it entirely.

But more than 210,000 people are already being fully taxed on their employer-sponsored health insurance benefits. Why? If you adopt employer health benefits for a domestic partner or adult child, those benefits are fully taxed as income. In fact, since the Defense of Marriage Act prevents the federal government from recognizing same-sex marriages, many married couples in Massachusetts, California, Iowa, and other states still have to pay full federal taxes on the health insurance for their spouses.

According to a 2007 study by CAP and the Williams Institute, employees with partners are paying an average of $1,069 every year in taxes on their health benefits, with their employers chipping in a total of $57 million each year.

These extra costs are discouraging employers, and especially small businesses from offering domestic partner benefits. And in today’s difficult economy, having to pay an extra thousand dollars can discourage employees from covering their partners.

In order to fix this problem, Rep. Jim McDermott (D-WA), Rep. Ileana Ros-Lehtinen (R-FL), and Sen. Chuck Schumer (D-NY) introduced the Tax Equity for Health Plan Beneficiaries Act (S. 1153/H.R. 2625), which would treat all health benefits provided by an employer equally, whether extended to a domestic partner or a spouse.

The tax exclusion of employer-sponsored insurance is an important element of the American health care system. However Congress decides to reform the exclusion, it should include tax equity provisions, so the exclusion applies equally to all families.

In today’s New York Times, Peter Bach proposes solving the problem of care over utilization by allowing doctors to bid for Medicare business. Over utilization of expensive procedures and treatments is a concern to many health researchers — who worry that we spend billions on untested or unnecessary medical procedures — and is a major hurdle to containing health care costs.

Bach, who argues that “when there are too many doctors in one area, too much money gets spent on health care,” solves this problem by proposing that the government establish “competition for doctors in oversupplied regions“:

Here is how it would work. Later this year, the agency would set a 2010 target number for each type of specialist in an oversupplied region. Then it would offer to sign up those doctors at a certain payment rate. The starting rate would be, say, $30 per doctor work unit. (Work units are a measurement that Medicare uses to set its rates; each procedure is assigned a specific number of work units.) This is lower than the $36 per work unit that Medicare pays all doctors today. If too few specialists signed up, the rate would go up, and it would keep rising until there were enough doctors for the area. In areas where there are too few doctors, Medicare could pay more than $36 per work unit, attracting not only specialists but also the primary-care doctors who are so needed in these places.

Bach notes that he “anticipate[s] a few objections to this plan” but he may be understating the concerns of some health care researchers. Allowing providers to bid for Medicare business may lead more doctors to opt out of Medicare and jeopardize patients’ care continuity. Medicare has always prided itself on maximizing patient choice — accepting all doctors — and providing stable coverage to every eligible American. Unlike private insurers, Medicare does not enter and exit different markets; it offers a reliable source of coverage that contracts with any provider who is willing to accept its reimbursement rates.

Preserving choice while addressing over utilization and market saturation is possible. In fact, the best way to reduce unnecessary or ineffective treatments is not by uprooting doctors but by incentivzing all providers to adopt best practices and instituting payment reform. This means changing the health care reimbursement system so that we pay for value, not volume, investing in comparative effectiveness research, and rewarding medical students who enter primary care residency programs.

In an update to their landmark 2001 study on medical bankruptcy, researchers at Harvard University have concluded that medical debt contributed to 62 percent of U.S. personal bankruptcies in 2007 — 78 percent of bankruptcy filers burdened by healthcare expenses had health insurance but “still were overwhelmed by their medical debt“:

For 92% of the medically bankrupt, high medical bills directly contributed to their bankruptcy. Many families with continuous coverage found themselves under-insured, responsible for thousands of dollars in out-of-pocket costs. Others had private coverage but lost it when they became too sick to work. Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year. Income loss due to illness also was common, but nearly always coupled with high medical bills.

“The proportion of all bankruptcies attributable to medical problems has increased by 50%” since 2001, and is likely to grow even higher once the economic climate of 2008 is considered. Nationally, the percentage of Americans “under the age of 65 with employer sponsored insurance declined to less than 63 percent in 2007, from more than 67 percent in 1999,” and employers are now reporting that they plan to shift more health costs to employees.

Earlier this week, a new study published in Health Affairs concluded that “the 161 million Americans with employer-sponsored health insurance are facing substantial increases in out-of-pocket (OOP) costs.” In 2007, “adults with employer coverage faced an average of $729 annually in OOP costs for medical services,” a “34 percent increase from 2004. In fact, between 2000 and 2006, premiums for family coverage grew 6.4 times more quickly than workers’ earnings and average worker’s share of family health insurance premiums nearly doubled from 2000 to 2007.

All this is to say that health care reform isn’t just about extending insurance to the uninsured — it’s also about shoring up inadequate coverage. In other words, personal financial security requires health care reform — affordable, adequate, accessible coverage for all Americans. Health reformers must assure Americans with insurance that reform will secure their access to coverage and protect Americans and their families from a medical or financial catastrophe. After all, this study demonstrates that too many insured Americans are just one illness away from bankruptcy.

[READ THE FULL REPORT HERE.]