Speaker Nancy Pelosi (D-CA) has scheduled a press conference tomorrow morning at 10am to release the final House health care bill with hopes of voting on the legislation sometime next week. According to early reports, the bill will cost approximately $900 billion/10 years, include a national public option that will reimburse providers at negotiated rates, cover 36 million Americans (6-7 million more than the Senate Finance version) and “be paid for, in part, with a 5.4 percent surtax imposed on those with incomes over $500,000 for individuals, $1 million for families.”

But while media attention has focused on these top line compromises, behind the scenes, some observers are concerned that an impasse over abortion funding could derail the entire reform effort. Yesterday, during an appearance on Washington Journal, Rep. Bart Stupak (D-MI) said said he is “considering teaming up with Republicans to block House health reform legislation (HR 3200) unless Democratic leaders allow a floor vote on an amendment that would add new restrictions on the use of federal funding for health plans that cover abortion with private dollars”:

STUPAK: I still gets down to, under HR 3200 — the house bill, the one I am most familiar with — there is these affordability credits. In other words you’ll get a refund if you will from the federal government to help pay for this tax, to help pay for this health care. So, what we’re saying is, if you are receiving an affordability credit, tax payer subsidies, you cannot buy a plan that has abortion coverage in it and we just can’t get by that. They once said, “no no,” if you get a subsidy from the federal government you should be allowed to buy abortion coverage with that subsidy. And that’s where we can’t go. It’s called the Hyde Amendment — no public funding for abortion. It’s been the law since 1976. If you wanna do health care that’s one thing but let’s not be changing the law on abortion coverage.” [...]

Somewhere in this process we have to have an opportunity to vote our conscious, in other words we have to have a vote or we’re gonna try and take down the rule. If we do not have the vote most members of the forty will not vote for the bill.

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But Stupak is misrepresenting the House legislation and the existing federal restrictions on abortion funding. Currently, the House bill contains what’s called the Capps Amendment — a compromise that maintains Hyde Amendment restrictions. The arrangement protects Hyde by specifying that subsidy dollars could only be used to abort pregnancies that threaten the life of mother or result from rape or incest (Hyde allows for this). Other kinds of abortions would have to be funded with private premiums. The provision also requires that at least one plan in each market area offer abortion services and one plan not. No abortion services—even those allowed by the Hyde Amendment — can be mandated as part of a minimum benefits package.

Stupak and his allies want to go beyond Hyde. They’re arguing that the current firewall between public and private money is inadequate. If a woman uses federal subsidies to pay for a basic benefit, she would have more private money available to fund her abortion, they claim. Or, alternatively, “premiums paid to that plan in the form of taxpayer-funded subsidies help support that abortion coverage even if individual abortion procedures are paid for out of a separate pool of privately-paid premium dollars.” Sen. Orrin Hatch (R-UT) proposed a similar amendment, during the Senate Finance Committee’s mark-up, leading Sen. Debbie Stabenow (D-MI) to say, “with all respect to my friend, as a woman, I find it offensive.” Stabenow stressed that further restrictions on abortion funding would drastically change existing law and levy an undue burden on women who seek access to abortion services. Under Hatch’s amendment, women who purchase comprehensive private insurance packages — that include abortion services — would have to pay for the entire cost of the package (even if they qualify for subsidies).

As Pelosi prepares to unveil the bill, “leadership aides admit that they still need to find compromise wording on abortion but are confident the issue will be resolved by the time the bill gets to the floor.” Reps. Tim Ryan (D-OH), Mike Doyle (D-PA), Rosa DeLauro (D-CT) and Lois Capps (D-CA) are hoping to find a compromise before the measure comes to a vote, but conservatives are already organizing around the Stupak provisions.

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This afternoon, Sen. Joe Lieberman (I-CT) appeared on Fox News to defend his intention to filibuster any health care reform bill that includes a national public option. Lieberman argued that a public plan would “stifle” the economic recovery and increase “the debt.” “It’s just unnecessary,” Lieberman said. The public option is “a new entitlement program and the tax payers and the premium payers are going to end up paying for it, or else the debt will go higher.”

Responding to proponents of the public plan who argue that it would actually lower costs, Lieberman insisted that if the public option paid lower reimbursement rates than private insurers, medical providers would shift costs to Americans with private coverage:

If the public option, the government run health insurance company negotiates hard to lower the reimbursement — the money it’s paying to hospitals, doctors — they’re [providers] going to have to get that money somewhere. And where they’re going to get it is from the 200 million Americans who today have private health insurance. Premiums will go up. It’s exactly what’s happened with Medicare and Medicaid….When people hear public option, I think they think it’s for free. It’s not for free. Somebody is going to have to pay for it and you can bet it’s going to be the taxpayers and the people who pay health insurance premiums now.

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Contrary to Lieberman’s claims, the public option envisioned by Majority Leader Harry Reid (D-NV) would be required to compete on a level playing field with private insurers and charge premiums “in an amount sufficient to cover expected costs.” Instead of stifling the “economic recovery” and increasing “the debt,” the Congressional Budget Office concluded that the self-sustaining public option (similar to the one envisioned by Reid) could actually save the government money and slightly lower premiums.

Like Lieberman, America’s Health Insurance Plans (AHIP) — the insurance industry’s lobby — and the Business Roundtable have also argued that a public option that reimburses providers at lower rates than private payers would force providers to raise costs for Americans with private coverage in order to make-up the difference. MedPAC, the Congressional Budget Office, and numerous actuarial studies dispute the insurers’ claims.

The problem is, these critics confuse cost shifts with price differentials. Economists point out that “price differentials are not necessarily the recouping of losses from one payer by overcharging another”; providers often “charge different prices to different market segments” to maximize profits, not to shift costs. In fact, MedPAC has concluded that “hospitals that are forced to run efficiently are adequately funded by Medicare payments. That is, Medicare payments are sufficient to cover costs but some hospitals run inefficiently and make it appear otherwise.” Therefore, increasing Medicare payments to hospitals would not reduce rates providers charge to private insurers. The research suggests that hospitals “are raising prices when they have the market power to do so,” not because they are reimbursed at Medicare rates. As the Congressional Budget Office points out, periods of increased competition between providers have “led to a limited amount of cost shifting and also encouraged hospitals to adopt cost-containment measures.”

During the Senate Finance Committee’s mark-up, Sen. John Kerry (D-MA) introduced an amendment that would have allowed the state based insurance exchanges to act as prudent purchasers on behalf of consumers. Kerry eventually withdrew his amendment, but his idea has already been implemented in Massachusetts, where the Commonwealth Care — which offers subsidized coverage to those who qualify — engages in prudent, selective purchasing of insurance. The Care exchange negotiates with plans for lower bids, encourages “plans to form select networks, and exclude plans that do not offer good value and cost-effectiveness.”

Yesterday, the Wonk Room sat down with Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority, and asked him to explain how the Massachusetts exchange lowers costs.

“You have to be selective in the plans that you offer,” Kingsdale said, and suggested that the exchange can choose plans that deliver quality care even more efficiently than a national public health insurance option. The Finance Committee’s bill “really sets up an exchange as what I call an automated yellow pages.” “Literally, any insurance plan that is licensed and meets some basic sort of specifications of benefits would be offered, and yet none of the administrative savings of actually centralizing enrollment, billing, collection etcetera, would actually be achieved through the Exchange.” “It is virtually an automated yellow pages, which is virtually useless,” Kingsdale sad.

We estimate that we’ve done about 6 percent reduction in premiums and saved about $140 million a year on subsidized care for about 180,000 people. Because we’ve been able to a) be aggressive in selecting and setting rules for health plans and b) set up an Exchange that translates the various costliness of their networks into a price that the consumer understands. The consumer doesn’t understand the price of a visit or the price of a procedure, or the price of an x-ray and can’t shop on that basis, but can shop annually for a premium, or monthly. And the trick with the Exchange is to translate the generators of cost and value and quality into a package called a health plan from which consumers have a choice and they have both funding but they are the price differences. And so with that program, we’ve been able to do it and have substantial impact.

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Kingsdale implied that the Senate Finance Committee should limit consumer choice within the exchanges. Focus groups conducted by the Massachusetts Connector revealed that consumers felt that too much choice was “confusing” and “overwhelming.” “Participants expressed a desire a for manageable numbers of plans (e.g. three to four) offered by four to six carriers. In addition, consumers expressed difficulty making plan comparisons under the existing model.” “Instead, consumers preferred for information to be presented in a simple and standardized format that clearly distinguished between different benefit design options.”

The current structure of the exchanges in the Finance Committee represents “the lowest common denominator that will have the least political opposition. But since cost containment always involves political opposition, it will have the least impact on cost,” he said. “Senator Kerry’s amendment would change that into an exchange that would certify health plans as good value, would rank them, and pass the price differences on.”

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