Weekly Newsletter: March 16, 2009
No Level Playing Field with Government-Run Health Care
Last week’s House Energy and Commerce subcommittee hearing on health reform yielded an important revelation from Congressional Budget Office Director Doug Elmendorf. Responding to a question from Rep. Jan Schakowsky, the new CBO head stated that “designing a system in which a public plan could compete on a level playing field is extremely difficult.” He specifically cited the federal government’s power to dictate provider reimbursement rates in programs like Medicare as evidence that a government-run plan could undercut any private health insurer’s costs.
Director Elmendorf’s testimony squares with other independent studies, which have found that cost-shifting from government-run to private health insurance plans would significantly undercut existing insurance coverage. For instance, actuaries at the Lewin Group, when analyzing President Obama’s campaign proposal to establish a nationalized health insurance plan, found that up to 118 million individuals—nearly 6 of every 10 Americans with private health coverage—would lose access to their current health insurance if a government-run plan were established, and that more than 130 million individuals would enroll in the nationalized insurance plan. When analyzing a similar proposal from the liberal Commonwealth Fund, the Lewin Group also found that the transition away from employer-sponsored coverage would be far from voluntary; the report projects hundreds of billions in savings for employers, largely “resulting from the shift of employers to the public plan”—in other words, businesses who currently offer coverage “dumping” their insurance plans and placing their employees on the government-run program.
Based on these data, some Members may be concerned by the implications of creating a nationalized health insurance option, particularly the dislocation of existing workers who may well be satisfied with their current coverage. Members may also be concerned about the budgetary implications of creating such an expansive new entitlement—particularly given Medicare’s nearly $86 trillion in unfunded obligations—and whether this new government program would exercise controls on patient care as the sole means available to slow the growth of costs.
Members may instead support less radical alternatives to the nationalized insurance plan that would focus more on expanding access to care for individuals of limited means. Providing incentives for low-income individuals to afford coverage, expanding choices for individuals to purchase the plan that best meets their needs, and promoting healthy behaviors would all serve to expand access while slowing the growth of health care costs—alternatives that Members may prefer to a massive new government plan that could harm those happy with their current health insurance options.
What the MedPAC Report Doesn’t Examine
On Tuesday, the Medicare Payment Advisory Commission (MedPAC) will testify on its annual recommendations regarding Medicare payment policy. An expected point of contention will be MedPAC’s support of “financial neutrality” between traditional Medicare and Medicare Advantage (MA) plans. However, while the MedPAC report discusses the need for competition between traditional Medicare and MA plans, some Members may believe the Commission’s recommendations focus primarily on squeezing MA plans financially, while doing nothing to address traditional Medicare’s inherent biases:
- The Commission does not propose to modify traditional Medicare’s built-in monopoly under current law, whereby seniors are automatically enrolled in traditional Medicare unless they choose otherwise—even if a more efficient and affordable MA plan exists.
- The Commission does not propose that supplemental benefits offered to low-income seniors should be able to “wrap-around” an MA plan offering—to obtain those extra benefits, seniors must enroll in the government-run plan.
- The Commission does not disclose how much more the federal government will pay—and seniors could pay—for prescription drug coverage if MA plans drop out of Medicare, as low bids by MA plans offering pharmaceutical coverage have helped result in total Part D spending much lower than projected.
Given MedPAC’s consistent focus on cutting MA plan payments—while ignoring the issues addressed above—some Members may question whether the Commission is examining comprehensive solutions for Medicare reform in an unbiased, non-partisan manner. Some Members may also view the double standards set by the MedPAC Commissioners as further evidence to oppose a nationalized health plan, because supporters of government-run health insurance will never create a truly level playing field for MA plans to compete against government-run Medicare.