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Change.gov: The Obama-Biden Health Care Reform Proposal

MedSave Admin | December 7, 2008

As a writer covering health care issues for more than two decades, I hardly expected to be surprised by the Obama plan for health care reform. But the first "official" proposed agenda from the Office of the President Elect is nothing less than shocking. It is disturbing not so much for what it contains but rather for what it does not address. In fairness to Obama and his team, the proposed agenda is a working piece, intended to be developed with additional input from many sources. With that in mind, here are my comments. The agenda is reproduced below in its entirety in standard text with my commentary in italics:

The Obama-Biden Plan
On health care reform, the American people are too often offered two extremes -- government-run health care with higher taxes or letting the insurance companies operate without rules. Barack Obama and Joe Biden believe both of these extremes are wrong, and that's why they've proposed a plan that strengthens employer coverage (differentiating from the Republican-style plan for individual-based coverage), makes insurance companies accountable (this sounds good but we don't know specificly what this means and can not tie it as an intended result of any specific part of the proposal) and ensures patient choice of doctor and care without government interference (no resistance here; freedom of choice is a cornerstone of the American way of life).

The opening paragraph provides a clear start but not without controversy. It establishes the intent to retain employer-provided group coverage that many (including this writer) believe is fundamentally the wrong direction. It also dashes the hopes of the growing minority of Americans who want a European-style nationalized universal coverage.

The Obama-Biden plan provides affordable, accessible health care for all Americans, builds on the existing health care system, and uses existing providers, doctors, and plans. Under the Obama-Biden plan, patients will be able to make health care decisions with their doctors, instead of being blocked by insurance company bureaucrats. (Of course; noting noteworthy here).

Under the plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year. If you don't have health insurance, you will have a choice of new, affordable health insurance options.

This is exciting! We've heard it before in the campaign and now really look forward to reading how the savings will be achieved.

Make Health Insurance Work for People and Businesses -- Not Just Insurance and Drug Companies.
OK; so we immediately jump to addressing health insurance reform and not health care reform. There is nothing inherently wrong with this agenda priority but let's be clear on the distinction. Reform of health care is entirely different than reform of health insurance and there are significant indications that access to health insurance does not ensure an adequate level of health care. Effective reform must address both issues.

  • Require insurance companies to cover pre-existing conditions so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums.
Everyone, especially the health insurance companies, thinks guaranteed insurablity is a great idea. This proposal is actually cornerstone of the America's Health Insurance Plans (AHIP) recently released plan for reform. After all, insurance companies make money by collecting insurance premiums, not by refusing them. But we need to be very clear that this measure will have two immediate and direct effects: 1) It will significantly increase the cost of insurance (just look at the astronomical rates for individual insurance in New Jersey where this provision is already in force), and 2) shifts much the financial burden of cost for the currently uninsured from the public to the private sector.

Nothing in this plan is related to stability of health insurance premiums. Health care inflation is entirely omitted from this proposal.

  • Create a new Small Business Health Tax Credit to help small businesses provide affordable health insurance to their employees.
Tax credits are a "tried and true" approach to modifying financial business behavior. But a majority of small business owners today do not see employees as the valuable asset as we would ideally prefer. Instead, they increasingly see employees as a replacable expense and are not easily moved to change thier habits. We would have to see this proposal work in order to beleive it.

  • Lower costs for businesses by covering (i.e. shifting to the public sector) a portion of the catastrophic health costs they pay in return for lower premiums for employees (in other words businsses would buy less insurance for a lower price).
This proposes shifting some catastrophic health care costs from the private insurance sector to some public taxpayer-supported sector. This would be a re-insurance umbrella for health insurance companies. Spreading risk over a larger population is a popular and proven risk management technique. But there is no reason to believe that this would help save on overall health care costs.

  • Prevent insurers from overcharging doctors for their malpractice insurance and invest in proven strategies to reduce preventable medical errors (as if natural market forces are not already pushing the health are industry to do everything possible to prevent these tragic and costly errors).
This is simply not realistic. The primary component of malpractice insurance cost is claim payout, not insurance company markups! If we want to address malpractice insurance cost then we must address the real issue - high claim awards. Making insurers the scape goat is not a real answer. Was this portion written by the ABA? Where is the statement about reforming jury awards? Additional legislation to address malpractice insurance pricing might drive down the price by 10% at most. This is not the type of reform that Americans are seeking. Americans want a leader with the fortitude to stand up to the bar association and reduce malpractice awards. Nothing less will work.

  • Make employer contributions more fair by requiring large employers that do not offer coverage or make a meaningful contribution to the cost of quality health coverage for their employees to contribute a percentage of payroll toward the costs of their employees' health care.
States like CA have already tackled this issue in ballot initiatives so we may feel confident predicting that this is no big deal and will have no significant effect. First of all, almost large insurers do offer health insurance. Secondly, it is the employees, rather than the employer who controls the decision to "opt-out" of the cost of employer provided coveragve. The recently adopted Wal-mart employee health plan is a perfect example; it certainly has not shaken up the health care market or dramatically affected the health care of its employees There is no reason to believe hat more of the same will make any difference - especially at the large employer level.

In contrast, if such a proposal were made for small employers it would be seen as revolutionary - and also controversial. But we do not see this type of dramatic and meaningful change tackled in this section or any other portion of the Obama plan.

  • Establish a National Health Insurance Exchange (presumes a shift of control of health insurance from the state to federal level - no easy feat!) with a range of private insurance options as well as a new public plan based on benefits available to members of Congress that will allow individuals and small businesses to buy affordable health coverage.
What is affordable about the congressional health insurance plan? Most people who do not have health insurance could not come up with cash to pay for this type of coverage, even if it were required by law. But the kicker is that Obama is not proposing that coverage be required. Instead this proposal seems to say that if we make insurance attractively priced then more people will buy it. Research results published by the government within the past year indicate that this is not the case. Obama's plan directly contradicts the findings of the National Institute of Health Care Management. (See "Covering the Uninsured - 2008 Update").

  • Ensure everyone who needs it will receive a tax credit for their premiums.
This is a yawn to the rougly80% of Americans who already directly or indirectly receive tax breaks for our health insurance premiums. Most of the other 20% do not have health insurance or do not pay taxes, so he point is mute. The small number of us (around 4%) who pay for health insurance with after tax money will certainly appreciate this provision.
Reduce Costs and Save a Typical American Family up to $2,500 as reforms phase in:
(We are still waiting for the cost reducing portion of the proposal).

  • Lower drug costs by allowing the importation (at least it does not say "reimportation"; the concept used by state governments that makes a mockery of our federal drug control laws) of safe medicines from other developed countries (assuming other countries make drugs cheaper than the U.S.), increasing the use of generic drugs in public programs (just like commercial health plans have been doing for years as a function of natural market forces), and taking on drug companies that block cheaper generic medicines from the market (presumes that drug companies' efforts to protect patents and profit margins is in opposition to the national interest. Nothing wrong with this conclusion, but let's be clear on the socialistic nature of this proposal).
  • Require hospitals to collect and report health care cost and quality data.
  • Reduce the costs of catastrophic illnesses for employers and their employees. (Is this the same as the cost-shifting proposal above? We can't tell).
  • Reform the insurance market to increase competition by taking on anticompetitive activity that drives up prices without improving quality of care.
  • "Anti-competitive activity"? Insurers are blamed for many woes but this is a new one. Googling "anti-competitive activity of health insurance companies" provides no insight outside of campaign talks. Perhaps the entire national press just overlooked this serious economic problem. If it is real then let's get some real examples on the table so we can see the problem. Until the president elect fills us in on what he means by this term, we will conclude that this is just leftover campaign rhetoric.
The Obama-Biden plan will promote public health. It will require coverage of preventive services, including cancer screenings, (This is commonly known as expanding health insurance mandates - a concept currently out of favor in state governments after it has proven to significantly raise health insurance costs in all 50 states) and increase state and local preparedness for terrorist attacks and natural disasters.

A Commitment to Fiscal Responsibility: Barack Obama will pay for his $50 - $65 billion health care reform effort by rolling back the Bush tax cuts for Americans earning more than $250,000 per year and retaining the estate tax at its 2009 level.

Is this the end? Where is the part about me saving $2,500? Did I miss it?

To summarize, this plan outlines six distinct and specific proposals for reform of health insurance law:

1) cover pre-existing conditions

2) shift catastrophic medical claims cost to government

3) regulate malpractice insurance

4) shift control of health insurance from states to federal government

5) establish a national insurance exchange

6) expand mandated coverage

There are two specific proposals for tax and/or labor law reform:

1) create a tax credit for health insurance premiums

2) require large employers to pay for part of employees' health insurance

It also proposes to:

1) modify drug control laws

2) modify medical data collection and reporting

We are not opposed to any of these ideas but rather skeptical that the measures will have significant effect. The shocking part is what the proposal does not contain. There is very little in Obama's plan that addresses reduction of health care costs and no mention of health care inflation. The plan does not address the delivery of health care which is generally viewed as the most direct way to control health care costs. The proposal does not address improvement in medical outcomes (i.e. what we get for our money) nor any other change in the health care delivery system itself. Most surprising, there is no mention of mandated coverage for children - an often-repeated campaign promise.

Perhaps the most significant omission in this plan is that the proposal does not even attempt to address the long term goal of universal coverage. We see required health insurance as the most economically sound and politically "doable" reform idea. It is not clear why the new administration avoids his issue. Polls show that public support is growing for universal coverage. The insurance industry no longer opposes the measure (as they did when Hillary Clinton tried to reform our national health care system years ago). Recent data from Massachusetts and other countries that require health insurance indicate that this does make a difference in overall health care costs.

We believe that when Americans will be disappointed when they realize the limited scope of the Obama agenda.

Health Care | Change.gov: The Obama-Biden Transition Team

Tags : health care reform, affordable health insurance, presidential health care reform, obama reform proposal

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