The Health Care Blog: No Country for Old Men

A good friend of mine, Jeff Goldsmith writes:

“It is possible that, for the second time in fifteen years, divisions inside the Democratic Party might doom health reform. President Obama will need all his skills and persuasive powers to save his Congressional party from itself. Rather than wasting scarce political capital on the public plan, health reformers need to focus on hospital and primary care physician payment reform, expanding Medicare coverage for the almost 11 million uninsured boomers and sensible design of a federal health insurance exchange. It isn’t going to take a miracle to get this important public task done, just focus and discipline…

In a 25 June New York Times Op-ed piece,  Alain Enthoven, a health policy veteran, argued persuasively that the ability to set health insurance market groundrules through a national health insurance exchange already hands the government sufficient power to curb private health costs, as well as to make covering the newly insured more affordable. This power, properly employed, makes the public plan completely unnecessary.

Enthoven is exactly right.   He proposed merely setting the maximum amount of tax-free pass through of health insurance premium costs to employers and employees at the amount of the least expensive exchange offering (a familiar remedy for those who have followed his work). People who want more expensive plans will be free to pay for them with after-tax dollars.    Since the exchange will also constrain underwriting practices and set minimum benefit levels, meet that price challenge by marketing only to the healthy or offering a stripped benefit will not be possible.

While health insurers and providers and the commentariat are engrossed in the contentious public plan debate, attention has been distracted from the crucial decisions regarding the shape of the federal regulatory regime embodied in the health insurance exchange.  This exchange will have immense power.  Health plans which do not adhere to its rules will be unable to serve their customers through the exchange and be locked out of access to a large fraction of their current market, as well as to the newly covered.

The exchange’s rules will likely include underwriting standards that limit pre-existing conditions exclusions, recissions of coverage, requirements of guaranteed issue, limits on the mark-ups for older and more costly patients, as well, crucially, the minimum benefit package and cost sharing provisions plans must meet.

These latter issues – benefits package and cost sharing- are both highly political and extremely important, as an excessively generous benefits package (containing ever-popular service mandates for chiropractic care, in vitro fertilization,  acupuncture, you name it) or elimination of high-deductible plans (another thing that happened in Massachusetts) could markedly increase employer costs, as well as the federal subsidies required to permit employers to participate.”

The Health Care Blog: No Country for Old Men