Disagreements Over Federal Investment Could Be Obstacle to Health Reform

Spiraling costs and continued lack of access to quality health care have resulted in broad agreement among congressional leaders that action is needed to overhaul the delivery of health care in the United States. Critical fault lines have begun to emerge, however, suggesting where that effort could stall.

Although no specific plans for health care reform have been introduced by either President-elect Barack Obama or leading members of Congress, several proposals have been offered as guideposts for the debate. Included in these general plans are some items that have drawn criticism from Republicans and some health care advocates.

Among the most controversial proposals is a plan to include a new government-backed insurance program that would compete directly with existing private insurance plans.

A report that outlines such a public plan is being touted by some Democratic lawmakers as essential to controlling health care costs and improving the quality of care. That plan, as outlined in a report by the Institute for America's Future and the University of California Berkeley School of Law's Center on Health, Economic and Family Security, would create a public health insurance plan like Medicare to compete with private health plans and could produce $1 trillion in national savings over 10 years by driving down costs, improving efficiencies, and fostering innovation.

Overall health care savings, according to Hacker, would come from private plans cutting costs to compete with a public plan that has lower per-enrollee spending. The basis for the argument includes previous research he cited that found Medicare spending per enrollee between 1997 and 2006 grew 4.6 percent a year, while the average private insurance spending per person grew 7.3 percent annually.

“If the private plans are really as efficient and effective as they say they are then they shouldn't be worried about competing with a public plan,” said Jacob Hacker, a University of California at Berkeley professor and author of the report, during a December 2008 telephone press conference.

Such an approach has been supported by Obama and Tom Daschle, his nominee to be secretary of Health and Human Services, and some leading Democratic lawmakers.

That proposal appears a lot less benign to critics, including insurers, who are concerned that federal regulators will create rules to favor a public plan over any private option. The long-term consequences of such an unbalanced competition could be a flight from private plans to a cheaper public-insurance option resulting in a de facto single-payer system, according to critics.

Chuck Clapton, health policy director for Republicans on the Senate Health, Education, Labor and Pensions (HELP) Committee, said existing public plans like Medicaid impose price controls and shift costs to purchasers, which shows that true market-based competition is not possible with such public plans.

“Inherently it's an uneven playing field,” Clapton said, during a December 2008 policy briefing in Washington,D.C.

Critics of the public health insurance plan cite an October 2008 analysis of Obama's health care approach by the Lewin Group, a national health care research firm. That analysis concluded that the Obama plan would increase the number of people with public insurance by 48.3 million, while private insurance coverage would decline by 21.6 million people as employers and individuals shift to a national plan that they expect will have cheaper premiums.

John McDonough, a health policy advisor to Sen. Edward Kennedy (D-Mass.) said the public-insurance proposal is important because it provides some“ cost accountability” and provides a potential way for policymakers to hold down the overall and ongoing cost of a national health reform plan.

“There may be other ways to try to achieve those ends effectively, but it is important that, as we have this conversation, that the accountability in terms of costs, is very much a part of it,” McDonough said, during the December health care forum sponsored by the Alliance for Health Reform.

The government-backed insurance option has been linked to the contentious issues of physician reimbursement and some clinician shortages in existing public-insurance plans. Supporters of a new public-insurance program maintain that a government insurer could help bolster physician reimbursements because it would be in competition with the reimbursements provided by private insurers.

“If there was a shortage of physicians in the [new] plan then we would have to up the pay,” said Rep. Pete Stark (D-Calif.), in a December 2008 press conference. “That's called competition.” Stark is chair of the House Ways and Means Health Subcommittee.

Another area of contention has emerged around the role of health information technology (HIT) within the health care reform effort. Democratic congressional leaders have called for an expansion of and public funding for HIT as part of any major health reform effort.

Clapton, the Republican health advisor, warned, however, that the unresolved patient privacy concerns that kept previous HIT legislation from passing still need to be addressed.

The contentious issues that have arisen, and future obstacles that will emerge, should not be allowed to derail health reform as happened during President Bill Clinton's first term, agree the effort's supporters, as well as some of it critics.

“Stabilizing our health care system is a critical component of putting our economy back on track,” said Jocelyn Moore, health policy advisor to Sen. Jay Rockefeller (D-W.Va.), a member of the HELP Committee.“ It is why we cannot afford to let the window on reform close even a little bit.”

Many Republicans agree that federal health spending growth is unsustainable, including projections that Medicaid and Medicare spending will double by 2018. States also have called for reform as they grapple with their share of spiraling Medicaid costs that require frequent tax increases or cuts in essential services.

The dissolution of Clinton's 1993 to 1994 health reform effort has led congressional leaders to strive to make health reform a bipartisan effort. To achieve that goal they have organized a series of roundtable discussions since last spring among both major parties and “stakeholder groups,” including physicians.

McDonough said supporters of the previous reform effort failed because they focused on various “micro details” of health reform proposals and neglected to summon the nation's political will to achieve “health reform for everybody.”

“We think fundamentally that what the American people want is to see a bipartisan solution that reflects the concerns of both sides of the aisle,” he said.

That bipartisan solution may not come early in the new Congress, according to supporters and critics, due to competing priorities that are likely to include a major economic stimulus package, reform or overhaul of parts of the financial system, and the need to pass government spending bills that Congress put off finishing last year.

The public-insurer plan by Berkeley and the Institute for America's Future is posted at<www.law.berkeley.edu/files/Hacker_final_to_post.pdf>.▪