Moving Closer To Acceptable Public Health Plan
Senator Kent Conrad (D-ND) Introduces a "potential compromise" to the public health plan. Following is an interview with Ezra Klein of the Washington Post.

(Earlier today, Sen. Kent Conrad, the North Dakota Democrat who chairs the Senate Budget Committee, introduced a "potential compromise" on the public plan: A system of federally-chartered co-ops that could offer a non-profit alternative to the for-profit insurance industry. In this telling, the co-ops preserve the central feature of the public plan -- they're a competitor to the traditional insurance industry -- but are free from the baggage of government control.

I spoke to the Senator this evening about the co-op model, and he said a few things that surprised me. First, his search for an alternative was on behalf of the G-11 -- the key Senate powerbrokers on health care. Second, it proceeded from the premise that the public plan doesn't have the votes. All Republicans are opposed and, according to Conrad, "at least three Democrats." And third, he thinks reconciliation is basically out as a viable option for comprehensive health reform. A lightly edited transcript follows.)

Tell me a bit about your idea for chartering co-ops in the health insurance market.

Maybe it would be most useful to tell you how I got into this. The G-11 group, which is the members of the Senate, Republicans and Democrats, chairmen and ranking members of the key committees, who've been given the overall responsibility to coordinate health care reform in the Senate, asked me 10 days ago to come up with something to bridge the divide between those who are strong adherents to the public plan and those who are strongly opposed.

The co-op structure came to mind because it seems to fulfill at least some of the desires of both sides. In terms of those who want a public option because they hope to have a competitive delivery model able to take on the private insurance companies, a co-op model has attraction.

And for those against a public option because they fear government control, the co-op structure has some appeal because its not government control. It's membership control, and membership ownership.

Also the co-op model has proven very effective across many different models. Ocean Spray in the cranberry business, and Land of Lakes in the dairy business, and Puget Sound in the health care business.

How do you respond to someone who says, this is a terrific idea. More competition is always welcome. But why instead of a public option? Why not do it alongside and let a thousand coverage models bloom?

Votes. The problem is this. If you're in a 60 vote environment in the Senate -- and I believe we are, because I believe reconciliation simply won't work -- if you begin tallying up the votes, I believe that virtually all Republicans are against the public option and some democrats are. So how do you get to 60?

How many Democrats would you estimate are against a public option?

I don't know for certain, but I think at least three, and maybe more.

And why do you think that reconciliation won't work for health reform.

Reconciliation was never designed to write substantive legislation. It was designed solely for deficit reduction. The whole idea was you would change numbers, not policy. You would change numbers on the revenue side of the equation and the spending side of the equation.

And so, the way it works, under current rules, if you're in reconciliation, you have to be deficit neutral over five years. Under the budget resolution, health care can be deficit neutral under 10 years. That's a big difference.

Two, under reconciliation, you're subjected to the Byrd rule. The Byrd rule says that anything that doesn't cost money or save money, or that only costs money or saves money in a way that's incidental to the policy, is subject to strike. The result, for instance, is that all the insurance market provisions are subject to strike. All the wellness and prevention provisions are subject to strike. The Senate parliamentarian said to us that if you try to write substantive health reform in reconciliation, you'll end up with Swiss cheese.

Then let's go back to why this works as a compromise. I understand why it would be preferable for Republicans. But for supporters of a public plan, the key advantage is that the public plan is big. It can negotiate discounts with providers. In the form Sen. Rockefeller offered, it can even use Medicare payment rates. These co-ops don't seem like they'd have that size or weight. How would they compete with large private insurers?

They might have that weight. One option is for a national cooperative. That would give it the heft and weight to compete. But you know, one of the interesting things when we talk to experts is that they say critical mass is probably around 500,000 members. Puget Sound is probably around 580,000 and they compete successfully against much larger entities. The experts tell us that there are probably advantages of size up to a point, but after that point, the law of diminishing returns sets in.

Who would charter these? What is the process? Do I go over to my local health insurance exchange and put in an application?

The way co-ops typically are formed, people who feel they're not appropriately served, or not served at all, band together. They form an organization, elect a board, hire people to do the work, pool their money, and the organization goes forward.

These cooperative entities would provide their contracts through the exchange just like everyone else, be subject to the same rules as everyone else, in terms of reserve requirements, in terms of what kind of contracts they could offer. People would go to their exchange, they'd see the option, and if they liked it, they'd sign up, and then they become one of the members, because every member is an owner. And they would have elections and that elected board would choose the leadership.

Would there be regulations on how many of these there would have to be in each state?

We've not contemplated having that in the health care reform law, but there is clearly an economic requirement in order to have the leverage to negotiate with providers to get competitive rates, you need greater bulk. That's where we believe we need 500,000 lives to be competitive.

That's probably one of the two major items of discussion still remaining here. They're various options for consideration if you will. I offered the G-11 group three models. One is state-based, so every state has one. I don't think that works frankly. In states like mine, the pool wouldn't be big enough. The second would be a national entity. That's probably too limiting as well.

What you probably need is a national entity with state affiliates, and the further flexibility so those states can have regional pools. So in our part of the country, you might have North Dakota, South Dakota, Montana, and Wyoming go together. Out east you might have Maine, Vermont, and New Hampshire together. We're consulting with experts tomorrow about that.

Where did this idea come from? I've done a fair amount of health care reporting, and this is the first I've heard of it.

I guess it came out of conversations in my office after we were asked to see if we couldn't come up with some way of bridging this chasm. Part of it is that we're so used to cooperative structures in my state. They were begun by progressives, they came out of the progressive era. And they're so successful in our state. So I can't really say we came up with some brand new idea. We just thought about our own experience.

What has been the reaction of some of your more liberal colleagues to this?

I think it's fair to say mixed. Those who really want public option because they really want single payer, this does not satisfy their position. Others who really want a competitive insurance model kind of like it. Others who are looking at how you put together the votes are intrigued by it. And on the Republican side, a grudging acceptance that this may be one way to increase competition that does not increase government control.

Let me ask you one last question on that. I understand why this proposal wouldn't satisfy liberals who want single-payer. But why does it arouse Republican opposition? It seems, in a way, to be very small-r republican.

Because they don't...ah, you know, you'd have to ask them. It would just be my surmise on why some of them don't like it. They really don't want a competitive model, at least some of them.

Who's Afraid Of A Public Plan?
Story from the Chattanooga Times Free Press

A new report showing that health insurance premiums in Tennessee rose five times faster than workers’ earnings from 2000 to 2007 is deeply troubling, but it certainly is not surprising. Workers still lucky enough to have access to employer-provided insurance — less than 55 percent in Tennessee still do, as compared to 60 percent nationally and 70 percent a decade ago — are well aware that their premium costs have eaten up their wage gains in recent years, even as their coverage has declined and their out-of-pocket expenses have soared.

Such depressing and clearly unsustainable trends should be fueling national demand for health care reform and the creation of an alternative public insurance plan for voluntary, tax deductible purchase.

The medical industry’s control

The dynamic of the public dialogue on this critical issue, unfortunately, is controlled by the medical industry and its lobbyists. And they are doing everything in their power to kill the concept of a public plan that would help keep insurers, hospitals, pharmaceutical companies, high-end health care providers and medical device suppliers from over-charging — and that ultimately would help reduce spending on health care.

The new insurance cost figures were compiled by a coalition of Tennessee groups that advocate health care reform and creation of a public plan. A spokesman for one advocacy group attributed the sharp increases in insurance costs to the dominance of the state’s two largest insurance providers — Blue Cross Blue Shield of Tennessee, which covers 45 percent of Tennessee’s insurance market, and UnitedHealth Group Inc., which covers 16 percent. A combination of other companies carry the 39 percent balance.

Big insurers rule

Their dominance, he asserted, allows BCBST and UnitedHealth to “set the prices, ... make the rules and call the shots.” It also enables BCBST to boast reserve funds of $1.4 billion, and executives at UnitedHealth to capture obscenely high compensation packages.

A number of other factors, to be sure, contribute to excessively high health care costs. A short list is illustrative: Too little focus on preventive and wellness care, and too much on procedures; excessive use of expensive technology; defensive diagnostic procedures to protect against malpractice claims; excessive hospital and provider costs; needless administrative costs to combat excessive insurance denials; and needless complexity of insurance claims, diagnostic codes and bundled services.

The insurance industry cites many of these factors, but it rarely addresses its own excessive costs and profit margins, and the needless complexity of its pricing rules, claims procedures and denials.

Blue Cross officials here maintain that Tennessee ’s 62 percent increase in premium costs from 2000 to 2007 (vs. the 12 percent gain, to $25,639, in the same period for median wage workers) primarily reflects the growing cost of medical services and the more intensive use of services required by the demographic shift toward a larger aging population.

While the latter may be true, the former is not reflective of medical cost margins in all other highly industrialized countries — all of which offer universal health care under different models, advanced medical services equal to those in the United States, and typically better health indices, more doctors and more hospital beds per capita.

Other advanced countries offer all this while spending between 8-to-11 percent of gross domestic product on health care. America, by contrast, spends nearly 17 percent of GDP on health care — a level expected to reach 21 percent within 10 years — and still leaves 47 million citizens uninsured, and far more citizens under-insured and subject to medical bankruptcy in the event of a medical crisis.

Pharma’s a culprit, too

Prescription drug prices for the top 50 most-used drugs, as well, are two-to-three times higher in the United States than in every other advanced country — and they are rising fast, if not faster, than other insurance and provider costs. This is largely due to Big Pharma’s anticipation of government price negotiations and their urge to set price markers higher now.

Not surprisingly, BCBST spokesperson Mary Thompson told this newspaper’s Dave Flessner that a government-organized insurance plan, available on a voluntary basis to citizens not satisfied with private market and employer-organized plans, ultimately would crowd out private companies and dampen the very competition that reform advocates seek.

Let insurers compete

That’s a disingenuous argument. Such a public plan should spur competition. The proposal is for a public option plan modeled on plans federal workers receive and administered on a Medicare-style model, like those BCBST administers for a profitable administrative service organization (ASO) fee in a number of states. If private insurers can do better than government, they should be able to offer a better product, or a lower cost.

If they can’t or won’t take that challenge, then that would expose the fallacy of relying on high-profit insurance companies to help reduce the unsustainable curve of the medical industry’s profit taking, and the medical miseries it is producing for this nation’s increasingly under-insured and uninsured population.

Given the choice, most citizens, if they had their say, would take a good public plan and peace of mind. Employers, relieved of health insurance costs, would be more competitive in the face of global competition. And workers, liberated by portable coverage that wouldn’t go away if they changed jobs or careers, would find new freedom and bargaining power in their new mobility.