Public Health Plan Option Pitched As Delivery Reform Instrument
March 17, 2009/ Inside CMS
Proponents of a public plan have begun touting the GOP-opposed idea of setting up a government-managed health plan option as vital to transforming America's health care system into one that rewards quality rather than quantity.
Faced with middle class voters' unease over the faltering economy, health care reform enthusiasts have been shifting their focus away from expanding coverage and onto reducing costs, notably through delivery system reforms that encompass medical home, bundled payment and accountable care organization models. But, at the same time, they caution that a “critical mass” of payers will have to adopt the new payment structures in order to get the incentives aligned and achieve payment system reform -- hence the need for a public plan.
The discussions come as the White House is signaling that comprehensive health reform may have to be implemented in steps, and a compromise on issues such as a public plan may be necessary to get a bill through Congress. White House health care advisor Ezekiel Emanuel, when recently asked by Inside Health Reform if a public plan is vital to reforming the delivery system, hedged. “I have no idea the answer to that question,” he said.
Buy a key House lawmaker made it clear on Tuesday that he believes a public plan is needed to drive delivery reforms beyond Medicare.
“Delivery system reform begins at home with public health insurance programs like Medicare,” House Ways & Means health subcommittee Chair Pete Stark (D-CA) said during a hearing Tuesday (March 17). “However, Medicare can’t do the job on its own. We will not get the widespread delivery system changes that are needed if the private sector is not pushed to modernize too, which is another reason why we need a public health insurance plan option to compete with private options in a reformed health care system. We have no mechanism to directly push the private sector to do delivery system reform and address rising costs other than to lead by example in the public health insurance programs and ask them to compete.”
In particular, Stark pointed to the failure to control costs in the Part D program, which has no public option, as making the case for creation of a public plan to compete with an insurance exchange.
“Much like what is proposed for an exchange, Part D has federal rules of the road and subsidies and reforms to ensure that the plans take everyone who applies, but there are also serious problems that stem in large measure from the lack of presence of a public option and the ability to structure the benefits in a fashion that exacerbates adverse selection,” Stark said. “The rapid rise in Part D premiums, drop in the number of low cost options, and discriminatory cost-sharing schemes designed to cherry-pick healthy patients all cast serious doubt on the ability of the private market to operate without competition from a public health insurance option to control costs and provide stability for beneficiaries.”
Commonwealth Fund President Karen Davis made a similar case for a public plan option last week during a delivery system reform forum at the Brookings Institution.
“Medicare can lead and be an innovator, particularly in aligning incentives rewarding the kinds of results we'd like to see. But Medicare cannot go it alone,” Davis said. “I think in this town we get very fixated on Medicare, and it's very important to start with Medicare and to move toward these new methods of payment for primary care, for acute hospital episodes, and to encourage the growth of accountable care organizations -- but Medicare is (only) 20 percent of the spending.”
Like Stark, Davis said a public plan supplementing Medicare would be needed in order to drive delivery reforms. “We've go to find a mechanism for spreading this to people under age 65,” she said. “The clinicians have come up with one mechanism, which is to apply these methods to Medicaid, to apply these methods to a public health insurance plan that would transform the market for private insurance, really give a stimulus to having private insurers move toward more innovative methods of payment as well.”
The Commonwealth Fund supports a public plan option as part of its health reform platform, and suggests that the number of patients with employee-sponsored coverage would increase from 164 million to 196 million if a national health insurance plan were created in the context of a National Health Exchange.
The argument that a public plan could help save money by strengthening the government's negotiating hand has been made before, notably by Yale political science professor Jacob Hacker, the brains behind many lawmakers' public plan proposals -- including that advanced by President Barack Obama.
“Because Medicare and (a public plan) would bargain jointly for lower prices and join forces to improve quality, they would have enormous combined leverage to hold down costs,” he wrote in a briefing paper for the left-leaning Economic Policy Institute in 2007. “To ensure that bargaining for lower prices does not come at the expense of high-quality care, Medicare and (the public plan) would also team up to monitor and improve the quality of care ... Using the extensive database of patient experiences (they) could amass, (they) would come up with guidelines for best practices, create new funding streams for the coordinated treatment of chronic medical conditions, provide comparative quality information about individual providers and medical institutions, encourage prevention and screening, and carefully assess the effectiveness of new medical technology. These innovations would be made available to private payers, and, as they do today, many would likely follow the lead of the public insurance pool in its coverage and payment decisions.”
But the strong focus on using the public plan for driving innovations in the health care delivery system does appear to be novel.
The argument comes at a time when the public plan option has come under increasing criticism from Republicans and the insurance industry for creating “unfair competition” while at the same time delivery system reform is seen as having broad bipartisan appeal. Some observers are quick to suggest a link between the two developments may be possible.
“Perhaps the other arguments weren't getting enough traction so people are espousing new arguments for the public plan option,” said Michael Tuffin, a spokesman for America's Health Insurance Plans. “If we're hanging our hopes on a public plan as fixing everything that's wrong with health care -- boy, that's a lot to take on.”
“I think the suggestion that adding more people to Medicare (or a similar public plan) because Medicare can't do this now is a stretch,” he said. “They're not set up to do that. Why not work in the public/private system that's in place? Those efforts are under way all over the country.”
Rep. Wally Herger (R-CA), the ranking member on the Ways & Means health subcommittee, shared similar concerns during Wednesday's MedPac hearing. He cited a recent report from the Lewin Group suggesting that a public plan paying Medicare rates would cause 120 million Americans to lose their current health insurance and enter the government-run health plan.
“I would strongly urge my friends on the other side to consider the evidence we'll hear today -- about the significant problems in the Medicare program -- before trying to force 120 million Americans who currently have private health insurance into another government-run health plan,” Herger said.
But some providers who hope to reform medical care while still making a profit say the situation that's in place now doesn't allow them to make the changes they'd like.
“Right now, we're sort of hung up on making the sort of changes that people want, because right now there is no critical mass for buying according to these principles,” Park Nicollet Health Services President and CEO David Wessner said at the Brookings event. “So even though we have organizational goals for leading in quality and patient experience and reducing patient costs, even though we've got that as our leading objectives, we've got to be profitable to sustain ourselves.”
“Right now, unless we get critical mass in buying according to those (new principles), we're hung,” he added. “We actually have to stop and we can't innovate because we will totally run out of gas, especially in this economic environment.”
He added that a critical mass of 60 percent of buyers is crucial for reforms to work. “It's not enough to do Medicaid, it's not enough to do state employees, it's not enough to do Medicare. We've got to get to a critical mass of somewhere around 60 percent of buyers who are going to be buying the right way so that we can design to those ultimate parameters and then conform our systems, our payments, our internal resources .. toward the right investments and the right mix. But we're hung right now.”
Emanuel, a special health care advisor to the Office of Management and Budget, agreed that getting many payers on the same page would help achieve the kinds of delivery system reforms that the administration considers desirable.
“That does to me seem to be a very important point,” Emanuel told Inside Health Reform.“We need to send a signal, we can't send 50 signals, then it's just cacophony.” But he stopped short of saying whether a public plan was vital to getting there.
AHIP's Tuffin took issue with the notion of “cacophony,” however, and instead argued for letting the private insurance industry experiment by working with providers and patients across the country. “Models that are community- or regionally based are more appropriate,” he said. “Let a lot of quality flowers bloom.” -- Julian Pecquet ()
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