Powerful Alliances and Unlikely Bedfellows
May 19, 2009, Jocelyn Richgels 

 

This week, a group of powerful health care industry groups joined together in a coalition of highly unlikely bedfellows to propose a health care cost-cutting plan.  In what the Administration called a "game-changing" announcement, the group of six indicated that they would help President Obama achieve cost-cutting in the health care industry by reducing the growth of health care costs by 1.5 percent per year over 10 years.  The six groups are the Advanced Medical Technology Association, America's Health Insurance Plans (AHIP), the American Hospital Association, the American Medical Association, the Pharmaceutical Research and Manufacturers of America (PhARMA), and the Service Employees International Union (SEIU).  

 

The details of how this $2 trillion in savings will be achieved are unclear and not yet drafted by the six groups. The President has given them until the beginning of June to offer their proposals.   At the end of the week, however, it appeared that proposal offered by the six is open to differing interpretations. The American Hospital Association (AHA) tried to reassure its members that all $2 trillion in savings would not be on their shoulders and the shoulders of the six groups in the coalition.  "What we said was we would do our part.  We did not say - and here's the first point of confusion - that we would save this country $2 trillion on our own.  We did not say that.  What we also did not say is that we would take 1.5 percentage points off the inflation rate next year and every year for 10 years," said Richard Umbdenstock, AHA's President.  AHIP also said the savings would "ramp up" gradually, eventually being 1.5 percentage points lower.   

 

Regardless of the interpretation of the offer, it is at least an "inning-changer" that these groups are offering to be a part of finding costs savings in health care delivery.   

 

Options for Affordable Insurance Coverage 

 

The Senate Finance Committee released its second Policy Option paper this week, Expanding Health Care Coverage: Proposals to Provide Affordable Coverage to All Americans.  This follows the release of their first Policy Option paper, Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs, a decidedly less contentious topic than options for expanding health care coverage.   

 

The most debated issue thus far in the health reform debate concerns whether or not a public insurance plan will be offered to complement or compete (depending on your opinion of the merits of a public plan) against private insurance plans.  The Finance Committee has proposed three options for the design of a public plan, without any clear indication of which has the most support.  The first is a Medicare-like option where the federal government would set payment rates through a new agency within HHS and require Medicare providers to participate in the public plan with payments of Medicare rates plus 0-10%.   

 

The second option would be similar to the Medicare-like plan, but would be operated by multiple regional third-party administrators instead of HHS.  These administrators would be required to establish networks of providers and would negotiate payment rates with providers.  This option is similar to the compromise public plan proposed by Senator Schumer of New York, with the primary selling point being that payment rates would not necessarily be lower than those of private insurance.  Whether this will ultimately calm private insurance plans' anxieties about being run out of business by the lower payment rates of a Medicare-like public plan is still open for interpretation.   

 

The final option for a public plan is a State-run public option, which could be either mandatory or optional for States.  Very few details are provided on how to incentivize states to design and implement their own plan.  The Senate Finance Committee does also leave the door open for no public plan option, but instead relies on "private options in a reformed and well regulated private market."  

 

At the same time, a group of 21 Senate Democrats wrote a strongly worded letter to Senators Baucus and Kennedy insisting that a public insurance option be created that would compete with private insurers in a reformed market.  The letter reminds the two committee chairs of the outcome of Medicare Part D for beneficiaries, "Medicare Part D should serve as a reminder of how well-intentioned offers to address health care issues - if not done with the best interests of patients in mind - can end up working better for the pharmaceutical and insurance industries than for beneficiaries."  

 

The Senate Finance Committee also this week held their third and final roundtable, focused on Financing Reform options.  Their third and final Policy Option paper will discuss financing options and be released next week.