O’Neill Institute for National and Global Health LawO’Neill Institute for National and Global Health LawLegal Issues in Health Reform

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Gearing up for the Long Aftermath of Health Reform

Post by Christina S. Ho

Senior Fellow and Project Director of the China Health Law Initiative

O’Neill Institute

The passage of universal health care, or (near-universal health care in this case), as Obama proclaimed, finally affirms in principle that as a society, we owe some security to one another against the life-and-death risks that can befall anyone from illness or injury.   And it was in honor of this proposition that when the House passed the Senate bill and the package of fixes, I got out the crystal, poured a toast.  And then I started thinking about how the sides would already be girding for the next battle.

And I don’t mean the lawsuits to block reform, or the fantasy scenario of repeal.  Instead I’m thinking about the slow grinding battle that will take place over years, even as a similar battle has been waged in previous decades over Medicare.  At stake in this struggle—which will be a struggle of inches–is the nature of health insurance.  Repeal is not the way to roll-back the transformation in our social safety net that health reform has wrought.

Health reform skeptics and opponents have already managed to slip in provisions that could serve as toeholds for future incursions—including a carveout from health insurance standards for the so-called “young invincibles” (Sec. 1302(e) of the Senate Bill) so they can buy catastrophic high-deductible coverage.  This fragments the risk pool and sets the conditions for health care to be viewed as something people fund through cash savings.

Examples abound, but even a recent history of Congressional fights over Medicare reveals exactly this type of maneuvering. As society’s guarantee of certain hospital and physicians’ benefits primarily for the aged, Medicare was a target for opponents of health care entitlements who worked to erode the defined benefit promised under the program.  Representative Paul Ryan nakedly avows the voucherization of Medicare in his recent bill, but voucherization by increments, shifting risk (under the guise of choice) to the seniors, and transforming assistance to a defined contribution by Medicare and no more, has been the creeping agenda of conservative interests for a while.  The success in Medicare has been limited, but sufficient to constitute a thorn in the side of the left.

Medicare Advantage, for example, transfers set subsidies out of the Medicare Hospital Insurance and Supplemental Medical Insurance Trust Funds to private insurance plans to provide benefits.  Medicare had already guaranteed certain benefits to seniors; the delivery of those benefits through a private insurance product served as a fig leaf only. But even that seems marginally better to those driven by an ideological horror of citizens expecting any guarantee from the government. When it became clear that the private insurance plans could not afford to provide the benefits as cheaply as the government, we did not allow them to trim back benefits.  The logic of Medicare, as a promise of certain benefits, clashed and ultimately prevailed against the logic of a voucher system.  We paid more and more to the private plans to bribe them to maintain coverage, ultimately much more than it would have cost to deliver the benefits through traditional Medicare. That overpayment, to appease the demand for private delivery of benefits, even if entirely cosmetic, will finally be reined in by this health reform bill.

The Medicare prescription drug benefit, passed in 2003, represented a masterful play by the opponents of health entitlements, posing as a new health benefit, but introducing for the first time into Medicare a health item that the government was barred from directly assuring.  Instead the government provided a “voucher”-like subsidy to private entities to offer drug coverage.  This was all the more shocking given that these private prescription drug plans were not a product the market had ever thought to offer—they did not exist and had to be wholly created in order to satisfy the uncompromising ideological refusal to allow government to provide benefits to anyone but private industry.  Recognizing the possibility that no such private entities would be willing to undertake this new function, the legislators were at least willing to allow a trigger for government to step in to assure that the benefit would still be provided.

If this was what Medicare was up against, at least Medicare started with the premise of a benefit that the government would arrange for and guarantee more or less directly, and seniors have a chance to re-enroll in traditional Medicare if they are dissatisfied with the private Medicare Advantage plans.  In health reform, the Democrats relinquished that ground early on, excluding a “public option.”  The path toward voucherization of health care is arguably within sight, and it is but a short distance further to argue that individuals should be able to “cash out” the premiums and subsidies into some kind of savings account.  Instead of guaranteeing health security, this framework could devolve into a defined contribution, and a rejection of governance as a mechanism for addressing collective risks.  If I were an opponent of health reform, once the volume dies down on repeal and lawsuits, I’d be trying to expand the domain of health savings accounts.

In addition to defending their ground against these efforts, what might Democrats consider as next steps?  Many are undoubtedly developing their list of fixes even now.  Medicare buy-in, a perennial issue, should be kept alive.   It seems to me that Medicare Part D should be rethought—when we as a society guarantee benefits, we should be able to assure that we can manage those benefits affordably, and government delivery should be an option.  The administrative standards on insurance, benefits, and exchanges will be crucial, I imagine.  I would be curious to see what others think will emerge as key items on both sides’ long-term strategic wish-lists.

2 Comments

  1. Posted March 25, 2010 at 11:45 PM | Permalink

    Christina,

    Your article is a veritable unitary policy-wonk orgy. Interesting points, fascinating really, but completely irrelevant to the actual risks and rewards. I’m sure the Administration and Democratic leadership would be in ecstasy if the conversation began to zero in on points like:

    “Medicare Advantage, for example, transfers set subsidies out of the Medicare Hospital Insurance and Supplemental Medical Insurance Trust Funds to private insurance plans to provide benefits.”

    So what do I think is relevant? Two points, which converge to one point. The first point is that, as a general rule, the federal government has no business being involved in direct delivery of benefits to individual citizens. Tenth Amendment, and all that. Our Nation’s history leads to a federal system of government, and a common law system, and a multiculturalism, and a, well, etc, etc, that are unique and mitigate against central government solutions. This Nation was born in armed rebellion against a distant and unresponsive central government. The Founders set up safeguards to prevent centralization, and the health industry bailout bill just passed tries to undo those safeguards.

    Central decision making never leads to optimization, it always leads to “lowest common denominator” solutions. The federal solution designed by the Founders guaranteed a fertile environment of competing and contrasting solutions, small solutions, local and easily adaptable solutions, solutions responsive to local citizens.

    The Massachusetts health care plan is sometimes quoted as an example of why universal health care entitlements won’t work. I disagree. It is an example of why a solution under federalism, with each state responsible for its own solution, provides the following two safeguards;
    1) Whatever is wrong in Massachusetts will not bring down the entire nation. What is wrong in Mass can be fixed in Mass.
    2) The citizens of Mass will get all the health care that the citizens of Mass are willing and able to pay for. In general, states cannot accrue debt to be passed on to as-yet-unborn generations, they must pay as they go (a trait that the federal government has shown no stomach for).

    Of course, with the federal government involved, both of those are completely run over and driven down. A federal plan can and will bring down the whole Nation at one time. For current status of Social Security and Medicare, just visit http://www.usdebtclock.org. If you aren’t stunned, then you must be expecting someone else to pay the bill. I lay awake at night in a cold sweat thinking about this.

    You repeatedly cite Medicare, and I am not sure why. Medicare is headed for financial collapse. I can only imagine that this is an example of why NOT to have the federal government providing health care services. Additionally, we now have a major clinic declining new Medicare patients, and a major drugstore chain declining new Medicaid patients … reimbursement is too low. You cannot pass legislation to force people to work for less than they are willing to work for, unless you are a Communist regime.

    So in closing, I’m not sure whether you don’t realize that there are much bigger issues that have 55% of the people in a lather, or whether your realize it and are attempting to deflect the conversation to an area where policy wonks can prevail. In either case, there are better things to be doing, and fortunately for the Nation there are many people out there doing them.

    All that being said, thank you kindly for your efforts to inform and enlighten the public discourse.

    Warm regards,
    Chuck

  2. captbecker
    Posted March 26, 2010 at 7:10 PM | Permalink

    Christina,

    Your article is a veritable solo policy-wonk orgy. Interesting points, fascinating really, but completely irrelevant to the actual risks and rewards. I’m sure the Administration and Democratic leadership would be in ecstasy if the conversation began to zero in on points like:

    “Medicare Advantage, for example, transfers set subsidies out of the Medicare Hospital Insurance and Supplemental Medical Insurance Trust Funds to private insurance plans to provide benefits.”

    So what do I think is relevant? Two points, which converge to one point. The first point is that, as a general rule, the federal government has no business being involved in direct delivery of benefits to individual citizens. Tenth Amendment, and all that. Our Nation’s history leads to a federal system of government, and a common law system, and a multiculturalism, and a, well, etc, etc, that are unique and mitigate against central government solutions. This Nation was born in armed rebellion against a distant and unresponsive central government. The Founders set up safeguards to prevent centralization, and the health industry bailout bill just passed tries to undo those safeguards.

    Central decision making never leads to optimization, it always leads to “lowest common denominator” solutions. The federal solution designed by the Founders guaranteed a fertile environment of competing and contrasting solutions, small solutions, local and easily adaptable solutions, solutions responsive to local citizens.

    The Massachusetts health care plan is sometimes quoted as an example of why universal health care entitlements won’t work. I disagree. It is an example of why a solution under federalism, with each state responsible for its own solution, provides the following two safeguards;
    1) Whatever is wrong in Massachusetts will not bring down the entire nation. What is wrong in Mass can be fixed in Mass.
    2) The citizens of Mass will get all the health care that the citizens of Mass are willing and able to pay for. In general, states cannot accrue debt to be passed on to as-yet-unborn generations, they must pay as they go (a trait that the federal government has shown no stomach for).

    Of course, with the federal government involved, both of those are completely run over and driven down. A federal plan can and will bring down the whole Nation at one time. For current status of Social Security and Medicare, just visit http://www.usdebtclock.org. If you aren’t stunned, then you must be expecting someone else to pay the bill. I lay awake at night in a cold sweat thinking about this.

    You repeatedly cite Medicare, and I am not sure why. Medicare is headed for financial collapse. I can only imagine that this is an example of why NOT to have the federal government providing health care services. Additionally, we now have a major clinic declining new Medicare patients, and a major drugstore chain declining new Medicaid patients … reimbursement is too low. You cannot pass legislation to force people to work for less than they are willing to work for, unless you are a Communist regime.

    So in closing, I’m not sure whether you don’t realize that there are much bigger issues that have 55% of the people in a lather, or whether your realize it and are attempting to deflect the conversation to an area where policy wonks can prevail. In either case, there are better things to be doing, and fortunately for the Nation there are many people out there doing them.

    All that being said, thank you kindly for your efforts to inform and enlighten the public discourse.

    Warm regards,
    Chuck

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