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Blue Dogs and House Democrats Reach a Deal; Senate Finance Committee Coming Close

Yesterday, the Blue Dog negotiators were held in the seven-hour meeting with House leadership and Rahm Emmanuel. It was not, I'm told, a pretty meeting. But it produced a deal.

The substantive changes the Blue Dogs made to the bill are minimal. The original legislation let the public plan use Medicare payment rates for three years, after which point the secretary of health and human services would negotiate rates. Now the secretary negotiates rates from year one. States can set up co-op insurance plans, but in addition to, rather than in lieu of, the public plan. The small business exemption is raised from $250,000 to $500,000. There are some cuts elsewhere in the bill to bring down the cost, but I'm not hearing that they represent anything crucial.

Rather, the real concession was timing: The Blue Dogs didn't want to vote before the August recess if the Senate wasn't going to vote before the August recess. They won on that point. But that's really the substance of the deal: They won't have to take a hard vote before they know what the Senate will do. But the bill they'll have to vote on is pretty much the same as it was a week ago.

As for the Senate Finance Committee, it's nearing a deal too. It says it has a bill that the Congressional Budget Office has scored as covering 95 percent of Americans, costing $900 billion and reducing the deficit in the 10th year. You almost wonder if it'll come with a juicer attachment, too.

By Ezra Klein  |  July 29, 2009; 4:37 PM ET
Categories:  Health Reform  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: On Co-Ops
Next: The Problem of (Some) Profits


When people talk about the public plan being able to use medicare rates, does that mean that they will be able to tell hospitals that if they don't accept the new public plan that they won't be able to accept medicare either? I guess I don't fully understand what people mean when they talk about using medicare rates.

Posted by: spotatl | July 29, 2009 4:46 PM | Report abuse

spotati: they are referring to the rate schedule that Medicare uses to pay all providers for each procedure. I'm not sure, but I think these rates are localized or regionalized by Medicare - and usually thought to be too low for preventive or standard procedures, and too high for specialist-provided procedures.

Each insurer negotiates these charges, so a provider gets differing amounts of cash for each insurer plus Medicare. No wonder they lose their mind. They can/do argue endlessly with the insurers about which charge category applies to what they do.

Meanwhile, Obama keeps talking about changing to payment for outcomes, not procedures.

If you've ever been hospitalized and seen the itemized bill you would note that each bandage, sponge, and aspirin are separately charged for at a negotiated rate. And the prices for the little items are outrageous, while office visit charges don't cover the MD/staff's time. The system is broken, but somehow works.

I'd rather substitute the cheese grater attachment for the optional juicer? Please take this up with Sen. Finance during the break in August.

Posted by: JimPortlandOR | July 29, 2009 4:57 PM | Report abuse

I'd like to know where the $100B savings is coming from with the Blue Dog compromise. The concessions which have been announced will all add to the net cost of the bill. Lower tax revenue from increasing the pay or play threshold, and increased costs for the public plan by not pegging rates to Medicare. Whatever the other cuts may be would have to offset the budget impact of these another $100B in order for the news report to be accurate.

I wouldn't be surprised if this $100B figure is totally bogus...political cover going into the Aug recess.

Posted by: morgen-vs | July 29, 2009 5:02 PM | Report abuse

How I understand it is that Medicare rates are generally low- but hospitals choose to make up for them in volume. If a public plan decided to just use medicare rates I'd think that most providers would simply choose not to accept the public plan.

Posted by: spotatl | July 29, 2009 5:05 PM | Report abuse

Right - the house bill currently says that no provider shall be required to take the public plan. There's no direct tie in to Medicare, except that in earlier drafts rates were initially to be at Medicare + 10%, until the Secretary of HHS could negotiate rates or 2 or 3 years.

Posted by: GrandArch | July 29, 2009 5:15 PM | Report abuse

I'd be interested to know what the average number of employees is for small businesses with payrolls in that range. The federal definition of "small business" is too high, but I would almost say 250,000 is to low. There are probably a decent number of restaurants and auto body shops with payrolls that low.

Posted by: NicholasBeaudrot | July 29, 2009 5:18 PM | Report abuse

How in the world is abandoning medicare payment rates a "minimal" change? That seems like a pretty big deal. Can the Secretary just declare the rates are Medicare rates?
Does the plan at least still start with Medicare's provider network with a default opt-in?

Posted by: jbrians | July 29, 2009 5:31 PM | Report abuse

jbrians- once again I don't think I get it. What does using medicare's rates have to do with Medicare's provider network if providers are not required to accept the public plan? If we are just talking about setting rates why couldn't the public plan set them at whatever they like? Its only at the point of compelling providers to accept public plan patients at the same rates they accept medicare patients that there seems to be an advantage but if thats what we are talking about it sure isn't clear from the terminology being used.

Posted by: spotatl | July 29, 2009 5:34 PM | Report abuse

"When people talk about the public plan being able to use medicare rates, does that mean that they will be able to tell hospitals that if they don't accept the new public plan that they won't be able to accept medicare either?"

My understanding is that the public plan would use the same price structure as Medicare, it doesn't mean that if providers refuse to accept people on the public plan they will lose all their Medicare patients too.

Some hospitals make a profit on their overall Medicare payments, some don't. It depends on their costs, their case mix and other factors. High volume urban hospitals are definitely at an advantage.

Posted by: steveh46 | July 29, 2009 5:43 PM | Report abuse


Posted by: bluegrass1 | July 29, 2009 5:49 PM | Report abuse

Why is it an advantage simply to be able to use medicare rates? what barriers are there for any insurance company to simply copy medicare rates if this is advantageous?

Posted by: spotatl | July 29, 2009 5:51 PM | Report abuse


I had been meaning to address this question a while back. Folks have become to focused on Medicare rates, when as you point out- this i only helpful if the providers must access the the public plan at those rates in order to keep Medicare patients.

The AMA already got the huge concession a few weeks back, in exchange for their support. The House bill compromised, participation in the public plan is now optional, but assumed as an "opt-in" (meaning docs will have to actively opt-out). Additionally, my read of the legislation provided the Secretary with some negotiations room beyond Medicare rates in the first few years, if needed.

In other words, the public option, which will need to get providers in its network like everyone else, will effectively function as a regular non-profit insurance company on a local basis. The Blue Dog concession, is even smaller than Ezra suggests.

Posted by: wisewon | July 29, 2009 6:22 PM | Report abuse

In the long run, many reformers believe that getting various principles in place – the public plan, IMAC, universal coverage, employer mandates – are more important than the details of how they are put in place, since history shows that all social insurance systems, both here and abroad, are subject to extensive revision over time before they reach equilibrium. In fact, an argument can be made that there is no social insurance system in the world that has actually reached equilibrium yet.

Reading the very preliminary available coverage, the concession to the Blue Dogs by the leadership is that payment rates for the public plan will be negotiated by the plan with the providers.

Currently, Medicare pays somewhat less than private insurance in most markets. In some settings, where some providers – i.e. Partners’ Healthcare in Boston – have been able to negotiate/extort higher than normal payments from private insurers, the difference is considerable. Medicare does not negotiate, although its rates are affected by political pressure.

It is not clear at this point that the public plan has given up the possibility of linkage to Medicare in terms of requiring participation – that if providers want Medicare they must accept the public plan. They may have, but the news people have not gotten to that point. We will see more on that later.

Since Obama sees the IMAC board and savings from other sources, including getting people into care systems that prevent them from waiting for catastrophe before getting help and getting people out or ER’s for more routine care, as well as savings anticipated from the EMR and other changes, to be the primary source of savings, this concession is minor in the scheme of things. As Ezra points out, the public plan was required to begin negotiation of fees in 3 years anyhow.

Historically, it is quite clear that in most settings Medicare acts as the main driver for payment schedules for private payers, since the private insurers usually “shadow” Medicare. That will probably remain true.

Posted by: PatS2 | July 29, 2009 8:22 PM | Report abuse

I think this is a bigger deal than folks realize. Just because there is some sort of public option, doesn't mean it will be sufficiently "strong" enough to be a viable option.

The medicare rate issue is a big deal bec. Medicare is typically 15-20% cheaper than private rates. Automatically granting those rates makes the public option a guaranteed in-demand real world competitor.

The problem here is the "let the P.O. negotiate rates on its own" part. As if it was so easy. To get good rates, it needs to have lots of folks already enrolled to start (which it wont) and it has to be really big, not enough people in it and it cant properly get those lower rates bec. its not big enough to demand anything.

Thats why the private sector wants to keep it as small, regional, and on its "own" as possible. That way it is just a public equivalent to a small time 3rd party provider in a state where one or 2 big insurers dictate everything. Starting out literally out of nowhere, to be successful the P.O needs to either have a large base of people so it can negotiate on its own, or, an initial lower cost medicare rate to attract people to it if it starts out small.

Posted by: nineinone | July 29, 2009 8:36 PM | Report abuse

There is nothing good about Baucus CBO score. It covers 12% less people for 10% less cost. That is not a good report.

Posted by: JonWa | July 29, 2009 11:20 PM | Report abuse

"The medicare rate issue is a big deal bec. Medicare is typically 15-20% cheaper than private rates. Automatically granting those rates makes the public option a guaranteed in-demand real world competitor."

The only advantage would be if the government told providers that if they accept medicare rates that they must also accept the public option. If providers have the option of simply declining to accept the public option then setting the rates to be the same as medicare would be exactly the same as if any other insurance company tried to do it- the result would be that providers simply wouldn't accept the plan.

If you want to say that all providers must accept medicare rates if offered by any insurance company then you are getting into some serious cost savings- but once again I don't think thats what people are talking about.

Posted by: spotatl | July 30, 2009 7:17 AM | Report abuse

Unfortunately, the Blew Dogs and the Industry ae locked in a battle to get the most for themselves at the expense of the golden goose. For my vote they'll both have to address the mental health coverage disparity and get these small state potentates out of the way. I don't want New York coverage looking anything like Montana or Iowa or Mississippi. In an aside, there was an NPR report yesterday on ATC claiming fraud of Medicare costing 3/4's of the supposed annual cost to reform. It's time for some MD's and administrators to join Bernie and bring a collar or two to this white collar crime. Generally, thanks for the straight talk and keep it up.

Posted by: freesmilesinc | July 30, 2009 12:03 PM | Report abuse

"an an aside, there was an NPR report yesterday on ATC claiming fraud of Medicare costing 3/4's of the supposed annual cost to reform."

That's exactly why the government should butt out of health care!!

Posted by: Jules5 | July 31, 2009 2:32 PM | Report abuse

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