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Happy Days for Health Reform?

Robert Pear interviews Olympia Snowe, who says exactly the right thing:

Senator Olympia J. Snowe, Republican of Maine, voiced the same concern. In an interview with The New York Times and CNBC, Ms. Snowe said that for her to support the bill, “there would have to be more subsidies” for low- and middle-income people and that she was trying to figure out how to pay for them.

Max Baucus, for his part, responds in exactly the right way:

The senator said the "most obvious" option would be to increase tax credits to households earning between 300 percent and 400 percent of the federal poverty level so their premium costs would be capped at a lower level. Some Democrats and Republicans have advocated scaling back the amount of coverage people would be required to buy, but Baucus noted, "I don't think that would be wise," because it would expose people to higher out-of-pocket costs.

And Chuck Grassley is actually contributing a perfectly good idea:

The approach Grassley is recommending would create a reinsurance system under which the federal government would cover some of the claims filed by high-cost individuals. That would permit insurance companies to offer lower rates.

Encouraging!

By Ezra Klein  |  September 18, 2009; 10:00 AM ET
Categories:  Health Reform  
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Next: What's Wrong With the Finance Bill? An Interview With Sen. Jay Rockefeller.

Comments

Of course, Grassley will vote against it even if they incorporate his idea, but that doesn't mean it couldn't work (if combined with thorough audits to make sure that the government money doesn't flow directly to management pockets).

Posted by: paul314 | September 18, 2009 10:51 AM | Report abuse

John Kerry proposed a catastrophic reinsurance scheme in '04, and it seemed like a good idea at the time. (Of course, Bush claimed that reinsurance constituted a "government takeover" of health care, just as I'm sure the Republicans will today if Grassley's amendment is accepted.) I wondered why it wasn't being discussed now.

Posted by: Isa8686 | September 18, 2009 11:06 AM | Report abuse

this is all fine and good but I wonder if Ezra was covering the House Oversight Hearing yesterday and if so if he's going to blog on it today. One of the panel members correctly said the following statement and Rep Jordan agreed:

Insurance premiums don't drive healthcare costs, Healthcare costs drive insurance premiums.

Every one of the largest members on the panel already had loss ratios over 80% and most were right around 85% which most pending bills require. In fact the largest was Cigna which was at 89%.

Also 10% of medicare claims are denied as per CRS.

The insurer's denial rates are:

Aetna- less than .5%
Humana- 5.7%
Cigna- .1%
HCSC- .3%


So the old adage that insurers are denying every claim isn't right. In fact this oversight panel saw that Medicare denies many more claims that private insurance does. Also part of the reason private health insurance is more costly.

Posted by: visionbrkr | September 18, 2009 11:08 AM | Report abuse

Lucy is moving the football again.

Posted by: patrick27 | September 18, 2009 11:10 AM | Report abuse

My first thoughts on this are that reinsurance would lower overall "plan costs", which would be distributed across the pool. As a result, a dollar of reinsurance would be spread across everyone in the risk pool. By contrast, greater direct low income subsidies would just hit lower-income members. So, a federal reinsurance subsidy sounds more expensive for getting down the cost for low-income beneficiaries.

Posted by: GrandArch | September 18, 2009 11:17 AM | Report abuse

Btw, visionbrkr, let me address some of your points:

1) There's a ton of endogeneity in the relationship between health expenditures and premiums. Managed care works at driving down expenditure, and a budget constraint would do the same. But obviously very inelastic demand for health care could lead to costs driving premiums. The question is the degree of demand elasticity. Unfortunately, pricing data in health care are fractured and often hidden (due to confidential rebate contracts).

As for denial rates, they're only a small view at "degree of control", or the hoops a doctor has to jump through. Insurers can have low denial rates if their doctors are well trained or if they never deny, they just take a long time to pay. Medicare Fee for Service doesn't do managed care - it's straight fee for service. It doesn't pay as well, but it's considered less restrictive than most private insurers.

Posted by: GrandArch | September 18, 2009 11:31 AM | Report abuse

This is insanity. Why didnt these very same people make these same comments and add them to the bill their Holy Six compromise was supposed to give us?

Is it really news to them the reax they got to the first draft?

Posted by: zeppelin003 | September 18, 2009 11:44 AM | Report abuse

Grassley's great idea:
"Create a reinsurance system under which the federal government would cover some of the claims filed by high-cost individuals. That would permit insurance companies to offer lower rates."

The government already covers: the elderly on Medicare, the poor and disabled on Medicaid, the military, all the really high-risk groups.

Now the government would reinsure high-cost individuals, so insurance companies can lower premiums. Any guarantee they'll lower premiums? Any chance they'll make greater profit?

Why don't we just say as soon as anyone is sick the government will cover them?

If the government is going to be the insurer of last resort, the best way to keep costs down is to enlarge its pool of insured -- get those young and healthy folks paying into the government plan -- to offset the expenses of the high-risk people.

It seems the private insurance companies are all ready getting the Public Option.

Posted by: jshafham | September 18, 2009 11:50 AM | Report abuse

>>So, a federal reinsurance subsidy sounds more expensive for getting down the cost for low-income beneficiaries.>>

Our federal income tax system is progressive, so reinsurance that spreads across the risk pool would seem similarly progressive. Helping the middle class, rather than just the poor, would seem a good thing.

The whole idea of insurance is spreading risk. Reinsurance would do that.

It was a good idea when Kerry proposed it and it's a good idea today. (I remember a right-wing fried who thought it a great idea until I told him it was a Kerry proposal.)

Posted by: fuse | September 18, 2009 11:54 AM | Report abuse

>>Why don't we just say as soon as anyone is sick the government will cover them?>>
Because it does not seem possible to get the vote on that sensible idea.

Posted by: fuse | September 18, 2009 11:55 AM | Report abuse

we (as the govt) should not under any circumstances be providing reinsurance for private companies. that is bad political philosophy. it is bad enough that we (the govt) are trying to implement legislation that fundamentally alters the balance between govt realm and private realm by forcing people to buy a private product. it is completely inappropriate for the govt to privatize and mandate profit while nationalizing loss.

Posted by: PindarPushkin | September 18, 2009 12:12 PM | Report abuse

GrandArch,

if there was no waste or abuse of the system then there wouldn't be need of the "controls" you speak of. But studies show that Medicare and private plans 10%+ of cost ($230 Billion a year) is wasted or stolen from the system. An extra call to an insurer, or medicare to me seems logical. Private insurers investigate fraud, Medicare is just starting to now. If that wasn't done just imagine how much worse that problem would be.

As far as prompt payment rates many states (including my own of NJ) have prompt payment laws (ours I believe is 30 days) and I believe if a "clean claim" is not paid within 30 days then interest must be paid.


As far as the first issue, pricing is too hidden and private insurers have been working to the best of their ability to let people see that. Many insurers (aetna for example) have been working on transparency for years. See below:

http://www.aetna.com/about/aoti/business_solutions/price_quality_testimony.html

Posted by: visionbrkr | September 18, 2009 12:20 PM | Report abuse

visionbrkr, it's not a revelation that insurers are not the main problem with health care. But that's where the dollars flow into the system, and it's something everybody understands, so why not accept it as a metaphor for the time being?

Ezra, more money for subsidies is great. But without cost controls and indexing to health care inflation it will be a a disaster for the middle class and an albatross for Democrats.

Furthermore reinsurance is unnecessary if you have risk adjustment. That's why the reinsurance idea has gone off the table. There are ways to do it that don't end up as another government subsidy for insurers.

Posted by: bmull | September 18, 2009 12:31 PM | Report abuse

This is corporate wellfare on a grand scale. Forcing people to buy private insurance or else pay a huge tax or get thrown in prison combined with the our tax dollars going to pay for expensive customers is just gift after gift to the corporate lobbyists at our expense. The IRS shouldn't be thugs forcing us to buy products. This is healthcare reform, but the kind of healthcare reform that is good for the corporate lobbyists, not us.

Posted by: SpanishInquisition | September 18, 2009 12:32 PM | Report abuse

bmull,

I get that and accept it. I just don't see how they're demonized so much when FACTS show they pay better than medicare, more accurately and deny less. I guess once we get to the day that pre-existing conditions are gone the pundits will have to either fine a new bogeyman or actually try to rein in costs in a reasonable way and not just blame it on insurers profits or the salaries of their executives.


SpanishInqusition,

the issue I have with thoughts like that is why should we all that have healthcare coverage continue to pay $1000 or more per year per family for those of you that don't want to pay for coverage and just want to be treated on my dime when you need it and then you have the audacity to complain about the method of treatment at that time. If you don't like the method of treatment I have a simple solution for you.

PAY FOR IT YOURSELF.

Posted by: visionbrkr | September 18, 2009 12:53 PM | Report abuse

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