Killer App

by dday

The House Ways and Means Committee as well as the Education and Labor Committee have passed health care reform bills this week, which have largely the same form as the Tri-Committee bill released earlier. Both of the committee votes lost Democrats, but their numerical advantages allowed them to still pass the legislation. In the Energy and Commerce Committee, Blue Dogs hold higher numbers, and so some compromises may be needed to pass the bill. That markup will end sometime next week.

The focus now, thanks to the CBO head Doug Elmendorf’s testimony in the Senate Budget Committee, is on cost control. Elmendorf claims that the current legislation would not bend the cost curve on health care to a sufficient degree. The White House has distributed language on strengthening MedPAC, the board that recommends how Medicare pays for certain services. If Medicare gets used as a way to make medical delivery more efficient, that could ripple through the rest of the system, and the White House proposal would allow those recommendations to go into law immediately, though Congress would have the power to vote down any recommendation. It’s similar to Tom Daschle’s old proposal of a Federal Reserve for health care. Elmendorf himself wants to revisit the employer deduction for health benefits, but as long as advocacy groups paid by unions continue to protect union interests, there will be no momentum for it in Democratic circles. I’m fairly upset with union opposition on this score.

But there is one legitimate reform that could lower costs for both individuals and the government, increase competition in the marketplace, and provide the best coverage at the best cost for everyone. That would be Ron Wyden’s Free Choice Act, and it’s what I think progressives ought to really push at this point.

There are two major problems with the proposals being considered in Congress. The first is that they do not do enough to cut costs, because they do not do enough to change the fundamental nature of the employer-based health-care system […] The second is that the bill does not offer obvious benefits to an insured worker. You can argue that it changes the system around them: There are subsidies if they lose their job and regulations to protect them from the excesses of private insurers. But though the health-care system might be different, it will not, for most people, feel different. And that has made it hard to explain to people why this is something they should pay for. You can tell the insured worker what he gets if his circumstances change. You cannot tell him what he gets if his circumstances do not change.

Enter Wyden. The Free Choice Act is not a health-care-reform bill. It is best understood as a reform of the health-care-reform bill. In particular, it reforms the nature of the Health Insurance Exchange. Under the bills being considered right now, the exchange will be limited to the uninsured, the self-employed and small businesses. Maybe it will be expanded over time. Maybe not. In addition, it is barricaded by what’s called a “firewall.” The firewall essentially bars individuals from entering the exchange so long as their employers offer them a basic level of health-care coverage.

The Free Choice Act starts by setting the rules for the exchange: Within five years the exchange is open to all employers. More importantly, it’s open to all people. The firewall is extinguished. But as the late, great, Billy Mays would say, that’s not all!

The key component of the Free Choice Act is called “cash-out.” Under the Free Choice Act, if I decide that I don’t like any of the health-care coverage options being offered by my employer and would prefer to choose from the many options being offered on the Health Insurance Exchange, my employer has to give me a voucher that covers 65 to 70 percent of the cost of the lowest level of exchange plan. (That is the average portion that an employer pays of his employee’s health insurance premiums.) I can take that voucher and, along with whatever money I want to throw in, choose a plan on the exchange.

We keep hearing the mantra of “if you like what you have, you can keep it.” Wyden’s reform preserves that. But it also opens up the health insurance exchange to everyone, and forces both insurers and the public option into real competition. The public option would not be walled off simply to those who don’t have insurance from their employer or certain small businesses. It would have the opportunity to get market share to compete with private insurers. And for the first time, insurers across regions would compete with one another, as the companies inside the exchange would be able to entice workers who get insurance through their employers. All of this could actually change the dynamic in the insurance market and force competition on price and quality, rather than the current competition among insurers, which is “who can pay for the least amount of health care.” It gives individuals the freedom to choose without stripping them of their bargaining power – in fact, it empowers them more. And it strengthens the public option, by opening the market to potentially tens of millions more consumers.

The employer-based system is nice for some, but it really delivers health care inefficiently, and Wyden’s Free Choice Act would allow over time for an alternative to emerge that maintains the economies of scale to allow that alternative to compete. And this would save money, as it encourages cost effectiveness since everyone is competing on price.

Wyden talks about his idea here:

What we tried to do in this proposal is show the sweet spot between blowing the employer-based system to pieces and, on the other hand, simply saying that we will not try to improve it. The president’s promise that we will be sensitive to not changing what people have is not incompatible with being able to choose some better.

When you tell people they can have access to a full menu of choices like members of Congress have, that’s out of the park in terms of positive reaction. But if you’re a congressperson and you’re with Blue Cross one year and then all of a sudden you decide you want to go with Aetna, your transition is seamless. Someone in the private sector wouldn’t even get that choice. We’re trying to give it to them.

The biggest problem with health care reform right now is that we’re grafting onto a system that doesn’t work. Wyden actually finds a way to do that while also transforming the system. It’s not enough to just argue for a public option that is as highly regulated and firewalled as what exists in the current House and Senate options. If you want actual health care reform, I think you need to echo Wyden’s call for free choice.

…From the Department of Bad Timing, just as I praise Wyden, he signs on to President Nelson and Collins’ letter to delay health care reform. I have no idea why Wyden is in that coalition, but maybe this Free Choice Act has something to do with it.

Also, Dennis Kucinich passed an amendment, with broad bipartisan support, in the Education and Labor Committee that would allow states to institute their own single-payer programs if they chose to do so. Worth noting.

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