12/2002 The Pulse

Published December 1, 2002

Let’s take a look at the elections and how they will influence health care issues in the new Congress.

First, this is without a doubt George W’s election. He finally gets the mandate that eluded him two years ago. His campaigning and his coattails made all the difference. This means the President is the undisputed champion of the Republican Party, and Congressional Republicans owe him big time.

He will set the agenda and they will rally around the President’s flag. The President is very likely to make health care a high priority in the new Congress. He understands the need (as does Karl Rove) to seize the initiative on domestic policy and build a track record of accomplishment in time for the 2004 elections.

And thanks to the work of Mark McClellan, Bobby Jindahl, and other bright lights, the administration has a comprehensive, far-reaching agenda for health reform all ready to go. It includes tax credits for the uninsured, association health plans, expansion of MSAs and FSAs, malpractice reform, growth of safety net public health clinics, and targeted prescription drug assistance for low-income seniors. That is not the be-all-and-end-all for health reform, but it represents a giant step in the right direction.

Once all that is under our belts, we can go on to fundamental reform of Medicare and Medicaid. Hold on to your hats. The next six months should be a wild ride.

Senator Baucus Sends Letter to Secretary Chao

The myth that the tax credits for uninsured workers created by the Trade Act disallow individual insurance has become a liberal mantra, echoed in a letter by Sen. Max Baucus (D-Montana) to Labor Secretary Elaine Chao.

Baucus is wrong on several counts, beginning with the spelling of the Secretary’s name–the letter misspells it “Chow,” as in “Puppy Chow,” three times. (Of course, if a Republican had made that mistake he would be accused of disrespect and cultural insensitivity, the Washington Post would be demanding an apology, and Tom Daschle would demand the offender’s resignation.) But Baucus doesn’t get the substance right, either.

The point of his letter is to intimidate the Department of Labor from allowing state flexibility in providing coverage. He says, “(The conference committee) did not intend to allow states to enter into arrangements with individual insurers through the state-based coverage options. … Any other interpretation of the law would be a violation of the intent of its authors.” He also thinks the requirement for three months of continuous coverage should apply only to the time prior to becoming unemployed. After that, they can go as long as they want without coverage on a guaranteed-issue basis.

Rep. Thomas Corrects Baucus Misrepresentations

Baucus sent copies of his letter only to Secretaries O’Neill and Thompson, but House Ways and Means chairman Bill Thomas (R-California) acquired a copy and forwarded his own thoughts to Secretary Chao. Thomas writes in his capacity as chairman of the conference committee to correct Baucus’ suggestion “that his letter spoke for the Trade Act conferees…”

Thomas says, “Specifically, Senator Baucus contends that the conferees did not intend to allow states to enter into arrangements with individual insurers through state-based coverage options. That is exactly what the conferees intended.” Thomas quotes the section of the law that allows a state to enter into an arrangement with “a group health plan, an issuer of health insurance, an administrator, or an employer.” He adds, “The language is quite clear: states may contract with insurers in the individual market to provide health coverage for eligible individuals.”

Thomas also objects to Baucus’ interpretation of the three-month continuous coverage provision. He notes that allowing people to go without coverage for an unlimited amount of time would create “a significant adverse selection problem … as people would wait until they got sick before buying health insurance.” He concludes, “When the conferees agreed to these provisions, we were very clear as to what each meant and their practical impact on disaffected workers.”

Thomas, by the way, spells Secretary Chao’s name correctly and has the courtesy to send Baucus a copy of the letter.

Source: These are pretty short letters, but for some reason, very large pdf files. I will send you copies if you email me at [email protected] Please include “Baucus” in the subject head.

Washington Post Distorts Definity Numbers

The Washington Post ran a major article about consumer-driven plans in its Health section. The article by Melody Simmons is a fairly good description of the concept, though she gets her numbers wrong in trying to illustrate how they work.

Like most things in Washington, the article was prompted by a new federal initiative. Specifically, the Postal Workers Union will be offering a Definity plan to federal employees this year in its FEHBP program. This is important because all 9 million federal employees are eligible to sign up for the program by paying a small membership fee.

It is also interesting because the federal unions have fought tooth and nail against various efforts to get MSAs included in FEHBP. Simmons says the premium for the program is “slightly higher than most federal employee HMOs but as much as 20 percent less than a typical PPO plan.” Each individual will get $1,000 to apply towards a $1,600 deductible (double those numbers for families). After reaching the deductible there is an 85/15 coinsurance for services within the PPO up to a $4,500 stop-loss limit and 60/40 for out-of-network services (up to $9,000).

Simmons quotes Families USA’s Ron Pollack as calling these plans “a wolf in sheep’s clothing,” designed merely to shift costs from employers to workers. She then works through some “hypothetical” family situations and concludes the consumer-driven product would be more expensive than the other options.

But her numbers don’t add up, and she plumb forgets to subtract the $2,000 cash account from the family’s out-of-pocket costs. I expect the numbers came from Ron Pollack, and Simmons took them at face value–never a good idea when dealing with Families USA. Still, she concludes the plans are designed to “Allow consumers the freedom and flexibility to choose how and when to spend for their care.”

Source: Definity sent a blistering reply to the Post, pointing out Simmons’ errors, and the Post apologized for them. They apparently have also removed the article from their archives. But Definity’s response may be found at: http://www.washingtonpost.com/wp-dyn/articles/A59337-2002Nov2.html

New Insurance Model Proposed

Finally, writing in Modern Healthcare, James Rice argues there is a need for “new insurance products for (our) aging society.” He says the “old insurance models are not designed for the exploding costs and complex risks” of a demanding and aging population. He argues, instead, that we need a new insurance product (a “blended senior annuity”) that will combine a life annuity, LTC coverage, disability, life insurance, and “managed care health insurance that emphasizes health promotion and disease management.” He doesn’t much care if this product is offered as a government program or a private product, and he thinks all industrialized societies need to move in this direction.

It is a provocative thought and certainly conforms to growing thinking that health insurance needs to move towards a financial services model, rather than a “prepaid health care” model.

Source: http://www.modernhealthcare.com/article.cms?articleId=27639

Greg Scandlen is senior fellow in health policy at the National Center for Policy Analysis in Dallas, Texas and assistant editor of Health Care News. To sign up for his free weekly e-newsletter, Scandlen’s Health Policy Comments, log on to http://www.ncpa.org/sub. Email Scandlen at [email protected].