The Right Prescription

Blue Dog Day Afternoon

The conservative Democrat-Waxman deal should be taken very seriously.

By 8.3.09

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The "All Obama, All the Time" media have gone to great lengths to save his health-care reform crusade from faltering. So you might get the impression from their coverage of the shaky deal established at gunpoint by Obama consigliere Rahm Emanuel between conservative Congressional Democrats and Representative Henry Waxman that "real reform" is at hand.

I am afraid they might be right.

The deal cut with conservative Democrats consists largely of assuring that the hospitals in their districts are not run out of business by a government takeover of health care. Meanwhile Democrats are promising the public, as Charles Krauthammer summarized, "no policy cancellations, no preexisting condition requirements… even a cap on out-of-pocket expenses."

So how do you provide no-cap coverage for 97 percent of all Americans for everything they want for less than about 10 percent of their post-tax income?

First, it is important to bear in mind that at the end of the day less than 5 percent of all Americans will receive a health insurance subsidy. So you hide the fact that for all the hype the amount of dough Americans will really get isn't much at all.

Second, you cut what doctors get paid but spread the cuts as widely as possible. And third -- and by extension -- you make the government run plan a loss leader so you can get a total takeover down the road.

What you will hear instead in the coming weeks is how the new improved Blue Dog-endorsed version protects consumers against insurance companies without creating a government-run health plan.

Indeed, House Democrats have been using a letter from the Congressional Budget Office to claim that a public plan would not hurt private insurers and -- by extension -- you and me. In that letter the CBO estimates that only 6 million people from large employers would switch to public plans

But CBO's explanation is a backhanded compliment to private insurance companies:

Although we assumed that the public plan would have somewhat lower administrative cost per enrollee than would private plans in the exchanges, the public plan would probably have to incur much of the same cost in order to attract and retain members…. we estimate that the public plan's premium would, on average, be about 10 percent lower than that of a typical private plan offered in the insurance exchanges. The most recent analysis of that difference concluded that the costs of the traditional Medicare plan were only 2 percent lower, on average, than the costs of private plans participating in Medicare to provide the same benefits.

In other words, private plans providing more benefits and coordinated care to a group of seniors much sicker than most seniors were only 2 percent more expensive than the vaunted public plan used as the model for government-run health care.

How would a public plan offer lower premiums unless it cut what it paid doctors, hospitals, and others and also rationed care? Indeed, as a recent Lewin analysis (pdf) of the Waxman bill notes: "The (Waxman bill) includes over 80 sections that alter Medicare provider payment policies for virtually all types of providers of health services including physicians, hospitals, home health agencies, skilled nursing facilities, rehabilitation hospitals and other health care practitioners…. Total reductions in payments to providers under the bill would be $361.9 billion."

In addition, the Lewin study shows that even after scheduled Medicare cuts to a small percentage of AMA members are restored, total physician payments are cut (through Medicaid and other Medicare payment machinations) by $32 billion through 2011.

These cuts will produce lower premiums in public plans. They will allow the public plans to attract nearly 70 million younger and healthier people who hardly use the health care system. And they will be not requiring or receiving a subsidy.

Once the younger, healthier types enroll, the rest of the employees in private plans -- the sicker and older folks -- will come along or will be dumped as premiums rise. Trapped by the requirement not to adjust premiums or cap benefits, insurers and employers will make the logical choice. A government takeover of health care will be a fait accompli.

And as the number of people in public plans swell, the pressure to control costs will grow. CBO estimates that the cost of single payer care will grow rapidly by 2015 and add greatly to the deficit by 2019 even as Medicare goes bankrupt. The push to ration care and delay treatment will grow.

Who will be hurt, and how, is the subject of my next article.

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About the Author
Robert M. Goldberg is vice president of the Center for Medicine in the Public Interest and founder of Hands Off My H ealth, a grass roots health care empowerment network. His is new book, Tabloid Medicine: How the Internet is Being Used To Hijack Medical Science For Fear and Profit, was published last month by Kaplan.