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The Economist has a couple of very good articles in its current issue on the U.S. healthcare reform debate.

The first is an opinion piece pointing to “two huge distortions” in the U.S. system: 1. the tax exemption for employer-sponsored health insurance, which it says encourages “gold-plated insurance schemes;” and 2. Fee-for-service provider payments that encourage overuse of care.  (Btw, the piece warns that a public health plan “could harm innovation and distort the market further.”)

In other words, The Economist argues, it’s all about fixing the incentives.  A much longer article in the same issue expands:

If American reformers doubt the power of incentives, they should visit Sweden. Like other relatively cheap OECD systems, Sweden’s single-payer model has been plagued by long waiting-lists—a sign, to American conservatives, of the rationing that goes with socialised medicine. Swedish health officials tried and failed to cut queues by increasing direct funding for hospitals and even issued an edict requiring hospitals to cut queues for elective operations to three months. Then, last year, the health ministry said it would create a fund into which it would pay SKr1 billion ($128m) a year for local authorities that managed to reduce waiting times to that threshold. Nine months ago virtually none of the counties passed, but this month the health minister revealed that nearly all had cut their queues to three months or less.

Health insurance reforms being kicked around in Congress include provisions for guaranteed issue, community rating and a variety of other regulations designed to keep coverage affordable, available and adequate.  The question is whether regulation is enough, or is a public health plan needed — as President Obama says — to keep insurers honest.

In this video interview, former Cigna public relations executive Wendell Potter says, “Regulation is not enough….I don’t think that this is an industry that’s honest enough to ever be regulated as it should be.” 

David Whelan, writing in Forbes, agrees — but he thinks a public plan will become a dumping ground for the sick as insurers continue to cherry pick the healthy.

Insurance companies find ingenious ways to get healthy members in the door while being inconvenient to sickly applicants. That’s bad news for reformers, who imagine an egalitarian world that doesn’t discriminate against the sick. The four health care proposals now getting the most attention in Congress all require HMOs to offer coverage to all who apply, regardless of their health status.

Good luck with that. Insurance companies will have a financial motive to attract and keep the healthiest members, the ones who don’t rack up hospital visits or take costly medications. If Obama Care means HMOs will have to compete with a new public plan, a disproportionate number of unhealthy people will end up in the latter.

It’s an interesting dilemma.  I’ve been a proponent of the public plan, but I’m not blind to the possibility that a government-run option will result in various unintended consequences that will have to be addressed later.

Addition (June 26, 2009; 3:13 pm): After writing the above, I wondered in true Machiavellian style why health plans would oppose a public option if they could use it as a risk selection mechanism.  Then I remembered that Matthew Holt had already asked that very question:

As far as I can tell the regulation that AHIP is promoting would put them in a similar position to the role they play in Medicare in the commercial insurance market. But without a place to dump the people they don’t want to insure.

So here’s your quiz. If insurers need a place to risk-select against which they know will have to take the patients they don’t want, why is AHIP opposing a public plan?

It’s a good question.

The Commonwealth Fund published an analysis yesterday showing that savings can be achieved in the U.S. healthcare system with or without a public health plan.   However, a public plan that pays providers Medicare rates would offer the biggest savings — as opposed to no public plan (i.e., only private plans offered through an insurance exchange) or a public plan that pays rates midway between Medicare and private health plans.

All three paths would produce substantial health system savings over the 11-year period from 2010 through 2020, with cumulative savings of $3.0 trillion under the Public Plan with Medicare Payment Rates scenario, $2.0 trillion under the Public Plan with Intermediate Payment Rates scenario, and $1.2 trillion under the Private Plans scenario….

Differences in system savings under the three scenarios derive from insurance administrative savings realized by the offer of a public health insurance plan in competition with private plans; from the tighter payment rates used by the public plan; and from the application of payment innovations and system reforms to a greater share of the insured population under the two scenarios that feature a public plan.

I’d been wondering what happened to all the voices for single-payer healthcare.  Yesterday, the California Nurses Assn. and Progressive Democrats of America issued a statement reiterating their call for single-payer healthcare. 

Not that single-payer stands a realistic chance — or any chance for that matter — of making it into reform legislation this time around.  But one day it may.  And as I said in a prior post, it should be part of the debate at the very least to help better frame the discussion.

The joint CNA/PDA press release says that all other reform proposals “suffer the same limitations” because they… 

Leave the insurance industry, with its emphasis on generating profits and revenues rather than providing care, in control of our health.

Fail to assure financial security of American families by not cracking down on insurance pricing practices.

Avoid the strongest cost controls that are achieved in a single-payer system with one shared risk pool that covers everyone, elimination of the administrative waste associated with private insurers, and use of the power of the public entity to negotiate lower costs.

Does not protect choice of doctor, hospital, and other providers, as occurs in a single-payer system, because insurers can still limit choice to their own approved network of doctors and providers.

We may have to refer back to these points one day if half-hearted healthcare reform brings about the type of unintended consequences that end up making things worse than they already are.

Scary statistical analysis (here) from Nate Silver on how health insurance industry money is influencing Senators’ likely support of a public health plan option (Hat tip: Paul Krugman).  Writes Silver:

Health care is one of those areas where both popular opinion and sound public policy seem to take a backseat to protecting those stakeholders who benefit from the status quo. But can we actually see — statistically — the impact of lobbying by the insurance industry on the prospects for health care reform? I believe that the answer is yes….

Max Baucus, who leads all current senators in money accepted from the insurance industry, was also somewhat unlikely to support the public option in the first place, but he almost certainly won’t be an advocate for it given the money he’s received. Taken in this context, one wonders whether Baucus was ever a sincere supporter of the public option, or rather, whether he used the poor CBO score that the Senate Finance Committee’s draft bill received (a draft that did not include a public option!) as an excuse not to have to bother with it.

Stephen Colbert of The Colbert Report offers his thoughts on healthcare reform in this video.  Then he talks to former DNC chairman Howard Dean (see interview here), author of Howard Dean’s Prescription for Real Healthcare Reform.

Colbert: “Is there any truth to the rumor that under this public option surgeries will be performed by ACORN volunteers?”

Dean: “Only on the members of the Senate who vote against it.”

Sadly, I don’t know whether to laugh or cry.

Wachovia recently surveyed about 200 institutional investors to get their views on healthcare reform.  Here’s what the survey found:

Overwhelmingly investors believe that healthcare reform legislation will be passed this year and that it will likely cost well in excess of $1.0 trillion over ten years. Investors expect that the majority of the currently 47 million who are uninsured will be covered by the plan.

If a reform bill is passed, investors believe the following will result: Health insurers would be the most negatively affected, while generic drugmakers and healthcare IT firms would benefit the most. Investors believe diagnostic companies, hospitals, pharmacy benefit managers (PBM) and distributors would benefit modestly, while specialty pharmaceuticals, biotechnology, devices, and post-acute facilities would be hurt modestly.

Our survey asked detailed questions of services, devices, and therapeutics subsectors. A majority of services investors believe that employer-sponsored enrollment will decline significantly as a result of the plan. Device analysts believe that the market is correctly discounting the impact to stocks from healthcare reform. Therapeutics investors believe that its industry will be negatively affected only modestly, with the exception of generic drugs.

As expected, healthcare reform appears to be stumbling over money — i.e., how to raise enough in taxes or cut enough in costs to pay for reform.  Now might be a good time to think back to paragraph 81 of Atul Gawande’s piece in The New Yorker on healthcare cost and quality variation (see prior post), in which he highlights how Mayo Clinic keeps costs down while still delivering high-quality care.

“Decades ago Mayo recognized that the first thing it needed to do was eliminate the financial barriers. It pooled all the money the doctors and the hospital system received and began paying everyone a salary, so that the doctors’ goal in patient care couldn’t be increasing their income. Mayo promoted leaders who focused first on what was best for patients, and then on how to make this financially possible.”

(Hat tip: Stateofthedivision)

For all the coverage of the healthcare reform debate, there is one thing you almost never hear discussed: single-payer or nationalized healthcare. 

I give Obama credit for trying to find a meaningful middle ground between a market-based system and a single-payer system — which is what his public health plan proposal is all about.  But listening to the reform debate, you’d think Obama’s (politically) pragmatic approach and a free-market free-for-all are the only options. 

My fear is that the unintended consequences of — for lack of a better phrase — a half-assed approach to reform may actually set us back further (see prior post).   

That’s why like it or not single-payer or nationalized healthcare should be part of the debate.  At the very least, it would help us better frame the pros, cons and consequences of what we’re being asked to sign onto. 

As I’ve written before (see prior post), all healthcare systems have their shortcomings.  But in the main, single-payer or nationalized systems are “equitable, humane and viable alternatives to a failing U.S. system.”  Proponents deserve a seat at the table.

President Obama said in a press conference yesterday (audio here) that his Administration has “not drawn lines in the sand” on his proposal for a public health plan that competes with private insurers.  He had to be pushed by two reporters to admit this, but really it’s in line with earlier comments from White House health czar Nancy-Ann DeParle (see prior post), who indicated in April that the President was open to compromise on the issue.

I view the comments — then and now — as further indication that when all is said and done there won’t be a public health plan that competes with private insurers.  That said, Obama (not known for emotion) worked himself up a bit during the press conference in support of the public plan concept, which he called “an important tool to discipline insurance companies.”

The House and the American people are on his side on the issue (see prior post).  The Senate Finance Committee isn’t.  My guess is SFC — sadly — will win the day.

Yet another survey shows that Americans overwhelmingly support a public health plan option. 

The Employee Benefit Research Institute (Washington) found that 53% of Americans “strongly support” a public health plan option; another 30% “somewhat support” one.  Only 14% oppose.  About the same number support the idea of major health insurance companies offering national health plans that anyone can purchase. 

The survey, which is based on interviews with 1000 adults, also found wide support for other health insurance market reforms such as guaranteed issue, expansion of Medicare and Medicaid, and employer and individual mandates. 

None of which is a surprise.  Americans also continue to be overwhelmingly satisfied with their current health plan.  Nothing new here either.  Even during the HMO backlash of the early 1990s, overall customer satisfaction with HMOs was pretty high — as long as members weren’t denied care when they were really sick. (see prior post)

One thing that did stand out: the study found that only 15% of Americans identified healthcare as the most critical or pressing issue facing America today.  About 47% said it was the economy.

I’m afraid the message to opponents of reform (esp. a public plan) is clear: you’re out of touch.

From the Kasier Family Foundation; click here.  (Hat tip: Justin Lake of UBS).

For some reason when women talk about healthcare I feel like they sincerely care.  It’s a bias I have, probably stemming from the fact that my internist of nearly 20 years is a woman and growing up I received the bulk of my care from a woman — my mom.  So when healthcare czar Nancy-Ann DeParle, HHS Secretary Kathleen Sebelius, and Obama policy adviser Melody Barnes talk about healthcare reform — as they did yesterday on Good Morning America (video here) — I listen.

I had expected the House version of healthcare reform to be more liberal than the Senate version, and it is. 

A draft released Friday calls for the creation a public health plan that would pay providers Medicare rates for at least three years.  The House bill also calls for individual health insurance reforms such as guaranteed issue and community rating as well as the creation of a national health insurance exchange that over time would be opened to all employers.  The House also calls for subsidies for people earning up to 400% of the federal poverty level.

Compare that to the version out of the powerful Senate Finance Committee (see prior post): No public plan, subsidies for people earning up to 300% of the federal poverty level and “adjusted community rating,” with rate variation capped at 7.5 to one.

What’s interesting is that even at this late stage in the debate, most Americans seem to favor the House approach.  According to a New York Times/CBS News poll, Americans “are strongly behind…a government-run insurance plan to compete with private insurers.”  The poll (sample size 895)  also found that Americans view getting everyone covered as being more important than controlling healthcare costs.

The tide on healthcare reform appears to have turned in favor of conservatives, and they are hammering home their market-based vision. 

Former Senate majority leader Bill Frist, M.D., urges a consumer-driven market solution to healthcare reform in this video interview on CNBC.  Former Secretary of Health & Human Services Mike Leavitt urges the type of reform in which government organizes the market but doesn’t take it over in this video interview with Fox.

I knew this was coming, but as a proponent of a public health plan I must admit it still hurts to see it (or rather not see it) in black-and-white. 

The Senate Finance Committee’s draft proposal (hat tip: Washington Post) on healthcare reform doesn’t include a public health plan that would compete with private insurers.  It does leave the door open to government funding of not-for-profit co-op health plans (essentially mutual insurers), an 11th-hour proposal that frankly raises more questions than it answers — and that’s being generous (see prior post). 

As expected, the SFC proposal calls for individual market reforms including an individual mandate and guaranteed issue.   It also calls for “adjusted community rating,” with rate variation capped at 7.5 to one.

Under the proposal, private insurers could offer up to four standard benefit packages through a “state-based exchange.”  The benefit packages would have varying actuarial values: Bronze (65%), Silver (73%), Gold (81%) and Platinum (90%).  Health plans would be required to offer at least the Silver and Gold options.

States would have the option to “contemplate multiple, competing Exchanges after five years,” according to the proposal.

Writes the Post’s Ezra Klein, who broke the story: ”Sources say that it’s a major scale-back of the outline they had before. Specifically, subsidies have dropped from 400 percent of the poverty line to 300 percent. Medicaid eligibility has been tightened to 133 percent of poverty for children and pregnant women and 100 percent of poverty for parents and childless adults. The plans being offered in the exchange have seen their actuarial values sharply lowered.”