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I suppose that opponents of healthcare reform will focus on the one negative in the analysis released today by the Congressional Budget Office:  i.e., by 2016 individual health plan premiums would be 10% to 13% higher after reform than under current law.  To do so, however, would be a narrow and intellectually dishonest interpretation.  The CBO report in my view is the strongest statement yet on the cost benefits of reform.

First, the issue of individual premiums.  Yes, they would be higher on average, but that’s because people would be getting much better coverage.  Notes CBO:

The average insurance policy in this market would cover a substantially larger share of enrollees’ costs for health care (on average) and a slightly wider range of benefits.

Furthermore, even though premiums would be higher, most Americans wouldn’t have to pay the higher rates because of subsidies included in the reform legislation.  In fact, 57% of Americans would be eligible for subsidies, CBO notes; the amount these subsidized individuals would pay would be 56% to 59% lower than under current law.  Individual (or non-group) would account for 17% of the commercial market following reform or 32 million people — of which 18 million would be paying much less for much better health insurance.

Now here’s the big news.    According to CBO, premiums for large employers (i.e., more than 50 workers) would be unchanged or down as much as 3%.  Large employers make up 70% of the commercial market or 134 million people.  Small groups (up to 50 workers) would see premiums range from up 1% to down 2% (Note: about 12% of small groups would be eligible for subsidies; their premiums would fall 8% to 11%).  Small group makes up 13% of the commercial market or 25 million people.  

And what about all those fears of cost-shifting to the private insurance market?  CBO notes:

The effect of the proposal on premiums through changes in cost shifting seems likely to be quite small because the proposal has opposing effects on different potential sources of cost shifting, and the total amount of cost shifting in the current health care system appears to be modest relative to the overall cost of health insurance.

So to reiterate: under reform premiums for 134 million people in large groups would be flat to down, premiums for 25 million people in small groups would be flat to down, costs for 18 million people with subsidized individual plans would be down (a lot) — and costs for 14 million unsubsidized individuals would be up 10% to 13% because they’re getting much better coverage.

All of which is why the CBO analysis is a slam dunk for reformers.

Addition (Dec. 1, 9:47 a.m.):  Sorry, I failed to note that the CBO analysis specifically referred to the Senate bill.

Jeffrey Flier, dean of Harvard Medical School, comments on healthcare reform in the Nov. 28 issue of The Economist:

While the legislation would enhance access to insurance, the trade-off would be an accelerated crisis of healthcare costs and perpetuation of the current dysfunctional system — now with many more participants. This will make an eventual solution even more difficult.

The New York Times had a reasonable editorial this past Sunday in support of a public health plan — while noting the very real limitations of the current proposals.

We wish the proposed public plan could be powerful enough to demand low rates from health care providers, charge much lower premiums than private plans and attract large numbers of enrollees. But neither the House nor Senate versions would have that kind of power.

As always, Maggie Mahar has some provocative thoughts on why the debate around abortion and healthcare reform suggests that a single-payer government-run system may not be the best solution for America.

A single-payer system would have put us at the mercy of whomever happened to take control of Washington. I’m very happy to have a public plan as an option. But since I don’t know who will be in the White House in the years to come, I’m glad that government-run health care won’t be the only game in town….I want alternative insurance options, especially from nonprofits such as Kaiser Permanente. And I don’t want to find myself locked into an insurance plan run by conservatives — or Democrats — who feel they have a right to impose their religious beliefs on my access to care. 

I’m not sure I’m quite that cynical, but given the number of times I’ve been disappointed, maybe I should be.

I called Harvard Medical School’s David Himmelstein, M.D., last week to talk about his latest research report — the one suggesting that there’s no evidence that wiring hospitals for computerized order entry and electronic medical records saves money.  Or to quote from the report, published in the The American Journal of Medicine:

As currently implemented, hospital computing might modestly improve process measures of quality but does not reduce administrative or overall costs.

I tend not to be too cynical about health IT’s promise because in general I’m a believer.  But as Himmelstein points out, “We’ve been hearing it’s going to happen any time now for 45 years, but it’s not in the foreseeable future.”  The rub, as many who follow the issue closely know, is around hospital payments and incentives.  “What kind of hospital administrator in their right mind would install a system that reduces billings?” Himmelstein wonders.

Shift gears now to wellness and disease management.  Again, I’m a believer in helping people get healthy, stay healthy and better manage chronic conditions.  It makes intuitive sense.  Again, however, there’s scant evidence of cost savings.  That was the finding of CMS a year ago in its analysis of the Medicare Health Support disease management pilot program.  It was also the finding of benefit consultant Milliman in evaluating employer disease management and wellness initiatives.

All of which brings us to healthcare reform and the hope that legislation will bring significant savings.  I’ve been skeptical.  So have others.  (See John Cassidy’s recent New Yorker piece titled, Some Vaguely Heretical Thoughts on Health-Care Reform).  Himmelstein is downright dismissive.  Just to be clear, Himmelstein is a self-described member of the “radical left” who favors single-payer healthcare.  So these aren’t the views of a conservative ideologue out to kill reform or the claims of some hyperbolic health insurance industry report. 

“The mechanisms in the bills around cost controls are a joke,” he says.   These include advisory councils on Medicare payment policies; the notion that scheduled cuts to Medicare provider payments will actually stick; payment reforms including risk-adjusted capitation; and the watered down public health plan — all of which Himmelstein says are “smoke and mirrors.” 

Or as the Congressional Budget Office said of the President’s Independent Medicare Advisory Council, “Achieving large reductions in projected spending would require fundamental changes in the financing and delivery of health care….In CBO’s judgment, the probability is high that no savings would be realized.”  At most, CBO said, savings from the President’s council would be $2 billion over 10 years.

Himmelstein’s solution to all this is the same as mine: a highly regulated public-private insurance market or single-payer healthcare.  “Those are the only conceivable ways to make it work,” he says.  So let’s be clear: I support this round of reform (including both the Pelosi and Reid bills) but this is just an incremental step — the consequences of which will have to be dealt with at a later date.

Senate minority whip John Kyl (R-AZ) — just prior to the historic procedural vote in which the Senate favored by 60-39 allowing the Patient Protection and Affordable Care Act to proceed to the floor for debate:

“Any senator that votes for this bill has to know that there’s a 97% chance that this bill ends up passing.”

I don’t know about the percentage, but I’d have to agree this vote suggests that healthcare reform – for all the flaws in both the Senate and House bills — is actually going to happen.

Should be a fun weekend: an important procedural vote on healthcare reform in the Senate on Saturday, followed by the Giants-Falcons game on Sunday.  The Senate will need 60 votes (i.e., every Democrat) to bring the healthcare bill to the floor, and given the recent play of the Giants defense the team will need to score nearly that much to win.  While neither is guaranteed, I’m betting Senate Majority Leader Harry Reid (D-NV) gets the votes he needs.  I base this on nothing in particular except the gut feeling that in the end the Democrats will fall into line.  (Update: The Dems indeed fell in line with a final vote of 60-39).

The Senate bill received a favorable scoring from the Congressional Budget Office, which stated that it would cost $848 billion over 10 years without adding to the federal budget deficit.  In fact, CBO said, the bill would reduce deficits by $130 billion over 10 years.  It’s important to note, however, that politically difficult cuts in Medicare payments are assumed in the scoring.  The bill, which would take effect in 2014, is expected to reduce the ranks of the uninsured by 31 million over 10 years; however, about 24 million people would remain uninsured, including about 8 million illegal aliens, CBO said.  About 25 million people would purchase insurance through an exchange, CBO said, while an additional 15 million would be added to Medicaid and CHIP.  Medicaid eligibility would be raised to 133% of the federal poverty level and include childless adults.  Only 3 million to 4 million people would choose the public health plan, CBO said. 

It’s not perfect legislation by any means, and I still don’t believe claims the bill will control costs.  But it’s time to take sides and so I say…Go Harry!  Go Giants!

Sen. Harry Reid (D-NV) during his announcement of the Senate healthcare reform bill.

This past year, 750,000 Americans filed bankruptcy.  Over half of these bankruptcies dealt with healthcare costs.  More than half of the people who filed bankruptcy because of healthcare costs had insurance.

One of the valid concerns the health insurance industry has with healthcare reform is that the penalties in the individual mandate are so small, healthy people will simply wait until they are sick before buying coverage — a formula for adverse selection.  Matt Perry of Wachovia notes, however, that the Senate bill helps mitigate the risk:

The new Senate bill would create an annual open enrollment period for the purchase of insurance and would not allow purchase of insurance outside this period, save for exceptions. This would mitigate the adverse selection problem by not allowing people to wait until they’re sick to buy coverage.

The House bill contains a similar provision.

According to a Congressional Budget Office estimate, the public plan proposed in the Senate healthcare reform bill would attract just 3 million to 4 million enrollees.  As previously reported, the House bill’s public plan would attract about 5 million enrollees.  Like the House bill, the Senate bill would require the public plan to negotiate rates — limiting its ability to keep costs and premiums low; i.e., the public plan would have premium rates comparable to private plans, CBO says.  The Senate bill would also allow states to opt out of offering the public option; CBO figures about one-third of states would opt out.  In both bills, CBO says, the public plan would end up with the sickest, costliest members because it wouldn’t manage utilization as tightly as private plans.  So why are we arguing about the public plan?

I’ll have more later on the healthcare reform bill released yesterday by Senate Majority Leader Harry Reid (D-NV).  While some Wall Street analysts took a measured tone (Christine Arnold of Cowen called it a “modest improvement” over the most recent Senate Finance Committee version), Oppenheimer analyst Carl McDonald came out with a strongly worded commentary on why the bill is bad for the insurance industry and should be killed:

There’s so much wrong with the Senate health reform bill introduced Wednesday evening it’s hard to know where to start. Putting the stocks aside for a minute, the bill is bad policy, because it does very little to control health care costs, and the weak individual mandate gives most people no reason to buy expensive insurance until they are already sick, since the penalties are so modest…For the insurance industry, there’s a litany of troubling news, including a government run plan, the weak mandate, a 3 to 1 pricing band on community rates, and a cap on profits and administrative costs. On a positive note, most of the changes wouldn’t be implemented until 2014.  The stocks probably won’t react well on Thursday to this legislation, but the good news is that this bill seems to have little chance of securing the 60 votes necessary for passage without major modifications, and the inclusion of a government run plan remains the biggest sticking point.

The public health plan is once again front and center in the healthcare reform debate — included in legislation passed by the House and still on the Senate’s radar. Will the public plan survive? Carl McDonald of Oppenheimer and Carl Mercurio of CRG comment.

Healthcare reform still has a way to go, and there are a lot of flaws even in the more liberal House legislation.  But no matter which side you’re on, you have to admit the House vote in favor of healthcare reform is historic.  Scott Fidel of Deutsche Bank comments:

While passage of the House bill was a milestone for HC reform, the real surprise was probably how close the vote ended up being; the Dems had almost no margin for error in the final vote. We saw two noteworthy political themes emerge from the vote. First, a number of “Blue Dog” Democrats ended up voting in favor of the bill, thus once again proving that while they advertise themselves to the public as independent “fiscal conservatives”, they typically end up voting along straight party lines. The second theme is that the abortion issue is emerging as one of the real potential areas of controversy in the reform process, along with the public plan. Indeed, Speaker Pelosi needed to make an important last minute concession around abortion to get the approval of certain pro-life Dems. We suspect we haven’t heard the last of the abortion issue as it relates to health reform.

Both the American Medical Assn. and AARP announced yesterday their support for the House version of healthcare reform, and to me this is a big deal. 

Seniors enrolled in Medicare Advantage plans will almost certainly face benefit reductions or higher premiums following reform because of funding cuts to the program.  The cuts may be fair and justified, but that doesn’t mean there won’t be a backlash among the 10 million or so seniors enrolled in Medicare Advantage plans (I called AARP for comment, but didn’t hear back by presstime).  AARP’s support means the organization will be on the front lines educating members why reform is necessary and why it’s good for the 50-plus crowd.  Says AARP:

Today’s endorsement marks the first time in this legislative battle that AARP has put its full weight behind a comprehensive health care reform package. In the coming days, AARP will be informing its members about the health care reform package through its publications, paid advertising and more than 5 million calls and e-mails to its grassroots activists.

AARP notes the House bill would eliminate the Medicare Part D donut hole and allow the government to negotiate drug prices (two things I’ve been calling for since the Part D program’s inception), strengthen the financial status of the Medicare trust fund, expand preventive care for Medicare, lower insurance costs for AARP individuals age 50 to 64 (i.e., those not yet eligible for Medicare) and create a voluntary long-term care insurance program.  That’s a pretty good sell; that said, there will be seniors in Medicare Advantage plans who need convincing.

As for AMA, it’s support of the House legislation is tied to the Medicare payment fix for physicians — which is actually a separate bill from the reform legislation.  In other words, docs are signing on in exchange for not having to deal with the perennial issue of looming cuts to physician payments from Medicare.  So the question is will AMA still support the House bill if it doesn’t get the physician fix?  AMA doesn’t offer a clear answer.  But healthcare attorney Bruce Merlin Fried of Sonnenschein, Nath & Rosenthal does: he says AMA won’t get the fix, but will still end up supporting the legislation.