http://online.wsj.com/article/SB125694764832619997.html
OCTOBER 31, 2009
By JANET ADAMY
A report issued by the nonpartisan Congressional Budget Office highlights faults with both sides of the argument to create a public health-insurance plan.
The CBO said only six million Americans would enroll in the public plan proposed in the 1,990-page health bill unveiled by House Democrats, according to findings issued late Thursday. That undercuts foes' claims that such a plan would lead to a government takeover of the health-care system.
One reason, according to CBO director Douglas Elmendorf's report: the public plan "would typically have premiums that are somewhat higher than the average premiums for the private plans" offered alongside it. That suggests the House bill could fall short of one of its major goals -- lowering insurance costs -- and presents those who back a public plan with a fresh challenge.
Under the House bill, the new public plan would negotiate rates it pays hospitals, doctors and other health-care providers. It would be available starting in 2013, alongside private insurance sold through new government-run insurance exchanges.
The CBO projects that 30 million people would get their insurance from the exchanges by 2019, but only six million of those would choose the public plan.
The House bill says the public plan would be designed so that the premiums paid by participants would cover the plan's benefits and administrative costs. In other words, it is supposed to be self-sustaining rather than rely on annual government subsidies, although the government would provide as much as $2 billion of start-up funding.
For its first few years, the plan would be available only to people who buy insurance without the help of an employer, or businesses with as many as 100 employees. Later, it would be open to larger employers. In the Senate, Democrats plan to include a public plan in their health bill, though they are structuring it more narrowly so fewer people could participate and states would have the right to opt out.
The House's public plan would save money by having lower administrative costs than private plans, according to the CBO's findings. But several other factors would drive up its costs, the report said.
The plan would attract less healthy enrollees, and would probably engage in less effective management of what the CBO calls "utilization," or how much treatment customers get. The payment rates the government negotiates with health-care providers would, on average, be comparable to those paid by private insurers, eliminating a cost-saving advantage many Democrats aimed to give the plan. The CBO says its findings aren't conclusive.
Supporters of the public plan said it was a pessimistic conclusion that left out important factors. Insurance prices vary widely by state. So while the public plan may be more expensive for consumers in some states, they said, it could be a cheaper option for those in states where private insurers charge disproportionately higher premiums.
"I think you can make a case -- a credible case -- that a public option is going to be at least as interested in reducing costs as any other private health plans," said Len Nichols, director of the health-policy program for the New America Foundation, a left-leaning Washington think tank.
Mr. Nichols predicts that private insurers, fearing they will have to absorb sicker patients through the insurance exchanges, will demand higher prices in the first year of the program.
New payment models in the bill would give the government an incentive to manage care more efficiently. And, Mr. Nichols said, the government won't have to spend as much on advertising as private insurers since "the country's going to be talking about the public option."
It also is possible that the government would drive a tougher bargain with doctors and hospitals than the CBO predicts, which would allow the public plan to offer lower premiums. That would give consumers a powerful incentive to abandon private insurance for the public plan. This is a scenario Republicans warn about when they say that a public plan threatens to drive private insurers out of business.
The bill says payments couldn't be lower than those of certain other government health programs, though it doesn't spell out the details.
"We're concerned that the floor becomes the ceiling," said Rich Umbdenstock, chief executive of the American Hospital Association. "It looks like these are going to be based in part on Medicare rates, and that concerns us."
Write to Janet Adamy at janet.adamy@wsj.com
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Here is an excerpt from Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/30/AR2009103002904.html
There are still concerns from moderates over the (House) bill's cost - $1.055 trillion over 10 years - and long-term spending implications, and disputes to be resolved on how to block federal funding of abortions and prevent illegal immigrants from getting taxpayer-funded care.
House liberals fear what will happen to their bill's version of the government-run plan when time comes to merge it with whatever the Senate passes.
Sen. Harry Reid, D-Nev., said earlier this week that the Senate bill would have a new federal insurance plan with negotiated payment rates. Unlike the House bill, though, states could opt out of the plan. It's not clear the proposal commands enough votes in the Senate to survive, and it could be replaced by a standby system pushed by moderates that would not go into effect until it was clear individual states were experiencing a lack of competition among private companies.
