There has been a lot of recent discussion about insurance companies’ sudden entrance into the health care debate. The Washington Post referred to the health insurers as Obama’s “top foe” last week, mainly as a response to actions taken by America’s Health Insurance Plans (AHIP), industry trade group, including an advertising campaign opposing health care reform and a controversial PricewaterhouseCoopers report commissioned by AHIP analyzing the recent Senate Finance Committee proposal.

Many others have criticized AHIP’s actions, claiming that AHIP is scared and attempting to block health insurance reform as a last ditch resort. Well, of course. The health insurance industry is reacting because the public option will put them out of business. Although they are not saints, the health insurers simply pay claims and charge premiums. In the end they make a 3% profit out of doing so. They also subsidize Medicaid and, to a lesser extent, Medicare-by paying doctors, hospitals, and more. The payment difference is not by choice-rather, free (and oligopolistic) market forces at work.

The idea that a public option will make health care more affordable can only happen in 2 ways: (1) pay doctors, hospitals, and others less. This may be a good idea, but there are consequences of monopolistic, heavy handed pricing tactics; (2) we can have taxpayers subsidize the public option.

The idea that the public option will save on administrative costs is not realistic. What does Medicare do for administrative costs? It contracts with Blue Cross and other insurance companies! If you still don’t believe it, go visit any major health insurer headquarters in CT (Anthem, Aetna, Cigna…). The places are half empty, having massively reduced costs over the last 5 years. “Profiteering” may be considered bad, but these insurers are very lean.

We don’t like HMOs, because they are too restrictive. We don’t like limited benefits so we pile on mandated benefits each year. We don’t like high deductibles, but we do like high tech cures. There is no ceiling and our solution? A public option? If our appetites are insatiable, NO option can solve the problem.

The proposed national health insurance plan has said it will price its products competitively or slightly below private insurance pricing. This could be a very tricky exercise. For example, in Westchester County, NY, a 25 year old male buying a PPO policy would pay between $1200-1500 per month. Up the stream in Stamford, CT, a 25 year old male could buy a similar policy for $100-$150 per month. Where will the government price its policy for 25 year old males? Will the government plan be subject to state regulations, state mandated benefits, state regulatory compliance, state premium taxes, graduate medical education fees, income taxes, or any of the other wide array of fees that today’s health plans pay? Actually, health plans don’t pay those fees. They pass them onto consumers, thereby raising the cost of health insurance.

A better question is how will the national health insurance plan save money over the competition? Reduced administrative fees? If all the national health plan does is reduce administrative fees, it will be an enormous failure, because today’s problem is not administrative fees. It is the 10-15% medical cost trend that occurs every year in both Medicare and private insurance. You can cut administrative fees that average 10-15% in the health insurance industry to 0, but a year later you’d have the same problem because the other 85% of the medical cost went up 10-15% and boom! You have the same problem.  So, before we jump onto the national health care plan bandwagon, we probably should know how plans are going to be priced, and, secondly, the cost of those plans, other than what they do in Medicaid and Medicare, which has ratcheted down fees to doctors and hospitals.

On Wednesday June 17 the Senate Health, Labor and Pensions Committee began the public drafting of legislation that will overhaul the national health care system. This process will be a top priority for both sides of the Capitol for at least the next six weeks, if not longer. Democrat Senator Chris Dodd from Connecticut took lead over the health committee proceedings earlier in June when his close friend Senator Edward M. Kennedy became to ill due to his battle against brain cancer.

In his opening statement, Senator Dodd described how the bills will have a huge affect on all Americans and that all Americans should be entitled to enjoy good health. Senior Republican Senator Michael E. Enzi of Wyoming used his opening statement to criticize Democrats by saying their legislation efforts are a “wasted opportunity” since the committee should be trying to produce legislation that would reflect a broad consensus. Enzi also said that Democrats are rushing health care reforms along too quickly to do a good job.

Some of the main issues being discussed by the Senate concerning the reform are cost, the new public insurance plan which would compete with the private market and whether employers must provide health care for their employees.

Beginning July 1, a new law in South Dakota will expand the South Dakota High Risk Pool to children with preexisting conditions that may not be able to get coverage any other way.

The law will help to cover approximately 455 children that are under the age of 19 who are considered medically uninsurable.  Governor Mike Rounds explains that “Every child in South Dakota should have health insurance, and now every child can. The South Dakota High Risk Pool will begin taking applications today for children who have been without health care coverage.”

The open enrollment period is from July 1 through August 29 and allows any child who has been without health insurance coverage for 12 months or longer can enroll without a pre-existing condition waiting period. Other requirements include:

Younger than 19
U.S. citizens
South Dakota residents

Monthly premiums range from $125 to $240 a month for children who qualify for the South Dakota Risk Pool. Deductibles range from $1,000 to $10,000 a year.

Though 455 children does not seem like a lot, especially compared to the 200,000 uninsured children in the state of South Dakota, but it’s a start and South Dakota is definitely making a positive stand for uninsured children.

The commonwealth of Massachusetts may soon drastically change the ways doctors and hospitals are paid. Under the current system, health care providers are paid on a negotiated fee for each individual procedure. Massachusetts has created a commission attempting to completely revamp this system; they are proposing a system in which each patient would have a set payment that would cover all their health care costs for an entire year. The “fee-for-service” system “has all the wrong incentives,” said Dolores Mitchell, a member of the Special Commission on the Health Care Payment System and head of the state employees’ insurance program. “It encourages excessive use and does nothing to discourage waste. People know the system has been dysfunctional for years.” While the plan seems to have the good intentions of lowering health care costs in the state, the idea is not practical. First, and most obviously, the idea does not make sense because medical costs are very difficult to structure under one fixed rate. As Dr. James Mongan, president of Partners HealthCare, the state’s largest hospital and physician network stated in early May: “Most of the healthcare system is not structured in a way that could really work out a very rational global payment system.” If doctors and hospitals are supposed to stay under their budget, should physicians refuse to give care to those who have already exceeded their “fixed payment?” Also, what if there is an emergency incident where a patient needs a procedure that would cost much more than their fixed rate? The biggest problem I see, however, is that the government will have much too large of an influence on the health choices of individuals. Who is the government to determine what procedures each person needs? Those choices should still be left up to the patients’ physicians. While the government may view some of the procedures unnecessary, they are not the experts in healthcare. Doctors need to be able to make their informed choices and not operate under fixed payment plans in order to perform the best care for their patients.

Government Health- Reform Plan Viewed as “Fallback” Option

The vociferous debate on whether to implement a government-backed health plan to compete against private insurers continues to thrive in Congress. Last week, Senator Olympia Snowe (R-Maine) met privately with several different members of Congress to discuss health care reform legislation. One option that Snowe supports and that continues to gain momentum in the search for a compromise is a “fallback public plan” that would be implemented in the next few years. Essentially, the fallback option gives private health insurers the chance to cut costs and increase accessibility before a government-backed public plan would be put in place. A similar option was included in the legislation that created Medicare Part D prescription drug coverage, but a public plan was never created because private companies were able to meet the legislation’s goals and standards. Snowe has had fruitful discussions with a group of bipartisan senators on the Senate Finance Committee, chaired by Sen. Max Baucus (D-Montana). “Fallback is on the table,” Baucus stated at a Kaiser Family Foundation on May 21. Despite the support of the fallback public plan among many bipartisan members of Congress, many have a very difficult time supporting any kind of government-backed plan. A group of House and Senate Republicans claimed on Tuesday the government-backed plan would have “the compassion of the IRS, the efficiency of the post office, and the incompetence of Katrina assistance efforts.”

Everyone knows that health coverage is in dire need of help. The government has proposed a public plan that Republicans believe may force private insurers out of business. Many believe that there is a middle ground that should aim to make health insurance more affordable without the addition of competition for private insurers.

Universal coverage is said to increase premiums for everyone since the large amount of uninsured people will begin to get coverage. Uninsured people raise the premiums by approximately 1.7%. Universal coverage will raise the premiums by a higher percentage but reforms that increase the number of people with health insurance may make that 1.7% even smaller.

Michael Cannon of the Cato Institute states, “There is no evidence that a dollar spent on universal coverage will save more lives than a dollar spent on clinics, or reducing medical errors, or nutrition, or fighting poverty, or even improving education.” This argument is to ensure that universal coverage, though it’s a good idea in theory, has an obligation to see that people who cannot afford insurance get access to good health care but there should be a better way. Young and healthy people will be forced to overpay under a universal coverage plan.

Another approach would be an easier way for people to buy their own health insurance. Any tax breaks given to employers can be applied to individual insurance policies. This relieves the anxiety of losing insurance when you leave a job and you can take your insurance wherever you go.

As of April 1, smokers will begin paying 62 cents more a pack for cigarettes when the new federal tax takes effect.  In some places, cigarettes may cost more than $7 a pack and cartons selling for more than $50. After April 1, a pack-a-day smoker may be paying more than $2,500 a year on cigarettes.

And cigarettes aren’t the only tobacco products to increase in price. The April 1 tax will also affect chewing tobacco, cigars, and rolling papers. The tax for cigars is not as significant as cigarette tax, but 40 cents adds up.

Some increases that have already occurred include:

-R.J. Reynolds Tobacco: raised prices of Kool, Camel, Winston and Salem cigarettes by 44 cents

-Philip Morris U.S.A.: prices of Marlboro, Virginia Slims, and Parliament cigarettes rose by 71 cents a pack

The new tax is a product of President Barack Obama’s bill that was signed into law called the Children’s Health Insurance Program Reauthorization Act. This act covers uninsured children whose families make too much to be covered under Medicaid but not enough to afford health insurance.

Increases per pack of cigarettes of some states:

-Arkansas: $.56 a pack

-California: $1.50 a pack

-Georgia: $1 a pack

-New Mexico: $1 a pack

-South Carolina: $.50 a pack

“Providing health care to more than ten million children through the Children’s Health Insurance Program will serve as a down payment on my commitment to ensure that every American has access to quality, affordable health care,” said President Barack Obama. He also stated that “As the worsening economy causes families to lose their jobs and health insurance, it is vital that we redouble our efforts to ensure that every child in America has access to affordable health care. That is why I am pleased that the Senate has joined the House in passing bipartisan legislation to provide health insurance to children whose families have been hurt most by this downturn.”

The Senate passing of legislation that will provide government-sponsored health care to approximately 4 million uninsured children is the start of Obama’s health care overhaul. The bill was approved yesterday 66 to 32 and will insure children in families that earn too much to qualify for Medicaid but not enough to afford private health insurance, increasing the amount of children who will be covered from 7 million to 4 million. The joint state-federal program will cost an additional $32.8 billion on top of the $25 billion over the next 4 ½ years. The expansion would be paid for by raising the cigarette tax from 39 cents a pack to $1.

“Low-income, uninsured kids all across America have been waiting for Congress to fulfill the promise of the Children’s Health Insurance Program for them,” said Senate Finance Committee Chairman Max Baucus. The House passed a nearly identical bill a few weeks ago with a vote of 289 to 139.

Similar legislation had been vetoed twice by former President George W. Bush. On the other hand, President Obama is eager to sign the legislation to begin the coverage that will hopefully lead to coverage for all Americans.

Along with the plans to build up clean-energy industries and boost security at U.S. ports, President Barack Obama is also promoting a plan to expand health insurance coverage in his stimulus package. His stimulus package is a part of the broader effort to pull the economy out of the recession it has been in the past year.

The report released on Saturday outlined the priorities for the two-year stimulus package which included health insurance coverage to the 8.5 million people who lost their jobs this past year. The $825 billion package of spending and tax cuts is a two-year plan that house Democrats have already begun working on.

Senate Version of Stimulus Package

The senate version of the stimulus package includes $149 billion in funds for health care. The package includes a provision that would extend Medicaid to families who have become ineligible because their incomes have increased at a cost of $1.3 billion over the next 10 years. The package also includes federal subsidies for 65% of the health insurance premiums under COBRA for 9months.

Another inclusion in the package is approximately $23 billion for health care information technology, whereas the House version is about $3 billion less at $20 billion.

House Version of Stimulus Package

The house version would allow states to expand their Medicaid programs to low-income, recently unemployed workers at a cost of approximately $9 billion through 2010. The house version of the package includes federal subsidies for 65% of the health insurance premiums under COBRA for one year. The house would also include in their version of the package, a provision that would allow recently unemployed workers ages 55 and older or those with at least 10 years of tenure at their jobs to continue to receive COBRA. They will receive COBRA until they find a job or reach 65 and are eligible for Medicare. The senate version does not include this provision.

“If we do not act boldly and swiftly, a bad situation could become dramatically worse,” Obama said on Saturday.