The Return of the Government-Run Health Plan…
You may have seen word that Progressive Caucus Co-Chair Lynn Woolsey and several other Democrats released a stand-alone bill (H.R. 5808) that would amend PPACA to create a government-run health plan in the new health insurance exchanges. The language very closely mirrors the original government-run plan written into Subtitle B of Title II of the legislation (H.R. 3200) that House Democrats introduced last July. There are a few technical changes, and a new requirement that any innovative payment models in the government-run plan must be certified by the Medicare actuary not to increase costs, but overall the legislation is nearly identical to the “robust” government-run plan advocated by liberal Democrats last year.
There’s a noteworthy element of the updated CBO estimate about a government-run health plan’s impact. Today’s CBO letter to Rep. Stark about H.R. 5808 stated that the government-run plan’s “premiums would be 5 percent to 7 percent lower, on average, than the premiums of private plans offered in the exchanges.” Yet one year ago, CBO told Rep. Camp that premiums in the nearly identical government-run plan included in H.R. 3200 “would, on average, be about 10 percent lower than that of a typical private plan offered in the insurance exchanges.” As yet it’s unclear why the premium impact is lower for the government-run plan in H.R. 5808 when it’s nearly identical to that in H.R. 3200, but it’s worth remembering that if premiums aren’t lower in the government-run plan, there’s no point in creating it in the first place – unless its advocates have an ideological agenda to create a single-payer health care system.
In case you need a reminder on what was in H.R. 3200, a lightly edited/revised version of the government-run plan section from my original summary of that bill follows below.
Government-Run Health Plan: The bill states that the Department of Health and Human Services “shall provide for the offering through Exchanges” a “public health insurance option” that “shall only be made available through Exchanges established” under PPACA. The bill states the plan shall comply with requirements related to other Exchange plans, and offer basic, enhanced, and premium plan options. However, the bill does not give the Exchanges the authority to reject, sanction, or terminate the government-run plan; therefore, some Members may be concerned that the bill’s headings regarding a “level playing field” belie the reality of the plain text.
The government-run plan would be empowered to collect individuals’ personal health information, posting a significant privacy risk to all Americans. The government-run plan would have access to federal courts for enforcement actions—a significant advantage over private insurance plans, whose enrollees may sue in State courts.
The bill gives the government-run health plans $2 billion in “start-up funds”—as well as 90 days’ worth of premiums as “reserves”—from the Treasury, with repayment—not including interest—to be made over a 10-year period. The bill requires the Secretary to establish premium rates that can fully finance the cost of benefits, administrative costs, and “an appropriate amount for a contingency margin” as developed by the Secretary. Some Members may be concerned that this provision would allow the Secretary to determine the plan’s own capital reserve requirements, which could be significantly less than those imposed on private insurance carriers under State law, and question why Democrats who criticized banks for maintaining insufficient reserves are now permitting a government-run health plan to do the exact same thing—unless their motive is to give the government-run health plan a built-in bias.
The bill provides that the government-run plan shall pay Medicare rates for at least its first three years of operation. Physicians also participating in Medicare as well as the government-run plan would receive a 5 percent bonus for its first three years. Reimbursement rates for pharmaceuticals within the government-run plan would be “negotiated” by the Secretary-a provision which, with respect to Medicare Part D, the Congressional Budget Office has stated would not result in any appreciable savings when compared to negotiations undertaken by private health plans.While the bill states that the Secretary “may utilize innovative payment mechanisms” to improve health outcomes and achieve other objectives, it also states that the Secretary must set payment rates “consistent with” provisions pointing to Medicare payment rates as the benchmark. Given estimates from the Lewin Group that as many as 114 million individuals could lose access to their current coverage under a government-run plan—and that a government-run plan reimbursing at the rates contemplated by the legislation would actually result in a net $16,207 decrease in reimbursements per physician per year, even after accounting for the newly insured—many Members may oppose any effort to include a government-run plan in any health reform legislation.The bill requires Medicare providers, including physicians, to participate in the government-run plan unless they opt-out of said participation, and provides that all providers who accept the government-run plan’s reimbursement rates shall be considered “preferred physicians”—regardless of their quality or expertise—and creates a new category of “participating, non-preferred physicians” who agree to abide by balance billing requirements similar to those in Medicare. Other providers may participate in the government-run plan only if they agree to accept the plan’s reimbursement rates as payment in full. Some Members may be concerned that these provisions would therefore compel providers to accept Medicare-level reimbursements, which the Congressional Budget Office has noted are 20-30 percent below private health insurance payment levels.
The bill requires the Secretary to “establish conditions of participation for health care providers” under the government-run plan—however it includes no guidance or conditions under which the Secretary must establish those conditions. Many Members may be concerned that the bill would allow the Secretary to prohibit doctors from participating in other health plans as a condition of participation in the government-run plan—a way to co-opt existing provider networks and subvert private health coverage.
Finally, the bill also allows the Secretary to apply Medicare anti-fraud provisions to the government-run plan. Some Members, noting that Medicare has been placed on the Government Accountability Office’s high-risk list since 1990 due to fraud payments totaling more than $10 billion annually, may question whether these provisions would be sufficient to prevent similar massive amounts of fraud from the government-run plan.