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Insurers Offer Own Proposal for Health Care Overhaul

By Drew Armstrong, CQ Staff

DECEMBER 3, 2008 -- It seems as though hardly a day goes by without someone putting out a plan to overhaul the American health care system, and Wednesday the health insurance lobby stepped up with its own version.

The industry's proposal would preserve a role for private insurers, require individuals to buy coverage, and focus on reducing health spending by private and public programs.

Karen Ignagni, chief executive of America's Health Insurance Plans, the industry lobby, called the individual mandate an "important goal. ... We also think it's important to build on what's working now."

President-elect Barack Obama thus far has opposed a mandate on individuals to purchase health insurance, though former Senate Majority Leader Tom Daschle, D-S.D., his pick to head the Health and Human Services Department, has supported such a requirement.

The insurance industry has been blamed for helping to kill past health care overhaul proposals, notably the plan put forward by the Clinton White House in 1993 and 1994.

"We are doing things differently, and we will do things differently," said Ignagni. "I hope that demonstrates the seriousness of our resolve but also the fact that we can actually help move the ball down the field. That's the test of whether we rise to the occasion and earn a seat at the table."

The insurance industry's 11-page proposal is broad in sweep but light on details, especially when compared with an 89-page "white paper" put out last month by Senate Finance Committee Chairman Max Baucus, D-Mont.

For example, it calls for a 30 percent reduction in the projected growth of national health expenditures, but offers only broad suggestions about efficiency and value instead of specific policy proposals.

Under the industry plan, Congress would set a target for sustainable national health spending, then set up an advisory group to make policy proposals on how to bring spending into line with that target.

Medicare already has a similar system in place for setting payments to physicians who treat seniors and other beneficiaries of the giant federal program. Doctors are supposed to be paid according to the sustainable growth rate, a formula crafted by Congress in 1997 (PL 105–33). But as spending has grown faster than the target rate, Congress has stepped in repeatedly to block cuts in physician payments required by the formula. The latest such action came in July, when lawmakers overrode President Bush's veto and blocked for 18 months a scheduled 10.6 percent cut in Medicare's payments to doctors (PL 110–275).

An advisory board, the Medicare Payment Advisory Commission, has made proposals to overhaul the physician payment system, but Congress so far has not acted on those.

The insurance industry proposal makes no mention of that Medicare system, nor of private insurer-run Medicare plans, known as Medicare Advantage. The plans are paid a subsidy well over the costs of traditional Medicare. Democrats have sought to cut those payments, and are almost certain to do so again in any health overhaul plan that emerges from the incoming Congress.

James Roosevelt, co-chairman of AHIP's policy committee and chief executive of Tufts Health Plan, said that the lobby wanted to focus only on the under-65 population not covered by Medicare. An AHIP spokeswoman said the group would have a statement on Medicare Advantage later this week.

Democrats Welcome Input

Congressional leaders praised the insurance industry's participation in the process.

An aide to Baucus said the Senate Finance chairman was "very glad to see the insurance industry come to the table to participate and looks forward to what he hopes will be constructive discussions. This proposal certainly adds to the momentum for everyone to come together."

A spokesman for Senate Health, Education, Labor and Pensions Committee Chairman Edward M. Kennedy, D-Mass., echoed Baucus' sentiment. "There's a spirit of optimism about our work to ensure quality, affordable health care for all Americans—and today's announcement adds to that optimism. The insurance industry has advanced serious proposals that deserve serious analysis and consideration," said Kennedy spokesman Anthony Coley.

Roosevelt said the proposal was the result of several years of work and a multi-city "listening tour" conducted by health insurers.
"This isn't something we've just rushed to do lately," said Roosevelt.

In fact, the proposal was the third from the insurance group since Democrats took control of Congress in the 2006 election.

In November, the industry proposed a mandate for individuals to buy health insurance, along with a guarantee that people with pre-existing conditions would be able to buy insurance.

Two years before, following the 2006 mid-terms, insurers put forward an overhaul plan to cover all Americans by expanding public programs like the State Children's Health Insurance Program and Medicaid, and providing tax credits for Americans to purchase private insurance coverage.

That was not the first time insurers proposed such an expansion, however.

In 2001, patient advocacy group Families USA and the Health Insurance Association of America, the precursor to AHIP, proposed a plan calling for an expansion of Medicaid to cover those ineligible for it, using the State Children's Health Insurance Program to cover more children and tax credits to help businesses provide coverage for low-income workers.

Mary Agnes Carey contributed to this report.

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