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Republicans Skeptical on Public Plan for Health Care Overhaul

By Jane Norman and John Reichard, CQ HealthBeat

May 5, 2009 – Republicans on the Senate Finance Committee expressed deep skepticism Tuesday about a public plan option as part of the health care overhaul, pressing witnesses at a roundtable hearing on how such a plan would work without holding an advantage over competing private insurance plans.

Committee Chairman Max Baucus, D-Mont., has been careful to include Republicans as he seeks sweeping health care changes in a country in which one in three Americans went without insurance for some period during 2007 and 2008 and a plummeting economy has deepened the problem, he noted. There weren't any fireworks, but senators did not appear to be sharing much common ground yet.

"It's interesting how this public plan is now called the consumer-oriented plan," said Sen. John Cornyn, R-Texas. "I think it's more descriptive to say it's a Washington-directed unfair competition plan, because the government isn't a fair competitor. The government price fixes, tells how much it is going to pay, take it or leave it. That's the way it is now with Medicare and Medicaid."

But New York Sen. Charles E. Schumer, a Democrat, took exception to arguments that a government-run insurance exchange with a government-run insurance option on the menu would have an unfair advantage because the government would both compete in the exchange and set the rules of competition.

"Some of you said you don't want the public plan to have an unfair advantage — I'd agree — but just as bad as a public plan with an unfair advantage is a proposal with no public plan at all," said Schumer. People "have problems with the government sometimes but they have a lot more problems with private insurance companies. And the bottom line is you need somebody who is not a private insurance company to be in the mix. And there are many of us who feel very strongly about that."

The beginning of the hearing was delayed by about four minutes when a series of eight protestors stood up and, one by one, spoke out in favor of single-payer health plans like Canada's to cover the nation's 46 million uninsured, an idea endorsed by some House Democrats. "We need to have single payer on the table," said one man, shouting. "I have friends who have died who don't have health care, whose health care didn't withstand their personal health emergencies."

Each protestor was hauled out of the packed Dirksen Senate Office Building hearing room by Capitol Police. Baucus urged the remaining audience members to listen to the discussion calmly. "I deeply, deeply respect the views of all the members of the audience," he said, adding that single-payer or a public plan is "a view many people have — it is a view which I respect — there are other approaches to health care reform that I also respect." A coalition of groups including Physicians for a National Health Care Program and the Prosperity Agenda later took responsibility for the protest.

Sen. Pat Roberts, R-Kan., known for his dry humor, said the protestors "undoubtedly were from the House — that's just the way they are. I'd mark 'em down as undecided."

Baucus gathered 15 experts to discuss with committee members the issue of coverage in an overhaul, including business, labor, insurers and think tanks. The meeting was the second roundtable for the committee after a first that looked at delivery options. "Now we're moving on to tougher issues," said Sen. Charles E. Grassley, R-Iowa, who along with other Republicans such as Sen. Orrin G. Hatch of Utah, wondered how the cost could be borne by states and the federal government if Medicaid is extended to more people, one idea under scrutiny.

Hatch said that expansion of Medicaid to those low-income people at living at 100 percent of poverty would cost $500 billion to $700 billion over 10 years for the federal government. An expansion of Medicare to younger retirees 55 and up might prompt bankruptcy for the Part A Medicare hospital benefit by 2015, said Hatch. "To me, a combination of Medicaid, Medicare and SCHIP (State Children's Health Insurance Program) expansion has much the same effect as a public plan," he said.

But Ron Pollack, executive director of Families USA, said something has to be done to upgrade Medicaid because so many people lacking insurance are very poor yet still can't qualify now for the program. "If we are going to be serious about covering people who need care the most and who are least able to get it, we are going to have to upgrade Medicaid and create a national floor," said Pollack, "so that nobody can fall through."

Hatch said he would prefer subsidies for low-income people to obtain private coverage. "We can have a lot of flexibility to do this coverage in other ways," he said.

More doubt about a new public plan came from Roberts, who said health care access already is a problem in his largely rural state. "I really worry about the availability of health care providers, as we have seen today that we're rationing health care," said Roberts. "And here we're talking about superimposing this big plan over the current plan. Not that I don't want reform."

Grassley observed that some advocates of a government-run public plan say it's needed to keep private plans honest, and asked the panelists if the same effect would be achieved by reforming ratings and requiring insurers to take all applicants. Stuart Butler, vice president for domestic and economic policy studies at the Heritage Foundation, said it would; the issue is whether a level playing field can be set up with a government plan included, he said. "The public plan will be your plan. Everybody will see it that way. So I think it's impossible to imagine a true level playing field in that circumstance."

In the Federal Employee Health Benefits (FEHB) system, which covers 10 million workers, the same questions arise but broad rules are set along with negotiations on a national basis to ensure benefits are available everywhere across the nation, Butler said. "You don't need a public plan in the FEHB and I don't think you need it generally," he said.

Karen Ignagni, president and CEO of America's Health Insurance Plans, said the answer to Grassley depends on the desire for government regulation, pointing out that her group is advocating additional regulations that would change the marketplace and even out problems for consumers. "We are ready to be accountable for those rules," she said.

Building on the employer-based system with improvements such as tax credits, insurance market reforms and personal responsibility for obtaining coverage was voiced as the preference of the Blue Cross and Blue Shield Association, which includes 39 community-based companies that provide insurance for 100 million people.

Scott Serota, president and CEO of the association, said if the government pays providers the same rates as under Medicare and Medicaid and tries to expand coverage at the same time to millions of people, "it would have a tremendously, potentially devastating effect on access."

But Len Nichols, director of the health policy program at the New America Foundation, said, "I think in fact you could design a public plan that could be competitive" and 30 states have been able to do that for their employees with their own self-insured plans competing with private products.

Nichols, a health economist, said in his prepared testimony that many Americans distrust private health plans and a new public plan would assure them their plan is accountable to consumers and not profits. A public plan also would serve a benchmark role. But Nichols said all insurance market rules would have to apply to all plans equally, the authority managing the insurance marketplace couldn't be the same as the public health insurance plan, and the plan couldn't leverage Medicare to claim an unfair advantage.

Said Schumer: "I don't think the public plan should have an unfair advantage but it would be giving all of you in the insurance industry an unfair advantage not to have a public plan, particularly given the fact that in many states we don't have any real competition" among insurers.

"So I'd like to focus on trying to make the public plan fair . . . so it's a fair competitor as opposed to having an unfair competitive advantage."

To that end, Schumer proposed a "Plan USA," which he described as a "consumer-driven public health plan." He said it would operate under the same rules as private plans and would be subject to rules requiring the issuance of insurance policies regardless of health status and could not charge rates based on health status.

The plan could not be run by the same entity that runs the insurance exchange. The plan would have to be self-sustaining financially, and government could not use denial of participation in Medicare as a way to force providers to accept public plan enrollees. The public plan would have to meet the same minimum standards for plan benefits, and subsidies to buy coverage could not be greater for public plan enrollees, Schumer said.

Pollack said he agreed with much of the Schumer proposal but said certain advantages enjoyed by the public plan should not be dropped. For example, unlike private insurers, the plan would not face the same costs for marketing and for sales agent fees and would not have to charge more to make a profit. And it would likely enjoy larger enrollment than any single private plan and should enjoy the greater economies of scale it has as a result, Pollack said.

However, Butler said he wondered if the criteria Schumer said the public plan would have to meet are realistic. He noted for example that Schumer would require the entity running the plan to be separate from that controlling the insurance exchange, but ultimately Congress would control both.

Members also discussed how to make more choices available in coverage, again citing the FEHB. Sen. Ron Wyden, D-Ore., said that "people want coverage like their members of Congress have — that's what you hear again and again and again." The key is individual choice among plans, said Wyden, and many Americans don't have a choice of plan because only one is offered by employers.

Sen. John Kerry, D-Mass., said he is moving ahead already with legislation that would do away with gender rating in insurance, with women charged higher premiums than men for identical coverage. "It seems to me that's insurance discrimination," he said. Ignagni told him "we believe gender should not be the subject of ratings" and her association has recommended an end to it.

A third roundtable meeting on May 12 will focus on financing.

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