Now That’s Health Care Reform

The House of Representatives shows how it’s done.

Click here for a guide to following the health care reform story online.

Nancy Pelosi

The House of Representatives today released its version of the health care reform bill. (The text is here and a section-by-section summary is here.) This bill and the bill that the Senate health, education, labor, and pensions committee is expected to pass later today offer a snapshot of what health care reform looks like before the Senate finance committee screws it up, as seems likely, in a version that may or may not be released later this week.

I will focus on the House bill’s “public option,” i.e., the proposed government program created to compete with private health insurers, because that remains the most important part of any health care reform. “In designing the option,” the legislation states, “the Secretary [of Health and Human Service]’s primary responsibility is to create a low-cost plan without compromising quality or access to care.” Nothing there, happily, about protecting the economic interests of private health insurers.

The public health insurance option “shall offer basic, enhanced, and premium plans” and may also offer “premium-plus plans,” presumably at escalating levels of cost. This is to make it conform to the private plans also offered within the new, strictly regulated health insurance exchange created under the bill. Consumers can’t buy public-option health insurance from the government unless they are granted access to the health insurance exchange; to be eligible, you must either lack health insurance completely or lack adequate and affordable health insurance. A drawback to the House bill is that it defines the latter group too narrowly. “Too many people who would be a lot better off getting health insurance through the exchange will be prevented from going into it,” Jacob Hacker, the political scientist who dreamed up  the public option, complained to me in an e-mail. (Hacker is otherwise mostly pleased with the House bill.)

Rather than provide a menu of four public-option plans, I’d prefer to see the government establish a single, reasonably generous public-option plan and leave the gold plating to private insurers. Doing so would allow the government to take a more egalitarian approach and at the same time would turn over to private insurers a decent-sized potential market for nonbasic health care. It wouldn’t stop their squawking, but it might reduce it.

Premiums for the public option will vary regionally according to the cost of living in different geographic areas and must be sufficient to cover the program’s costs. That’s been a given for some time. Payments to doctors and hospitals will correspond, at least for the program’s first three years, to payment rates under Medicare, which typically are lower than payment rates under private insurance plans. Doctors already participating in Medicare can charge an additional 5 percent, as can doctors (like pediatricians) who have never provided services covered by Medicare. Even with that sweetener, doctors, hospitals, and insurers will likely hate this provision—doctors and hospitals because it will reduce their per-patient income relative to what they charge private insurers, and insurers because they lack the financial clout to demand comparable volume discounts. The House bill does not, as the American Medical Association feared, compel doctors who participate in Medicare to participate also in the public option, but if these doctors choose not to participate, they must alert the government. The same goes for hospitals. Prescription drug prices will be negotiated by the secretary of Health and Human Services—a privilege famously denied HHS when Congress added a prescription benefit to Medicare in 2003.

It’s far from perfect, but this is a real health-reform bill.

[Update, July 16: The American Medical Association has endorsed the House bill. This is a remarkable turnaround from last month, when the AMA appeared to be getting ready to oppose any health-reform bill that included a meaningful public option, as the House bill does. Jonathan Cohn speculates in his New Republic blog that the House bought off the AMA by repealing something called the “sustainable growth formula,” which annually reduces, or threatens to reduce, physician payments under Medicare. Cohn estimates that the repeal will cost the Treasury $200 billion to $300 billion over ten years.]

[Update, July 17: The House Ways and Means committee and the House Education and Labor committee both approved the bill today with votes largely but not exclusively along party lines (Ways and Means: 23-18; Education and Labor: 26-22). A third vote, in the House Energy and Commerce, is expected next week, and could face some obstacles.]