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HEALTH REFORM: Health Analysts Debate the Public Plan

March 23, 2009 - 3:02pm

There's quite a lively debate among health policy analysts going on over at the National Journal's Health Care Experts Blog in response to the moderator's question: Can Congress fashion a public health plan option so that it does not blow up health care reform this year? This post was my contribution on that blog:

Let me be crystal clear: if the playing field is level, it is possible for public and private health insurance plans to compete in such a way that our citizens—enrollees and taxpayers alike—are well served and private health insurance plans that add value thrive. The choice of a public health insurance plan should not create an impasse or stall reform efforts.

Appropriate insurance market reforms—minimum benefit package, guaranteed issue, guaranteed renewal, no pre-existing condition exclusions, modified community rating, risk adjustment—combined with subsidies and a requirement to purchase coverage could achieve satisfactory performance from a market comprised exclusively of private health insurance plans. Yet, I admit that there are few real-world examples that prove regulations of this kind can compel all private insurers to behave appropriately, though the experiment in Massachusetts does appear promising on this front. Even more importantly, I acknowledge that many advocates and citizens are highly skeptical that regulations or contracts will ensure private insurers comply with all reforms for all people. Therefore, it is worth exploring how to design an insurance marketplace wherein private and public plans can compete fairly.

Fair competition will require separating the oversight of the public plan from that of the managers of the marketplace or exchange(s). It will also require that all rules of the marketplace—benefit package requirements, insurance regulations, and risk adjustment processes—apply to all plans equally, whether public or private.

More than 30 state governments offer their employees a choice between traditional private health insurance products and a plan self-insured by the state. In other words, the state bears the insurance risk of the self-insured product and selects its managers. These managers cannot profit from denying care. This experience combined with historic competition between public and private plans in both the Medicare program and California Public Employees Retirement System (CALPERS) serves as proof-of-concept: plans operating with politically appointed managers can compete with plans run by private managers if the rules of engagement are structured properly.

Again, state employee plans offer an excellent model for how we could structure a choice of a public health insurance plan because many states offer their employees traditional products as well as option(s) insured by the state. In the case of the self-insured product, the state or a third party administrator (TPA) negotiates provider contracts and performs administrative functions. While the state may pay a TPA (usually the resident "Blue" plan) to handle some tasks, the plan is publicly owned and financed. If claims outpace premiums in a given year, the state pays and is at risk for the difference. Likewise, if the TPA collects more premiums than it pays out in claims, the surplus dollars are usually allocated to a premium stabilization fund or remain with the state's general revenues. The TPA never profits more than agreed upon in the administrative fee.

I believe the type of public plan I describe above can achieve many of the goals of public plan advocates, while preserving fair and effective market competition, negating the risk of excess cost-shift, and avoiding a progression toward a single payer health system. We should move beyond the rhetoric currently consuming this issue and toward a more substantive conversation about the policy choices necessary to find common ground.

For more on how to make public-private competition work, see the recent paper by myself and John Bertko.

 

HEALTH REFORM: Health Analysts Debate the Public Plan

Unfortunately the National Journal discussion is "closed" and apparently limited to a select few who they anoint with standing to comment on what is undeniably a grassroots issue. Why limit the conversation to authoritative "elites" or special interest "insiders"?

I agree that the role of Government need be to set the rules wherein public and private ventures can compete in the open market based on the value proposition of cost effective and quality health care services.

We have far too many "me too" type third parties whether TPA, or traditional insurer (whatever that means these days) or health plan, who add little if any value to the health care exchange relationship. In my mind, the weakest link in this supply chain is undeniably the payor in all its mutations.

Ellwood's idea was (and remains) a good one, but has been both mis-interpreted and certainly poorly implemented by the major health plans with the majority share of the market. They grew by acquisition and not by the requisite cultural build-out of what an integrated model need absolutely requires, i.e., "group culture".

We need a Swiss-like model with a handful of "public trusts" on the financing side that earns a budgeted and perhaps regulated profit; but that otherwise supports the sustainability and integrity of the overall financing and delivery model.

Now is the time for this change; I am encouraged by the power of social media to level the playing field in this business and force a level of transparency and accountability too many of the players have hid behind for far too long.

Gregg Masters, MPH
http://www.twitter.com/2healthguru

the best part of competition between the public and private insu

I guess the best part of competition between the public and private insurance will be that it can bring down the excessive costs and raise the quality of service to survive particularly in private sector , therefore there is no need to worry about the expensive medical costs over time, as EUROPE tells it.

Thank You !

Using state employee plans for health care reform

We need not search far for a model reform plan built around expansion of the employee insurance pool.

In Connecticut, HB6600, or "SustiNet," just got a favorable report from the state legislature's Public Health Committee and is gaining momentum. SustiNet ensures that the state wisely uses the dollars it is already spending on state employees, HUSKY (for low-income children) and SAGA by uniting them into a large self-insured health plan. It uses this critical mass of insured residents to improve how health care is delivered in our state and to phase in the enrollment of more residents of Connecticut, including: the uninsured; people with unaffordable or inadequate insurance; sole proprietors and other self-employed people; small businesses, municipalities, and non-profit employers; and businesses of any size.

SustiNet was developed with extensive input from all health care stakeholders and with the expertise of Stan Dorn of the Urban Institute and Jonathan Gruber of MIT. It has the support of, among others: the Connecticut Realtor’s Association; the Connecticut State Medical Society; the Connecticut Public Health Association; and Small Businesses for Health Care Reform.

For more information about the bill, you can go to: http://www.healthcare4every1.org/site/PageServer?pagename=learn_thesolut...