Mandate

HEALTH REFORM: Round Two of Reports

Len Nichols — Thu, 15 Oct 2009 19:39:00 -0400

The latest study released by the insurance industry, while better than the one that came before it, is riddled with flaws. The recent report produced by Oliver Wyman (an management consulting firm with an actuarial services arm) for the Blue Cross Blue Shield Association (BCBSA) is more reasonable than the PriceWaterhouseCoopers study issued by America's Health Insurance Plans (AHIP), but it, too, is designed to scare Americans into accepting the status quo rather than comprehensive health care reform.

Lets' be clear here: some of the best plans in the country are Blue plans, and we need all of them to get better post-reform. It's worth noting that the two things the Blues have been lobbying about most vigorously are the same positions that Wyman's analysis supports: (1) prevent the melding of the small group and individual markets, and (2) keep the insurance exchange as small as possible.

The report gets one thing right: reformers must make sure insurance coverage is affordable and that the mandate to buy insurance is enforceable so that most Americans get coverage. Otherwise, requiring insurers to sell to any customer who wants to buy (guaranteed issue) will risk the stability of the risk pool in the exchange. On this much we (and many others) agree.

What I cannot agree with is the attempt to sway the reform debate with data that cannot be checked and assumptions that seem to be designed to produce the results BCBSA wants us to believe. On many points Wyman and BCBSA could be correct. But since their data are not public, it is impossible to check.

These are the report's weaknesses:

The Wyman report ignores potential savings from the exchange or delivery system reforms. The Congressional Budget Office (CBO) found that exchanges would reduce the administrative costs of non-group plans. Clearly, health plans' administrative costs would be reduced with guaranteed issue, an end to health status rating, streamlined risk adjustment, and the ease of marketing within an exchange context. Indeed, these new regulations will reduce or even eliminate the profitability of traditional risk selection strategies. In addition, the CBO found that the Finance Committee bill would slow the rate of health care cost growth and begin to "bend the curve." Neither of these findings is reflected in the Wyman report.

The Wyman report uses proprietary Blue Cross Blue Shield plan data. It is impossible to know whether the data are representative because they are not publicly available and cannot be verified independently. This is unlike the Urban Institute's data in its HIPSM model. The Wyman report states that its model is based on:

... a database of actual claims, premium and underwriting information from over 375,000 small groups, representing 4.2 million covered lives, and 1.24 million individual policies, representing 1.6 million covered lives. The database includes blinded information on approximately 1-in-10 purchasers in the individual and small employer markets today. These data are representative of states across the country and reflect the varying rating rules that are used today. This allows the model to provide insight into the impact of reform at the state level.

The model uses 10 percent of Blue Cross Blue Shield data. Does this mean 10 percent of plans? Of states? Of enrollees? If only a few states are represented, how can we be sure that the market environments are representative of either today or what a reformed insurance market would be like?

The Wyman report overstates the impact of insurance reform on the non-group market. The Wyman report concludes that insurance market reform will raise claims costs in the non-group market. They reach this conclusion by assuming that average medical claims for the uninsured are 20 percent higher than claims in the current individual market. This appears to be pure assertion, unless the Blue Cross Blue Shield database somehow maintains data on the uninsured.

Misinformation about the non-group market has always been a problem. A few years ago, for precisely this reason, Health Affairs asked Mark Pauly and me to do a study of the non-group market. Health Affairs thought that since Mark had advised many Republicans over the years and I had advised mostly Democrats, if we could agree on the implications of the non-group market data that people on both sides of the aisle might believe our conclusions and stop arguing unproductively about unsubstantiated assertions. (This process is of course an option for people in Washington, DC, but I digress).

In our paper we concluded that one of the main reasons the non-group market fails to work well is because a majority of the relatively healthy uninsured have no effective way of reporting just how very healthy they are. This is why we don't see premium offers nearly as low as their far lower than average expected claims costs.

Consider this: data show that the uninsured use about half as much health care as the insured. Certainly some newly insured will be sick. But on average, when you include the mostly healthy uninsured that will be in the exchanges post-reform, it is very unlikely that the newly insured will cost 20 percent more than the currently insured. The report mentions the high cost enrollees who will come from high risk pools. There are fewer than 150,000 high risk pool enrollees nationwide. CBO estimates 25-30 million people will be in the exchange, a large percentage of whom are currently uninsured. Therefore, it is highly implausible that health costs will be 20 percent higher than today, even with current high risk pool enrollees.

The Wyman report conflicts with CBO's complete assessment of the individual mandate. The Wyman report makes an important point about the need to get as many people as possible into the risk pool. I certainly think that we should make coverage affordable and the penalties for not buying such that they are rarely used -- we would much rather people opt for coverage. The report, however, reaches a very different conclusion about the stability of the risk pool than does CBO, which considered the entire bill and set of policies.

Perhaps one difference in perspective is that consulting actuaries are naturally accustomed to advising clients to bid high or just exit when regulations get tighter. CBO knows that the individual and small group markets will largely reside in the exchange, that competition could be quite considerable within them, and that "bidding high when in doubt" in that context could lead to significant loss of market share.

Again, it is the totality of conditions -- underlying demand for health insurance, subsidies, penalties, market incentive for insurers -- that affects the effectiveness of the mandate. I am by no means saying I would not be more comfortable with more generous subsidies and stronger penalties. What I am saying is that CBO's analysis of the specific legislation in question is more complete than Oliver Wyman's, by its own admission.

The Wyman report overestimates the number of insured individuals in the individual market who have plans with an actuarial value below the reform threshold. Wyman asserts that 50 percent of the policies in the individual market fall beneath the actuarial value standard put forth by the Finance Committee bill. Remember, the Finance Committee package allows existing policies to be "grandfathered"-- if you like your coverage you can keep it. Even still, more general survey data suggests that around 25 percent of individual market enrollees have plans below the 65 percent actuarial value threshold.

The Wyman report does not consider subsidies when analyzing the impact of age rating. Wyman asserts that narrow age rating (2:1 or pure community) would be an unmitigated disaster for young people. We know that some insurers are generally supportive of large age rating bands (5:1), because they think young people will drop coverage if their premiums go up. Linda Blumberg of the Urban Institute just released a competing report (using representative data, methods that are explicitly described, and non-profit foundation funding). She found that if you account for the fact that many young individuals will be subsidized to purchase coverage, even pure community rating does not increase premium costs much for the vast majority of young workers or add to the aggregate cost of subsidies. Like PriceWaterhouseCoopers, Wyman computes the impact of age rating without accounting for subsidies. What is the point of that?

Wyman should be commended for improving on the PriceWaterhouseCoopers attempt. But this study is still sufficiently flawed and/or impossible to verify. It should not sway informed opinions about the implications of reform.

The Wyman report does strike a legitimate cautionary note about the importance of affordability of insurance and the enforceability of an individual requirement to purchase coverage. The Finance Committee bill can be strengthened. But there is no reason to panic. Pessimism and fear are not evidence.

HEALTH REFORM: Building on Finance with Cents and Sensibility

Joanne Kenen — Wed, 14 Oct 2009 13:05:00 -0400

Robert Greenstein over at the Center on Budget and Policy Priorities finds plenty to like about the bill the Senate Finance committee has approved -- and much that still needs work. With his usual mix of progressive values and budgetary common sense, here's how he balances it out:

The bill is a "major step toward enactment of legislation to extend health care to tens of millions of people who lack it, strengthen insurance protections for millions more who are underinsured or face exorbitant charges, and begin to address the nation's most serious fiscal threat -- the relentless rise in health care costs." It is fiscally responsible and will modestly reduce the budget deficit.

It also has "serious shortcomings." The tax credits don't go far enough to make insurance affordable to people of "modest means." Premiums for low-income households are higher than in the HELP and House bills. (See a related CBPP brief) And the benefit packages are less comprehensive, meaning higher deductibles and co-payments. This is another area where the bill merits improvement. (They have a brief on this too). Greenstein noted that the bill was scored at $829 billion -- so there is money to spend on making it better before hitting President Obama's $900 billion limit.

Greenstein is not a fan of Finance's "free rider" provision because it might actually make it harder for low- and moderate- income people to get or hold their job. It was also designed in a way that would be cumbersome to administer. (More here.)

He concluded that what we need is really the best of the congressional committee worlds:

Policymakers should continue to move health reform legislation through the legislative process. In so doing, they should blend the best provisions from the various bills in a way that is fiscally responsible, addresses the shortcomings that remain in the Finance Committee package, and can command the votes to pass Congress in final form.

And even though that's a tall order, it seems more likely to be fulfilled with each passing day.

HEALTH REFORM: Frist Backs Individual Mandate

Joanne Kenen — Tue, 29 Sep 2009 18:22:00 -0400

Last time I ran into Bill Frist, he was sounding distinctly nonpartisan on a panel discussion about preventive care and social determinants of health. We then talked about comparative effectiveness research at Vanderbilt, where he is affiliated, and he was so enthusiastic that he took my notebook out of my hands and began sketching diagrams of DNA molecules (at least I think that's what they were.) I asked him why he didn't write on op-ed about this, given that the research has been so controversial among his fellow Republicans. As far as I know, he hasn't written that an op-ed -- but he just penned an endorsement of an individual mandate to purchase health insurance.

The mandate is a lynch pin of effective insurance market reform and it's coming under increasing Republican attack. Some state legislators are even talking about amending their constitutions -- a largely symbolic conversation among conservatives -- to ban such a requirement.

In his guest column for U.S. News and World Report, Frist called for an individual mandate. He wants to begin smaller than the bills currently being considered in Congress, recommending a mandate for catastrophic coverage as "an appropriate place to start." But he defined catastrophic coverage as good enough to protect people from bankruptcy from medical bills, and made clear that he favors expanding coverage as the economy improves.

Of course, a number of Frist's former colleagues were for a mandate before they were against a mandate, and the idea was injected into the national debate (at least when I first became aware of it) in 1993–94 with by a Republican, albeit a moderate one, the late Sen. John Chafee. That was before Frist won his first Senate term in the 1994 Republican tidal wave.

Frist writes (emphasis ours) :

In our reimbursement-driven, public-private health sector (which delivers the most robust health services on the globe), the only way affordable access can be achieved is for every citizen to have some type of insurance... No industrialized country in the world leaves such a large proportion of its citizens without coverage. And insurance matters. Those without health insurance on average receive poorer care and die sooner.

He added,

No family in America should fear bankruptcy because of an accident, a child's cancer, or a heart attack. That is the purpose of insurance. An individual mandate is the only way to achieve affordable insurance coverage for every American in a pluralistic, public-private sector.

The former Senate majority leader made some effort to cast the mandate in a conservative light. He said it would eliminate wasteful cost-shifting, enhance transparency, reduce adverse selection, and make the insurance market function better. But his basic pitch was a moral one. People need to be covered. A mandate is the best and fairest way to achieve that.

Judging from what we're seeing in the Senate, conservatives are not going to rush to his side. But his comments might add a bit of ammunition and fortitude to those in the center who may play an outsized role in determining the contours of reform.

We're looking forward to reading Frist next on comparative effectiveness. We can even suggest an opening paragraph. Something along the lines of :"Conservatives should embrace research designed to improve the quality of American health care, and make sure that our hard-earned dollars don't get wasted on care that doesn't work or isn't needed."

HEALTH REFORM: Obama's Vision

Joanne Kenen — Wed, 03 Jun 2009 22:20:00 -0400

The White House has posted President Obama's letter to Senators Ted Kennedy and Max Baucus on health care reform. He reiterated his vision (and ours) that reform is an economic as well as a moral imperative. And he added a few points (and $$$) we hadn't heard before:

In addition to the $635 billion reserve fund Obama outlined this Winter in his budget proposal, (some of which Congress balked at) he's calling for an additional $200 to $300 billion over 10 years in Medicare and Medicaid savings. This isn't from slashing the entitlement benefits but by taking steps to better manage chronic diseases, utilize health services more wisely, and reduce the revolving door of hospital readmissions. We waste a lot of money on care that doesn't make people any better.

Obama said he was "open" to the idea of giving more clout to the Medicare Payment Advisory Commission (MedPAC), which currently gives nonbinding but respected advice to Congress. In a post-reform world, MedPAC's recommendations on cost reductions would be adopted, unless opposed by a joint resolution of the Congress.T hat's modeled on military base closure system. (We published a paper on MedPAC a few months ago, and our colleague Tom Emswiler is working on a post about it that we hope to have for you soon).

During the campaign, Obama did not endorse the individual mandate (or "shared responsibility" as it's now known) but in this letter he was open to it, as long as health care costs are being brought down and there are "hardship exemptions" for certain individuals. Ditto for small businesses. Some should be exempt from any employer mandate. We didn't spot any explicit mention of the debate over whether to tax a portion of employer-sponsored health benefits, although news reports have said he may be able to accept the idea.

To summarize a few other elements of his vision of health reform:

It's not just about coverage. "Indeed, without a serious, sustained effort to reduce the growth rate of health care costs, affordable health care coverage will remain out of reach," he wrote.
Americans should have better choices for health insurance, building on the principle that if they like the coverage they have now, they can keep it, while seeing their costs lowered as reforms take hold.
Creating a health insurance exchange— a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that's best for them, in the same way that Members of Congress and their families can.
No one should be denied coverage because of their health history
All plans should have an affordable basic benefit package that includes prevention, and protection against catastrophic costs.
Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.

Obama concluded:

I know that you have reached out to Republican colleagues, as I have, and that you have worked hard to reach a bipartisan consensus about many of these issues. I remain hopeful that many Republicans will join us in enacting this historic legislation that will lower health care costs for families, businesses, and governments, and improve the lives of millions of Americans. So, I appreciate your efforts, and look forward to working with you so that the Congress can complete health care reform by October.

HEALTH REFORM: Step Forward from Health Insurers

Joanne Kenen — Wed, 25 Mar 2009 15:44:00 -0400

The health insurance industry, in what was widely seen as a step toward consensus on health reform, has said it would stop charging sick people higher rates as part of a comprehensive health reform plan that required everyone to have insurance.

The New York Times said the concessions on pricing in the individual market and acceptance of more regulation "came as a surprise to lawmakers" and could "make it easier for Congress to reach a consensus." The Times and others also pointed out, however, that the offer from America's Health Insurance Plans and Blue Cross Blue Shield Association were made in part to counter proposals that private insurers would have to compete against a new public insurance plan. (We're going to post separately about that shortly).

"Creating a new government-run plan would thwart the ability of the healthcare sector to implement meaningful delivery system reforms, exacerbate the cost shifting from public programs to consumers in the private market, and destabilize the employer-based system," AHIP CEO Karen Ignagni and BCBSA CEO Scott Serota wrote in a letter to the chairmen and ranking Republicans of the Senate HELP and Finance Committees.

But the changes the insurers offered are significant, particularly given the role the industry had in thwarting reform in the early 1990s. Insurers had previously argued that if they lowered costs for sicker people, rates would skyrocket for healthier ones, which would lead to more healthy people skipping insurance, which would then boost rates for the sicker ones even more.

There were caveats. The insurers still want to be able to vary prices based on age, geography and family size. And while they promised to change underwriting based on health status in the individual insurance market, they didn't extend that proposal to the small business market, although AHIP's Ignagni said her group would release a proposal addressing small business within a month.

"The offer here is to transition away from risk rating, which is one of the things that makes life hell for real people," New America's health policy director Len Nichols told the AP. "They have never in their history offered to give up risk rating."

Len also addressed aspects of insurance market reform in his testimony to the Senate HELP committee on Tuesday:

The role of policy is to set the rules so that self-interest is channeled to serve the social interest. We have not done this very well with regard to insurance regulation, either at the federal or state levels. We can do far better. ...

Our goal should be to create marketplaces wherein insurers who adopt socially responsible business models will thrive. The obsolete business model that has inflicted so much inefficiency and human suffering on so many is centered on aggressive underwriting and risk selection. Under this model, insurers compete to insure the best risks and avoid the sick at all costs. Americans will be much better served by rules that make it unprofitable and illegal to continue these strategies. ... We want to create markets wherein insurers compete based on price, clinical value added, and consumer satisfaction, rather than on avoiding the sick or strategically denying claims.

COVERAGE: The Case for Comprehensive Insurance Market Reform is Overwhelming

Len Nichols — Thu, 20 Nov 2008 16:52:00 -0500

This post also appears on the National Journal's Health Care Experts Blog. where you can also see what other health policy analysts have to say about insurance market reform.

The point of insurance market reform worthy of the name is twofold: to make markets more efficient and more fair for all, not just for some, and to transition the business model of insurers away from risk selection and toward care coordination and high value care. In order to maximize value per premium dollar, we need to align incentives among insurers, consumers, and health providers.

Guaranteed issue and modified community rating (I would allow age, but not health status rating), along with an individual purchase mandate and the subsidies to make that mandate humane, would enable insurance markets to extend the advantages of large group purchasing to the entire nation. Under this scenario, insurers would still make money, but only if they help us organize access to appropriate care efficiently. Economies of scale in administration and risk sharing should lower administrative loads from the very high levels experienced currently in the non-group and small group markets. But the kicker is the mandate and outlawing underwriting. We do not need to continue to make it profitable to exclude high risk Americans. We do, however, need to make it possible to share in the value created through coordinated health management and organized purchase of necessary and effective health services.

Grace-Marie makes a good point about Mark Pauly’s research over the years (some of which I proudly co-authored with him): the non-group market performs better for some people than some commentators allow. But this does not mean the current model of risk selection and aggressive underwriting—as “across state lines” type proposals would encourage and indeed require—is the best way to organize access to good health insurance. Furthermore, a market organized to the satisfaction of the zealous underwriters can never be made functional for all Americans. An underwriting culture will always punish those who behave humanely. In other words, some kind of publicly organized high risk pool or other safety net insurance mechanism will always be a necessary adjunct to this “partial” insurance market. Why prop up the most inefficient portion of our insurance universe, when we could fix it all with smart rules and organized exchanges? I think the objective case for comprehensive insurance market reform is overwhelming.

HEALTH: Baucus Plan Highlights Importance Bipartisanship and Cost of Inaction

Len Nichols — Fri, 14 Nov 2008 16:37:00 -0500

This post also appears on the National Journal's Health Care Experts Blog. where you can also see what other health policy analysts have to say.

On Wednesday, Senate Finance Chairman Max Baucus (D-MT) made clear that reforming our health care system is an economic imperative and that comprehensive health care reform should be a priority for Congress. I applaud his leadership, vision, and willingness to work with colleagues, stakeholders and the public to "get it done" in this Congress. He has laid down a key cornerstone in our pathway to a high quality health care system that works well for all Americans.

Senator Baucus emphasized two important messages on Wednesday: 1) The cost of "inaction is much more expensive" than reform, 2) We should approach health reform with a bipartisan attitude and endeavor to persuade "80 Senators" to support the final legislation. I believe the health care reform conversation would be well-served to continue to remember and echo these two points.

As for policy, the Baucus policy plan is extensive, so today I will simply highlight what I view as the most original contributions.

Counter-cyclical FMAP formula. As the economy weakens and people lose jobs and income, more Americans will become eligible for Medicaid or some kind of safety net insurance. This occurs just as states are compelled to reduce spending to match their recession-induced drop in revenues. (The vast majority of states have balanced budget requirements). Scholarship suggests that a 1 percent increase in the unemployment rate leads to roughly 1 million more Medicaid and SCHIP enrollees. Senator Baucus' proposal to make the federal share of (FMAP) responsive to fluctuations in the economy is a great way to strengthen state and personal finances and access to care when they are in most peril. Our current economic situation is an appropriate time to implement this improved policy stance.

Immediate access to care for the uninsured. I was intrigued by Senator Baucus' thoughts on providing the chronically ill uninsured with immediate access to care. As we think about how comprehensive reform may be sequenced or phased-in, this may be one way we could provide instant relief to the uninsured with the greatest health needs while we work to establish the infrastructure and rules of the new marketplace and other key delivery system reforms.

Focus on payment reform. While Senator Baucus' decision to place an emphasis on payment reform is not surprising given the Finance Committee's expertise and jurisdiction, nonetheless the comprehensiveness of his vision is impressive. We will not control health care costs until we fundamentally restructure the incentives—for both patients and providers—in our health system. Senator Baucus offers several valuable policy solutions that would help achieve this goal.

In addition to these new ideas, Senator Baucus gently emphasizes three policy concepts which I have long believed will be necessary to achieve bipartisan support for comprehensive health reform.

New marketplace. Senator Baucus recognizes the weaknesses of the current individual and small group markets and proposes a new market or "exchange" where individuals and small businesses can purchase coverage regardless of their health history or where they live. There is much to debate about how best to structure this new marketplace, but it is encouraging that Senator Baucus-along with President-elect Obama and a growing number of members of Congress- has identified this policy choice as a key pillar of reform.

Individual requirement to purchase coverage. Senator Baucus prioritizes individual responsibility and makes clear that requiring individuals to purchase coverage (once coverage is accessible and affordable) will make health insurance markets work far more efficiently and fairly. His framing of this issue re-creates space for a dialogue about how best to introduce a requirement to purchase coverage into the American health care system. This is an important and necessary conversation that will likely engender much debate, since some liberals and some conservatives alike have opposed purchase mandates for very different reasons. Chairman Baucus should be applauded for his leadership in re-igniting this essential policy conversation.

Reforming the tax treatment of health insurance. Perhaps Senator Baucus' greatest single policy contribution in his "call to action" is the decision to highlight the need to consider changing the current tax preference for employer premium contributions. He did not advocate or demand it. Yet, he did state simply and boldly that changing the tax code for health insurance may be necessary to improve incentives and provide a source of funding for coverage expansion and delivery system improvements. After a tough political campaign in which this issue and many surrounding it became confused in campaign tit for tat, Senator Baucus should be commended for his leadership on this issue.

Real health reform will never be easy. Opponents will always work tirelessly and concoct new arguments daily. Still, proponents of comprehensive health reform have had a good couple of weeks. First, Senator Barack Obama's election shows that a majority of voters want and expect comprehensive health reform to be an important part of our nation's agenda in the next few years. The incoming administration also views health reform as a priority and a key component of a broader strategic vision to stabilize the financial future of the American middle class. In addition, Congressional leadership is apparent unlike 1992. First, Finance Chairman Baucus has boldly stepped up to declare health reform an economic imperative, whereas former Chairman Moynihan was cool if not downright hostile to health reform as a key agenda item in 1993-4. This "call to action," combined with Senator Kennedy's prodigious and ongoing work and the bipartisan bicameral cosponsors of the Healthy Americans Act have all created far better pre-conditions for a national conversation than we had in 1992. Visionary business, labor, health stakeholder, and advocacy groups have also helped jump-start our essential health reform conversation. Senator Baucus has staked out a catalytic leadership role for himself at just the right time for our nation to act: now.

HEALTH POLITICS: The Strange Bedfellows Make Themselves Heard

Joanne Kenen — Tue, 11 Nov 2008 21:38:00 -0500

That strange bedfellow Divided We Fail coalition you've heard us talk about before about is putting its money where its mouth is in the name of health reform. The Business Roundtable, the National Federation of Independent Businesses, the AARP and the SEIU have sent President-elect Barack Obama an open letter urging him to enact comprehensive health reform. And they are backing it up with a nearly $1 million TV and newspaper ad campaign.

"What we are doing is reminding not just the president but the Congress as well that . . . this remains one of the most important issues facing the country," Business Roundtable President John Castellani was quoted as saying in the Los Angeles Times. The coalition sees health reform as an essential aspect of economic recovery and job creation.

"Addressing skyrocketing healthcare costs is a critical component of stabilizing household, national and global economies," the letter from the business-labor-senior citizen group said. "Inaction undermines the economic security of our families; limits the productivity of our workforce; stagnates job creation and wage growth; and threatens to crowd out investments in energy, education and infrastructure."

The Business Roundtable, by the way, hasn't released its own detailed health reform proposal but it is worth noting that it backs an individual mandate, subsidies and robust federal programs for low-income people, and a more regulated insurance market.

REFORM: If You Hold It, They Will Come

Paul Testa — Wed, 11 Jun 2008 19:39:00 -0400

Forget about the Nationals' new stadium (you already had?), the hardest seat to get in town this summer has been at the Senate Finance hearings on health reform. We arrived 20 minutes early yesterday to find the halls of the Senate's Dirksen building packed. And for good reason, as the day's testimony on 47 Million & Counting: Why the Health Care Marketplace is Broken was as refreshing as the room's AC (68.2 degrees!)

The hearing opened with video testimony from Lisa Kelly, of Lake Jackson, Texas. Kelly is one of the 25 million underinsured Americans we wrote about yesterday. Kelly purchased a limited benefit plan with a $189 monthly premium that provided fine coverage for her allergy pills but was woefully inadequate when she was diagnosed with leukemia in 2006. Kelly's trials were the subject of a recent piece in the Wall Street Journal. Forced to dip into her savings and currently saddled with nearly $137,000 in medical debt, Kelly, was asked what she thought Congress should do. Her answer was particularly moving:

"I don't know what's the right or wrong thing to do. I know health care is expensive and that doctor's time and medicine is expensive. But they were charging me for things I didn't need. Everybody should be able to go in and get health care whether you have money or not."

Kelly's testimony set the tone for a particularly interesting hearing that focused on why our current system fails to meet the needs of so many Americans and what to do about it.

Raymond Arth, president and CEO of Phoenix Products, in Avon Lake, Ohio, presented the plight of small businesses on behalf of the National Small Business Association. Until 2003, Arth said, he was able to provide acceptable coverage for his employees while managing to keep costs down. But then, the numbers started to catch up with him. In 2007, his firm faced a 22 percent increase when he tried to renew the insurance plan, He switched to a high deductible plan and was "forced to pay a little more to cover much less." This year renewal rate is 35 percent above last year's, and Arth says he's run out options to deal with what amounts to a $40,000 increase in premiums.

Aetna's CEO Ron Williams, presented the insurers' perspective, stressing that rising premiums and deductibles were a reflection of rising health care costs. He came out in support of an individual coverage requirement, and suggested if such a system could be achieved, bringing everyone into the system, insurers could abandon the current business model of medical underwriting and risk selection and instead focus on improving their members health and managing the quality of care they receive.

Mark Hall, a professor of law and public health at Wake Forest University, rounded out the testimony by emphasizing the "80-20 rule" of health care, which is that about 80 percent of the costs come from 20 percent of the population (for a more academic examination of this distribution check out this recent Health Affairs article). Such a distribution creates incentives for medical underwriting and leads to natural risk segmentation as healthier people select plans with the benefits (and costs) they expect to need. The key, Hall said, was to achieve risk pooling independent of health status.

With all likelihood, the Nationals' season ends in September and D.C.'s Southeast sluggers would do well to add a lefty-righty combination similar to Senate Finance chairman Max Baucus (D-MT) and ranking member Chuck Grassley (R-IA), whose bipartisan leadership on health reform has been impressive early on. Of course, there's no offseason for health reform, and we hope Baucus, Grassley, and all of Congress will continue to step up to the plate.

COVERAGE: Myths About the Individual Mandate: Stifling Competition

Paul Testa — Fri, 21 Mar 2008 15:51:00 -0400

Myth: An individual mandate will stifle market competition.

Fact: An individual mandate, coupled with insurance market reforms and subsidies, would make markets work more effectively and efficiently. By reducing the risk of adverse selection, an individual mandate would force insurers to compete based on price and quality, not underwriting and marketing.

More than half of the uninsured population is under age 34, a generally low-risk, low-cost population to insure.
However, as Mark Pauly and Len Nichols noted in a 2002 Health Affairs article, the individual market where the uninsured might look to find coverage does a poor job of identifying low risks and reflecting those risks in premiums.
Bringing everyone into the insurance marketplace will make the risk pool healthier, creating incentives for insurers to focus on high-value care as opposed to risk selection and underwriting. The recent California health reform initiative included a provision that required health plans to spend 85% of premiums on patient care.

To see all posts on the myths about the individual mandate or for more in-depth discussion of this issue, please read the New America Foundation's recent issue brief