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Current Reform Proposals: No Takeover of American Timely Analysis of Immediate Health Issues September 2009 Stan Dorn and Stephen Zuckerman

Summary Current national health reform proposals would not cause “a government takeover of health care.” Pending legislation would leave in place the country’s largely private medical care system, in which more than 90 percent of doctors are in private practice and 84 percent of all admissions are to private facilities. Reform proposals would not give the federal government new authority to intervene in private health care decisions. Rather, legislation would mainly extend two current responsibilities of the public sector: to fund health coverage for low- income, uninsured Americans and to regulate so that it meets consumers’ needs. In fact, reform proposals would substantially increase health plan choices for many people, including workers covered by small firms. While 73.2 percent of these employees are offered just one plan today, pending legislation would let them choose from among multiple, diverse health plans available in a new health insurance exchange. Some predict that including a public plan in such an exchange would cause private health insurance to unravel, ultimately “removing the medical sector from the free enterprise system.” However, under the original version of the House Tri- Committee proposal, the Congressional Budget Office (CBO) estimates that, by 2019, 12 million people⎯just 4.3 percent of Americans under age 65⎯ will be in the public option. Private insurance will cover 191 million people, according to CBO, or nearly 16 times the number in the public plan. Further, it is the consumer who chooses whether to enroll in public or private coverage offered through the exchange—a key detail sometimes obscured by arguments against reform. Finally, even if the public plan fully replicates ’s basic structure, it will simply pay private health care providers for furnishing covered services. Using this approach, Medicare has achieved high levels of beneficiary satisfaction, wait times below average levels under private insurance, and a choice of physician that equals or exceeds that available through private coverage. Former Senate Majority Leader Bill Frist (R-TN) recently acknowledged that Medicare is not socialized ; the same would be true of a public plan based on Medicare. Many claims about government-run health care are based on hypothesized future scenarios that go far beyond current proposals. Such speculation can easily prove unfounded, as illustrated by confident predictions in the early 1960s that enacting Medicare would eventually lead to the conversion of American medicine into a socialized system for all residents. With the debate over national health reform heading into a critical, perhaps determinative phase, reliable and objective analysis needs to focus on the details of current proposals and their likely results. Based on this standard, it is clearly mistaken to claim that proposed health reforms would lead to a government takeover of American medicine.

Introduction given the emotional arguments now medicine agenda,”2 with being made on all sides as well as “bureaucrats making the health care At this critical juncture of the the subject’s complexity. decisions that should stay with national debate, doctors, , and their loved decisionmakers and their This paper focuses on one central ones.”3 In examining these constituents need clear and claim in the debate —namely, that assertions, we do not mean to objective information about the proposed reforms would represent suggest that any one side in the content and implications of the “a government takeover of health 1 debate has a monopoly on proposed changes. This is not easy, care” that promotes a “socialized unfounded claims. For example,

proponents of reform now attack the major steps towards “socialized 2. A health insurance exchange insurance industry’s role in the medicine” or “government-run would offer diverse health national debate, even though the health care.” The authors explained plans. People without access to industry has agreed (assuming that that socialized systems provide employer-sponsored insurance reform legislation fits certain health care through government- could buy coverage through the parameters)4 to end preexisting employed staff operating in exchange, which would feature condition exclusions and similar government-owned facilities. That competing plans offering a practices.5 Some reform advocates paper concluded that most of the variety of benefits, deductible likewise suggest that increased proposals10 advanced by Democratic and copayment options, preventive care automatically candidates did not involve provider networks, and lowers overall health care spending, socialized or government-run health premiums. Consumers who despite much evidence to the care, since they continued the select more costly plans would contrary.6 central role played by private health pay the associated higher care providers and insurers, leaving premiums. Small firms (and In addition, it is clear that supporters considerable decisionmaking possibly other companies)13 of the current reform bills face authority in private hands. Dorn and would have the option to cover legitimate questions. How many Holahan suggested that claims about their workers through the low-income uninsured will use a “government takeover of health exchange, but each employee Medicaid and new subsidies to care” were a distraction from the would choose his or her own obtain coverage, given the more important issues of how plan. proposals’ individual mandates and reform proposals would affect cost, enrollment systems? Are the access to care, quality, and 3. Consumers buying coverage in subsidies large enough to mandate consumer choice. Over the past 16 the exchange could select a enrollment or will many people months, little has changed regarding publicly-administered health need to be exempt due to the meaning of “socialized plan. Depending on the affordability concerns? Are the medicine,” but the issue warrants proposal, such a plan may proposals to slow the growth in resemble Medicare, with a 7 reexamination given the specific health care costs adequate? Are reform proposals now before federal agency paying private there risks to moving low-income Congress. providers, or it could be a children from current public consumer-owned cooperative. programs into private insurance?8 Current health care In both cases, each consumer Will slower growth of some reform proposals would decide whether to enroll Medicare payment rates create in the public plan or in coverage access problems for beneficiaries? We focus on the reform proposals offered by private insurers passed by four congressional through the exchange. We do not attempt to address the committees and under consideration full range of such questions or to in a fifth.11 While details vary, the 4. Individuals would be required analyze the advantages and proposals share a remarkably to obtain health coverage, disadvantages of proposed reforms’ similar basic structure: unless they cannot afford it. many facets. Instead, this paper builds on a previous exploration of 1. The low-income uninsured 5. Employers above a threshold what is meant by “socialized would receive subsidies. size would be required to help medicine” and assesses what seems Medicaid would cover the finance health care, by either to be emerging as the primary poorest uninsured, and new buying coverage for their public argument against reform. federal subsidies would assist workers or paying a tax to the people with incomes too high federal government. Previous analysis for Medicaid but too low to 6. New requirements would apply 9 afford health insurance without In April 2008, Dorn and Holahan to health insurers. Insurance help.12 analyzed claims that proposals companies could not exclude being advanced during the the treatment of preexisting presidential campaign represented conditions or engage in similar

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practices.14 Health plans would The overall structure of Equally absent from current also have to follow new proposed reforms proposals are attempts to vest the minimum benefit rules, such as federal government with direct required coverage of preventive A typical criticism of the pending control over medical care without copayments.15 reforms states: “The Obama health decisionmaking. Presently, both care plan would allow, and even private and public insurers define 7. Various would attempt require, the government to take over the limits of covered services, and to slow the growth in health and run every aspect of the doctors and nurses attempt to meet care costs. Medicare pilot American health care system… For their patients’ needs, subject to projects would test promising doctors, surgeons, and specialists, these definitions. This same , such as new this also involves a substantial loss approach would continue under payment methods that “reward of control over their practice of proposed legislation, without any value rather than volume.” If medicine. Their clinical judgment new federal authority that these experiments succeed, would be increasingly displaced by circumscribes the practice of Medicare could expand them. the diktats of faraway government medicine. Private insurers could also apply bureaucrats who don’t even know successful Medicare their patients.”17 Instead of mandating or forbidding innovations, as they have done any particular service, the proposed in the past.16 A separate cost- Rather than expand government’s expansion of comparative related measure would sponsor role as the direct provider of health effectiveness research would simply research into the comparative care, current proposals leave the provide patients, physicians, and effectiveness of alternative practice of medicine firmly in insurers with better information medical treatments. private hands. Fewer than 3 percent about the treatments that are most of the nation’s physicians are effective for particular medical 8. Increased costs would be fully federal employees working for the conditions. This element of reform funded by new revenues and military, the Veterans Health extends the tradition of federally policies that slow the growth of Administration, or the funded health care research 18 Medicare and Medicaid Service. Among nonfederal, exemplified by the National spending. While proponents of -care doctors, only about 5 Institutes of Health and the Agency reform all articulate this goal, percent are employed by a city, for Healthcare Research and 19 final scoring from the county, or state government. All Quality. Gail Wilensky, who ran Congressional Budget Office other such physicians are full- or Medicare and Medicaid for has not yet demonstrated part-owners of their practices or President George H.W. Bush, whether this goal would be employed by a privately owned supports comparative effectiveness reached, and pending proposals entity. Similarly, 84 percent of all research as “providing objective, vary in how they raise revenue hospital patients were admitted to credible information on the likely 20 and reduce projected spending private facilities in 2006. The clinical outcomes of different on current public programs. remainder were treated at strategies to treat the same medical run by state and local In the main, reform proposals condition. The information or the Veterans Health simply extend the public sector’s produced and disseminated would Administration. Although Medicare current roles in funding low-income be intended to better inform clinical is a government-run program, its health coverage and regulating decision making and to help design beneficiaries were no more likely insurance. The most significant new sensible reimbursement than were the privately insured to be 23 public responsibilities involve strategies.” To insulate this admitted to a government-run coverage mandates imposed on potentially valuable research from facility.21 Nothing in pending individuals and employers, but such allegations of rationing, pending proposals would increase the mandates do not seem to be the legislation specifies that the agency proportion of care provided in primary concerns raised by those conducting comparative publicly owned hospitals or by warning of a “government takeover effectiveness research has no publicly employed physicians.22 of health care.” authority to impose “coverage,

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reimbursement, or other policies for through the exchange would be the “government takeover” label any public or private payer.”24 more like shopping in a traditional could have been attached to the marketplace, where consumers creation of Social Security and A central feature of pending balance the positive features of each Medicare, the Environmental proposals is the variety of choices product against its price, and sellers’ Protection Agency, the federal offered to consumers and to desire for market share drives highway system, and the National businesses. By letting consumers and competition. This Park system, each of which choose from among diverse, market-oriented approach to health extended the federal government’s competing health plans, with new coverage seems at odds with claims authority into a new sphere of protections for patients with that proposed reforms represent American life, but none of which preexisting conditions, the exchange steps toward socialized medicine. led to a socialist economy. will dramatically increase coverage options for many people. For Notwithstanding those options, During the debate over example, 73.2 percent of workers current proposals would also impose reauthorizing SCHIP in September covered by companies with fewer important new responsibilities that 2007, Senator Grassley of Iowa than 50 employees were offered a would constrain some choices. made comments that may fairly single health plan in 2008.25 These Individuals would have to buy apply to many of today’s arguments are the very workers most likely to insurance if they can afford it. against broader reforms. He noted obtain coverage through the Medium-sized and larger employers that “screaming ‘socialized exchange under reform proposals. likewise would be required to medicine’ during a health care By the same token, small firms will contribute to their workers’ health debate is like shouting ‘fire’ in a gain a new option to insure their care costs. Insurers would need to crowded theater. It is intended to employees through an exchange cover preexisting conditions and to cause hysteria that diverts people that, by purchasing coverage offer benefits that meet minimum from looking at the facts.”30 collectively on behalf of numerous requirements.26 Proposed reforms individuals and companies, can thus involve a straightforward The public plan apply substantially increased exercise of traditional regulatory 27 Critics of reform argue that “a leverage to get better deals from authority. government-run insurance option” insurance companies than small Pending proposals likewise spend will “slowly erode existing private businesses now obtain on their own. insurance plans to the point where At the same time, employers and federal funds to subsidize health coverage for low-income the so-called government option is individuals will remain free, if they 31 Americans. Similar fiscal the only option,” thus causing prefer, to purchase coverage directly “lower quality of care” by from insurers, without going arrangements in the past have not turned American medicine into a “removing the medical sector from through the exchange. 32 government-run enterprise. the free enterprise system.” Critically important, current Examples include President Bush’s This argument has three serious proposals would shift the locus of investment in flaws. First, including a public plan health plan choice. Today, centers, which created or expanded 28 as an option in the health insurance employers typically make health more than 1,200 such centers; the exchange is highly unlikely to end insurance decisions for employees establishment of the State the private health insurance industry and their families. Under the Children’s Health Insurance in America. The original Tri- proposal, by contrast, consumers in Program (SCHIP) in 1997; and the Committee House bill included the the exchange would choose their creation of Medicare and Medicaid most aggressive public health plan own health plans, taking into in 1965. provisions of any major reform account personal financial 33 Some contend that any significant proposal. The Congressional resources, available subsidies, and Budget Office recognized inherent their families' health care needs. increase in the federal government’s role represents a dangerous step uncertainties but estimated that, Those who select more costly plans under that proposal, only 12 million would pay more. Compared to the toward a government-run, socialist economy.29 From this perspective, out of 282 million nonelderly status quo, buying health insurance Americans, or 4.3 percent, would

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enroll in the public plan by 2019.34 consumers purchasing nongroup cooperative or the amended version CBO estimated that private coverage outside the exchange, for a of the House bill that passed the insurance would cover 158 million total of 191 million privately Energy and Commerce Committee, people through employers’ purchase insured, or nearly 16 times the involve a public or quasi-public plan of insurance outside the exchange, number of public plan enrollees with even less capacity to compete 24 million in private plans offered (figure 1). Other forms of a public effectively with private insurers.35 through the exchange, and 9 million option, such as a consumer-owned

Figure 1. Congressional Budget Office projections of FY 2019 health coverage under the original specifications of the House Tri-Committee proposal (millions of people under age 65)

Private insurance, inside the exchange, 24 Mil. Public plan inside the exchange, 12 Mil.

Uninsured, 17 Mil.

Medicaid/CHIP, 46 Mil.

Private, employer- purchased insurance outside the exchange, 158 Mil. Other insurance outside the exchange, 16 Mil.

Private nongroup insurance outside the

exchange, 9 Mil.

Source: Authors’ calculations based on estimates by CBO, July 17, 2009, and July 26, 2009. Notes: “Other insurance outside the exchange” includes various systems of coverage that include Medicare for people under age 65 and care offered to active-duty military and veterans. “Private insurance inside the exchange” includes 20 million individual enrollees and 4 million people whose employers provide coverage through the exchange. “Public plan” members include 10 million individual enrollees and 2 million people whose employers provide coverage through the exchange.

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CBO anticipated that only In a different analysis, The Lewin The claim that an inherently inferior companies with fewer than 50 Group estimated (assuming full public option would replace most employees would be allowed to buy implementation in 2011) that the private health insurance has a coverage through the exchange. public plan could cover 103.4 second major flaw—namely, it is According to 2008 survey data, this million people, considerably more individual consumers who decide would exclude from the exchange than forecast by CBO.39 Lewin’s whether to enroll in the public plan 81.6 percent of all workers whose analysis has been cited as evidence or in private insurance options employers furnish them with health that an exchange with a public plan offered through the exchange. If insurance.36 would dramatically reduce private problems emerge with the public insurers' role, helping lead to “a plan, consumers can vote with their CBO also concluded that the government-run, single-payer feet and move to private coverage. proposal, rather than lead most monopoly, with all private plans firms to drop coverage and let their driven out of business.”40 The distinction between an option to workers buy insurance through the select a public plan and mandatory exchange, would cause a small net However, as the Lewin analysts enrollment into publicly increase in employer coverage. made clear, their estimate assumed administered coverage makes a Among other reasons, current that the exchange would be dramatic difference to popular federal tax advantages would available to all employers, which is support. A survey of likely voters in continue to favor employer payment not required by current legislative January 2009 found that, while 73 of insurance premiums, medium- proposals or believed likely by percent supported giving all sized and larger firms would face a CBO. In addition, Lewin’s Americans a choice between public financial penalty if they dropped calculations assumed that the public and private health plans, only 9 coverage, and employers would be plan would pay providers at percent supported a proposal that pressured to help their workers meet Medicare rates and have would enroll everyone into public the individual coverage mandate. considerably lower administrative coverage.42 The power of individual CBO’s analysis is consistent with costs than those incurred by private consumers to decide whether to experience in Massachusetts, where insurers (although higher than enroll in a public plan thus seems to the combination of subsidies, a Medicare administrative spending), be a critically important element of health insurance exchange, and an resulting in public plan premiums current proposals. Nevertheless, individual mandate caused a nearly 30 to 40 percent below those for some opponents of pending 3 percentage point increase in comparable private coverage. If legislation charge that reforms employer coverage.37 such a sizable cost advantage involve a “massive, forced materialized, many people would dislocation of currently insured CBO further determined that, select the public option. However, individuals” who would among the estimated 36 million CBO determined that the likely “involuntarily lose their coverage Americans receiving coverage premium differential would be due to a government-run plan,”43 through the exchange, one-third closer to 10 percent, taking into and that “millions more Americans would choose the public plan. This account factors not considered by will be forced onto a government- is consistent with experience in Lewin.41 When the Lewin analysts run plan.”44 This perception is at California, which runs the nation’s calculated the effects of a 10 percent odds with the clear legislative largest health coverage system for premium differential and assumed language and CBO’s analysis of public employees outside the federal that only small employers and pending proposals and their clear government. California offers state individuals could use the exchange, legislative language. workers 10 health plan options, 3 of they estimated that 17 million which are run by the same public people would enroll in the public Third, the public plan would not agency that provides health and plan—a number quite close to “remove medical care from the free retirement benefits. In 2008, 29.3 CBO’s projection, given the enterprise system,” even if the percent of state employees and public plan was based squarely on 38 uncertainties inherent in all of these retirees chose a public option. estimates. This lower estimate Medicare. While programs like the suggests a strong and ongoing role Veterans Health Administration for private health insurance. (VA) furnish care through publicly

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owned health care facilities and The eventual consequences One noteworthy example is Ronald publicly salaried medical staff, of proposed reforms Reagan’s prediction in the early Medicare pays private doctors and 1960s about federal legislation that hospitals who provide covered Most of the claims that reform later became the Medicare program: services, and such providers would impose federal control over exercise considerable flexibility in the health care system involve First you decide that the doctor can determining the care they furnish. alarmist speculation about future have so many patients. They are As former Senate Majority Leader events. For example, although the equally divided among the various Bill Frist (R-TN) recently statutory language of current doctors by the government. But then acknowledged, “Socialized proposals as well as CBO doctors aren’t equally divided medicine is not Medicare. projections suggest that, in the short geographically. So a doctor decides Socialized medicine is you [i.e., the run, proposed reforms will not turn he wants to practice in one town government] own the hospitals, you American medicine into a publicly and the government has to say to own the doctors… The VA is administered enterprise, a recent him, you can’t live in that town. socialized.”45 Heritage Foundation paper predicts They already have enough doctors. that events will unfold differently. You have to go someplace else. And Medicare gives beneficiaries a The public plan “would be a wholly from here it’s only a short step to choice between enrolling in a owned subsidiary of Congress,” so dictating where he will go…. All of private health plan and seeking care “if the exchange became a powerful us can see what happens once you from private providers whom the regulatory agency,” Congress would establish the precedent that the program reimburses on a fee-for- have “powerful incentives to set the government can determine a man’s service basis. There is considerable rules to the advantage of its own working place and his working evidence that Medicare beneficiaries plan,” causing “the deck [to] be methods, determine his employment. are quite happy with the program. stacked against private-sector From here it’s a short step to all the More than 90 percent of players in a game that is rigged from rest of socialism, to determining his beneficiaries report good access to the start,” thus “ensur[ing] the pay. And pretty soon your son won’t 46 care. In fact, when compared to eventual triumph of a single-payer decide, when he’s in school, where privately insured individuals age 50 system of national health insurance he will go or what he will do for a to 64, Medicare beneficiaries are run by Washington.”51 living. He will wait for the less likely to experience waits for government to tell him where he will either routine appointments or A second example of such extended go to work and what he will do.53 urgent care.47 Despite Medicare’s extrapolation involves comparative potentially open-ended cost-sharing effectiveness research. Despite the Reagan further claimed that the obligations, only 15 percent of above-described statutory language backers of Medicare subscribed to a elderly Medicare beneficiaries have and the bipartisan origins of this “foot in the door ” any problems paying medical bills, policy initiative, Conservatives for through which the creation of compared to 30 percent of adults Patients’ Rights sees it as “a first Medicare “for this particular with private coverage.48 In addition, step towards rationing care in the population” would later expand into U.S.,” anticipating the ultimate a system of “socialized medicine for Medicare beneficiaries are 54 significantly more confident than outcome as “injecting a government every American.” None of these older adults with employer coverage bureaucracy between patient and predictions came true. If reform that they can get high-quality, safe doctor in the name of cost,” which legislation passes in anything like its medical care when they need it.49 In “can only lead to sacrificing care for current form, opponents of today’s giving enrollees their choice of those whose perceived life value proposals may not prove any more physician, Medicare nearly equals cannot meet the government’s accurate in their forecasts. cost/benefit standards.”52 the flexibility offered by private Conclusion Preferred Provider Organizations Such projections of the future that (PPOs) and exceeds the options go far beyond the legislative The late Senator Daniel Patrick available through private Health proposals do not enjoy an Moynihan cautioned that “we are all Maintenance Organizations impressive track record of success. entitled to our own opinions, just (HMOs).50 not our own facts.” That warning is

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well-taken for everyone involved in where we are in the legislative this standard, it is hard to conclude helping the public understand the process, reliable and objective that health reform legislation would complex undertaking of national analysis needs to focus on the lead to a government takeover of health reform and assess its details of current policy proposals American medicine. potential risks and benefits. Given and their likely results. Based on

Notes

9 Stan Dorn and John Holahan, Are We Headed 16 For example, most private insurers pay 1 House Majority Leader John Boehner, Towards Socialized Medicine? Prepared by the physicians based on a multiple of Medicare’s fee Americans Concerned about Impact of Dems' Urban Institute for the Robert Wood Johnson schedule; and when Medicare changed hospital Health Care Plan on Taxpayers, Families, Foundation, April 2008. reimbursement to pay based on each patient’s Seniors, August 6, 2009, Diagnosis-Related Group (DRG), most private http://republicanleader.house.gov/News/Documen 10 The one exception involved a proposal insurers followed suit. tSingle.aspx?DocumentID=141038. advanced by Congressman Kucinich. While the Kucinich proposal would preserve the private 17 Peter Ferrara, The Obama Health Plan: 2 FreedomWorks, FreedomWorks Leads sector’s role in furnishing care, the federal Rationing, Higher Taxes, and Lower Quality Grassroots Fight against ObamaCare, July 21, government’s authority would be so expansive as Care, The Heartland Institute, August 2009. 2009, to represent the functional equivalent of socialized http://www.freedomworks.org/publications/freedo medicine. Among its other features, the proposal 18 American Medical Association, Physician mworks-leads-grassroots-fight-against-obamac. would make it illegal to provide almost any health Characteristics and Distribution in the US, 2003- care services outside a greatly expanded Medicare 2004, Chicago, IL, 2004. 3 Newt Gingrich, “Deal Bites Dogs,” Washington program, place all capital investment decisions Examiner, July 31, 2009. related to health care in the hands of the federal 19 Based on tabulations from the 2004-2005 government, and forbid the for-profit provision of Community Tracking Study Physician Survey. 4 America’s Health Insurance Plans (AHIP), the health care. industry trade association, has agreed that, if 20 Authors’ calculations based on data from: (1) legislation mandates the purchase of health 11 Reform bills have been passed by the Senate American Hospital Association, AHA Hospital coverage, practices such as excluding preexisting Health, Education, Labor and Pensions (HELP) Statistics: 2008 Edition, Health Forum: Chicago, conditions can be outlawed, since consumers will Committee and the House Committees on IL; and (2) Personal communication with staff at no longer have the option of delaying the Education and Labor, Energy and Commerce, and the Veterans Health Administration. Hospitals purchase of insurance until they get sick. Ways and Means. The Senate Finance Committee operated by the Veterans Health Administration has released an outline of policy options and is are public facilities and admit approximately 5 For example, insurers would be forbidden from working on a legislative proposal for potential 800,000 patients each year. limiting benefits or raising premiums based on the action in September. individual medical condition of each consumer; 21 Medicare Payment Advisory Commission and premiums could vary by no more than a 12 The upper end of subsidy eligibility varies from (MedPAC), A Data Book: Health Spending and specified ratio based on such factors as age, 300 percent of the federal poverty level in the the Medicare Program, page 73, June 2009. gender, industry of employment, and area of proposal under discussion in the Senate Finance residence. Committee to 400 percent in the bills adopted by 22 If anything, the proportion of care furnished the other committees. privately may increase; some reform proposals 6 Congressional Budget Office, letter to the fund health insurance subsidies through reduced Honorable Nathan Deal, August 7, 2009, 13 For example, the House Tri-Committee bill payments to safety-net hospitals and could lead to http://www.cbo.gov/doc.cfm?index=10492&type leaves it to the exchange administrator to the closure of public hospitals. =1. determine whether large employers can participate after the first two years the exchange is 23 Gail R. Wilensky, “The Policies and of 7 See Robert Pear, “House Committee Approves operational. Creating a Comparative Clinical Effectiveness Health Care Bill,” New York Times, July 16, Research Center,” Health Affairs, July/August 2009, discussing CBO Director Doug 14 Plans are likewise forbidden from engaging in 2009; 28(4): w719-w729. Elmendorf’s concerns about proposed medical underwriting—that is, assessing legislation’s impact on cost growth. individual enrollees’ health risks to determine the 24 New Social Security Act Section 1181(h), coverage that will be offered or the premiums that added by H.R. 3200, Section 1401(a). 8 See Genevieve M. Kenney and Stan Dorn, will be charged—or rescinding coverage if an Health Care Reform for Children with Public illness arises. 25 Agency for Healthcare Research and Quality, Coverage: How Can Policymakers Maximize Center for Financing, Access and Cost Trends. Gains and Prevent Harm? Prepared by the Urban 15 As another example, some proposals forbid 2008 Medical Expenditure Panel Survey- Institute for the Robert Wood Johnson lifetime or annual limits on the amount of covered Insurance Component (MEPS-IC). Foundation, June 1, 2009. services.

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26 House Tri-Committee bill includes standards http://mediamatters.org/research/200908060012. people would enroll in the public plan, given that seek to prevent discrimination by insurers In his only public speech since leaving office, CBO’s estimates. based on health status (H.R. 3200, Sections 111- George W. Bush indicated openness to this line of 116) and that require health insurance to include argument. According to CNN: “Bush was asked 35 The Senate Finance Committee proposal certain “essential benefits” (H.R. 3200, Sections what he thinks about conservative pundits who appears likely to include, not a publicly 121-124). State insurance regulators would claim the Obama administration’s fiscal policies administered health plan, but a health insurance enforce these minimum federal standards, but are opening the door to socialism. ‘I've heard talk co-op owned by consumers. The House Energy they could set more demanding standards. If states about that,’ he said. ‘I think the verdict is out. I and Commerce Committee, after negotiations did not enforce these rules, federal enforcement think people are waiting to see what all this between House leadership and “Blue Dog” would occur. The goal articulated by means.’” Peter Hamby, “Bush: ‘The information Democrats, approved a bill that eliminated any congressional sponsors is to require insurers to we got saved lives,’” CNN Political Ticker, May linkage between Medicare reimbursement rates treat people fairly by making them accountable to 29, 2009, and the public plan, applied to the public plan a transparent set of rules. In the end, there would http://politicalticker.blogs.cnn.com/2009/05/28/bu various legal requirements that also govern be more uniformity in insurance rules across sh-the-information-we-got-saved-lives/. private insurance, facilitated the establishment of states than currently exists. state-level rather than federal exchanges, and 30 John K. Iglehart, “Fate of SCHIP—Surrogate supported the development of health insurance co- 27 Under current law, the federal government Marker for Health Care Ideology,” New England ops owned by consumers. See Amendment to the regulates some aspects of insurance markets. For Journal of Medicine 357, no. 21 (November 22, Amendment in the Nature of a Substitute to H.R. example, employers cannot exclude preexisting 2007): 2104–2107. 3200 offered by Mr. Ross of Arkansas, Mr. Hill of conditions for new workers with prior, continuous Indiana, Mr. Matheson of Utah, Mr. Space of coverage, and states must prevent certain types of 31 Conservatives for Patients’ Rights, Say No to Ohio, Mr. Barrow of Georgia, Mr. Gordon of discrimination based on health status when people Government-Run Healthcare, undated on-line Tennessee, and Mr. Melancon of Louisiana transition from employer-sponsored insurance to petition, http://www.cprights.org/no-government- (AINS-EC_001), July 31, 2009, 6:40 pm, non-group coverage. Mila Kofman and Karen run-healthcare.php. http://energycommerce.house.gov/Press_111/200 Pollitz, Health Insurance by States 90731/hr3200_ross_2.pdf. and the Federal Government: A Review of 32 Conservatives for Patients’ Rights, All Roads Current Approaches and Proposals for Change, Lead to Government-Run Healthcare, 36 Authors’ calculations from Agency for prepared by Health Policy Institute, Georgetown http://www.cprights.org/pdf/GovRunHC_85x11.p Healthcare Research and Quality, 2008 MEPS-IC. University, April 2006, df. http://www.allhealth.org/briefingmaterials/HealthI 37 Sharon K. Long, “On the Road to Universal nsuranceReportKofmanandPollitz-95.pdf. 33 For example, payment rates are set at Medicare Coverage: Impacts of Reform in Massachusetts at However, the states, rather than the federal levels for the first three years of plan operation, One Year,” Health Affairs, Web Exclusive, June government, currently set minimum benefit with a 5 percent increase for providers who also 3, 2008. Subsequent surveys show that employer- requirements, which do not apply to self-insured accept Medicare; Medicare-participating sponsored coverage continued to grow after the coverage. As explained above, proposed providers automatically participate in the new one-year period documented by Long. legislation would expand the federal public plan, unless they opt out; and federal funds Massachusetts Division of Health Care Finance government’s role in this area by setting a “floor” help capitalize the public plan, amortized over 10 and Policy, Health Care in Massachusetts: Key below which state benefit standards could not fall, years of premium payments. House Ways and Indicators, February 2009. and these new national rules would apply to self- Means Committee, America’s Affordable Health insured plans. Choices Act Section-by-Section Analysis, July 14, 38A similar proportion, 27.9 percent, chose a 2009, publicly-administered plan in 2003, the earliest 28 The President’s 2009 Budget for the U.S. http://waysandmeans.house.gov/media/pdf/111/sb year for which data are available, suggesting a Department of Health and , ys3200.pdf. relatively stable level of enrollment into public http://www.gpoaccess.gov/usbudget/fy09/pdf/bud coverage, rather than the rapidly growing get/hhs.pdf. 34 CBO, Letter to the Honorable Charles B. percentage some observers (but not CBO) foresee Rangel, July 17, 2009, under federal reform proposals. Authors’ 29 As noted in one news article, “Republican http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3 calculations, California Public Employees’ opponents say [President Obama’s] commitment 200.pdf; CBO, Letter to the Honorable Dave Retirement System (CalPERS), Preparing for of huge sums to try to revive the ailing economy Camp, July 26, 2009, Tomorrow: Comprehensive Annual Financial is driven by a philosophical belief in greater https://www.cbo.gov/ftpdocs/104xx/doc10400/07 Report, Fiscal Year Ended 6.30.08, December 17, government intrusion in many areas, from -26-InfoOnTriCommProposal.pdf. In the former 2008; Authors’ calculations, CalPERS, healthcare to education, dubbing it socialism.” document, CBO estimated that 30 million people Comprehensive Annual Financial Report, Tabassum Zakaria, “Resistance Grows to would receive coverage through the health California Public Employees’ Retirement System, Obama’s Bigger Government,” Reuters News insurance exchange in FY 2019, and 164 million Year Ended June 30, 2003, December 17, 2003. Service, March 22, 2009, would receive ESI. In the latter document, CBO On the general issue of state-administered plans http://www.reuters.com/article/newsOne/idUSTR made several important clarifications: its estimate for state employees, Moffit argues that such self- E52L0J820090322?sp=true. As one example, on of 164 million ESI recipients included 6 million funded forms of coverage are not analogous to the May 5, 2009, Lou Dobbs commented on his radio people whose employers would buy them kind of public plan included in reform proposals, show, “For the first time in the history of the coverage through the exchange; and these 6 since these state plans typically carry the trade United States, the federal government has million people were not counted in CBO’s name of a private insurer, and states, rather than supplanted sales, property, and income taxes at estimate that 30 million people would be covered perform as an insurer, simply contract with third- the state level as the biggest source of money for through the exchange. As a result, we concluded party administrators to handle claims payment and state and local governments,” adding that “so that 36 million would receive coverage through similar functions. Robert E. Moffit, State socialism has arrived in the first three months of the exchange. CBO further explained that, Employee Health Care as a “Public Plan,” The this year, folks, and it is—well, it is what it is, and whether they reach the exchange as individuals or Heritage Foundation, May 28, 2009. In California, it’s not going to change, I’m afraid, for a little through employer sponsorship, one-third of the former concern is not well-taken. The publicly while.” Media Matters, "Mr. Independent" Dobbs exchange participants would choose the public sponsored plans are named “PERS Choice,” repeatedly smears Obama, progressives as plan. We accordingly calculated that 12 million “PERS Select,” and “PERSCare,” after CalPERS, "socialist," August 6, 2009, the state agency that provides public employees

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with health and retirement benefits. And while 41 CBO, Letter to the Honorable Dave Camp. 49 Davis et al., “Meeting Enrollees’ Needs: How CalPERS contracts with a third-party Do Medicare and Employer Coverage Stack Up?” administrator to perform key administrative 42 Lake Research Partners, Voter Attitudes on a functions, the same is true of Medicare and would Public Health Care Plan, January 26, 2009. 50 The percentage of physician practices accepting doubtless be true of a public option under reform new patients, based on such patients’ source of proposals. 43 House Republican Conference, “Healthcare,” coverage, is 96.7 percent for Medicare, compared GOP Solutions for America (undated) to 98.3 percent for private PPOs and 86.3 percent 39 John Sheils and Randy Haught, Analysis of the http://www.gop.gov/solutions/healthcare. for private HMOs. MedPAC, A Data Book, page July 15 draft of The American Affordable Health 57. Choices Act of 2009, prepared by The Lewin 44 Senate Republican Policy Committee, What We Group for The Heritage Foundation, revised July Know So Far from CBO about the Democrats’ 51 Robert E. Moffit, “A Federal Health Insurance 23, 2009, Health Care Plan, July 30, 2009, Exchange Combined with a Public Plan: The http://www.lewin.com/content/publications/Lewin http://rpc.senate.gov/public/_files/HealthCareFact House and Senate Bills,” Heritage Foundation, HouseBillAnalysisHeritageRev.pdf, The same SheetHealthFactsWhatWeKnowSoFarfromCBOa July 30, 2009. findings were released several days later as John bouttheDemocratsHealthPlan.pdf. Sheils and Randy Haught, Cost and Coverage 52 Conservatives for Patients’ Rights, Is Congress Impacts of the American Affordable Health 45 “Healthcare Reform with Dr. Howard Dean and Importing Health Care Rationing from Britain? Choices Act of 2009: The July 15th draft, Staff Dr. Bill Frist,” The Charlie Rose Show, July 29, Undated White Paper, Working Paper #8, July 27, 2009, 2009, transcript at http://www.cprights.org/2009/05/is-congress- http://www.lewin.com/content/publications/Lewin http://www.charlierose.com/view/interview/10524 importing-health-care-rationing-from-britain.php. AnalysisHouseBill2009.pdf. #frame_top. 53 Larry DeWitt, “Operation Coffeecup: Ronald 40 Ferrara, The Obama Health Plan. See also 46 MedPAC, A Data Book, page 53. Reagan’s Effort to Prevent the Enactment of House Minority Leader John Boehner, Detailed Medicare,” September 2004, Analysis: House Democrats’ Government-Run 47 MedPAC, A Data Book, page 55. http://www.larrydewitt.net/Essays/Reagan.htm. Health Care Plan Breaks President Obama’s Promises, August 24, 2009, 48 Karen Davis, Stuart Guterman, Michelle M. 54 A recording of the entire Reagan speech is http://republicanleader.house.gov/News/Documen Doty, and Kristof M. Stremklis, “Meeting available at tSingle.aspx?DocumentID=142197; Conn Carroll, Enrollees’ Needs: How Do Medicare and http://www.youtube.com/watch?v=fRdLpem- Myths and Facts About Obamacare, The Heritage Employer Coverage Stack Up?” Health Affairs, AAs. Foundation, August 24, 2009, Web Exclusive, May 12, 2009. http://fixhealthcarepolicy.com/in-the-news/myths- and-facts-about-obamacare/.

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Acknowledgement The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance problems facing the nation. This research was funded by the Robert Wood Johnson Foundation. The authors appreciate the helpful advice and suggestions of John Holahan and Genevieve Kenney of the Urban Institute, Len Nichols of the New America Foundation, Karen Pollitz of Georgetown University, and James Reschovsky of the Center for Studying Change. The authors also appreciate the research assistance of Juliana Macri of the Urban Institute. About the authors: Stan Dorn is a senior research associate and Stephen Zuckerman is a senior fellow at the Health Policy Center of the Urban Institute. The views expressed are those of the authors and should not be attributed to the individuals named above, to the Robert Wood Johnson Foundation, or to the Urban Institute, its trustees, or its funders.

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