Insurance Reform and the Cost Conundrum

The U.S. Senate has been debating its health care reform proposal for several weeks. Differences between the House and Senate bills, which are considerable, must then be resolved by a conference committee composed of members from each chamber. These negotiations promise to continue into early 2010.

The debate at this stage is dominated largely by concerns about the cost of the proposals, their impact on the deficit, and whether or not they will truly reduce the cost of health care. Stated more bluntly, much of the debate is about money — who loses it, who gains it, who pays, and how much.

Both the House and Senate leadership tinkered with their proposals to make sure they came in under the $900 billion benchmark set by President Obama — and they did.

But both bills took different approaches to financing reform and controlling costs. In the House bill, the major revenue raisers are an increased income tax on those making $500,000 or more as individuals or $1 million as a family, and nearly $170 billion in reductions in payments to Medicare Advantage plans. The Senate bill would tax so-called ‘Cadillac’ insurance plans — those that cost more than $21,000 annually for family coverage.

The Senate bill also creates a new commission charged with finding $23 billion in Medicare savings beginning in 2014 if spending is greater than targeted. The commission-recommended savings would come from physicians, Medicare Advantage providers, and pharmaceutical companies. Hospitals and some other providers are not included in the proposed commission’s target reductions. Moreover, the commission approach is clearly designed to circumvent substantive congressional review and abrogates congressional responsibility to oversee Medicare.

As you would expect, the MMS, AMA, and other physician groups are strongly united in their opposition to this new commission as currently described. Eliminating many other Medicare providers from the commission’s purview will place the cost-reduction burden disproportionately on the backs of physicians. Nevertheless, given the imperative to meet deficit targets, the commission idea has garnered support from many economists and health policy analysts.

When President Lyndon Johnson fought to enact Medicare in the 1960s, he is reported to have urged lawmakers to ignore the “green eyeshade” people. In hindsight, if Congress knew then what Medicare was going to cost in dollar terms, the legislation might not have passed.

Although not without flaws, Medicare is hugely important to our nation’s elderly. So, despite today’s very different political and legislative climate, President Johnson’s point may still be relevant. This is not to suggest that we can totally disregard cost issues, but we also cannot continue to rely on simplistic measurements of cost. –

Alex.Calcagno is director of Federal Relations for the Mass. Medical Society (MMS), the statewide professional association for physicians and medical students. She is responsible for advocating the MMS positions before the state’s congressional delegation, federal agencies, and the executive office. Calcagno has more than 20 years experience lobbying in Washington, D.C. Before coming to Massachusetts she was assistant director of the Washington office for a national medical association, and worked on Capitol Hill for a member of Congress.