President Obama Spotlights Health Care Reform

President Barack Obama held a primetime news conference focused primarily on health care reform. He reiterated his objective that the final solution must lower costs, promote choice and provide coverage for all. He stressed the urgency of reform as skyrocketing health care costs will continue to cripple our national deficit and burden individuals and employers with increasing premiums and out-of-pocket expenses.

While Congress continues to debate health care reform, the President indicated several areas where consensus is emerging and used this opportunity to answer the question many Americans are asking, “What’s in it for me?”

For those with insurance, the President asserted that:

• Reform will provide more security and stability – those who lose their jobs, move or change jobs will not lose access to coverage
• Government will not be part of health care decisions – individuals who are happy with their insurance will have the option to keep it
• Insurance plans will not drop coverage for individuals who are sick
• There will be limits on out-of-pocket expenses
• There will be coverage for preventive care and a focus on wellness
  

For those without insurance, he said that:

• Individuals and small employers will be able to obtain competitive, quality, affordable coverage through a Health Insurance Exchange, which will include a public plan option
• Health coverage will not be denied due to pre-existing conditions
  

President Obama stressed that acceptable health care reform must be paid for and must not add to the national deficit. He believes that two-thirds of the cost can be paid for by eliminating waste in the Medicare system. It is coming up with the remaining one-third that has been the subject of much debate. The President’s own recommendation for financing reform, limiting the itemized deductions for the wealthiest Americans, has not been included in any of the proposals. The President indicated he is not opposed to the other financing mechanisms suggested by Congress, including the early proposals of the Senate Finance Committee (although no draft bill has been issued) and the House proposal to apply a tax on wealthy individuals (those with joint income of $1 million). The President was very clear that the financial burden for health care reform must not be placed “on the backs of middle income families.” He indicated he will oppose any bill that is primarily funded through middle-class tax increases.

The President expressed his determination to have a health care reform bill passed and signed this year. Notably he focused more on having Congress develop the “right bill” to address the health care issue, and was less concerned about his own August deadline for a vote by Congress. Clearly this August timetable will not be met in the Senate. The day following the President’s press conference, Majority Leader Harry Reid (D-NV) stated the reform package will not be voted on until the fall. The President commented the delay is acceptable so long as Congress continues to work on this issue.

As indicated in previous reform updates, there are many committees currently working through their respective proposals. Once out of committee, the House and Senate will each need to vote on a bill. Then the respective bills will be re-negotiated, merged together and will require one more vote by Congress before a final reform bill makes its way to the President’s desk for signature.

I expect that while some aspects of the proposed health care reform bills are beginning to solidify, there will still be significant discussion and negotiation in the weeks ahead, most notably on the role of a public plan option and the sources of financing health care reform.

Widget

Interesting Widget on Health Care Developments

Universal Coverage: The Cure For the Ailing Inurance Companies

Industry pundits agree that perhaps the largest contributing factor to the defeat of Clinton’s Health care reform efforts in the 1990s was due to the mighty lobbying effort on the part of the private insurance companies.

Billions of dollars were spent by the insurance companies, both on the health and property/casualty sides, to thwart reform efforts. And ultimately, it worked and reform was defeated. This was also the case when health care reform was shot down under Carter, Johnson, and even Truman’s terms in office. Although Medicare did make it through despite the same type of lobbying efforts simply because there was enough of an aging population to support it.

This is also the single biggest reason why health care reform will ultimately happen under Obama: because private insurers will support it this time.

I get some pretty wild reactions from people when I make this statement. Everyone in my industry seems convinced that any governmental reform will push the private insurers out of business.

That simply isn’t true. For one, the government just spent billions bailing them out this year. Why would they make an investment in a business that they ultimately intend to bankrupt?

But the real reason why the insurers will support reform this time around is because of the membership they stand to gain, and need. In fact, it can be argued that the industry needs universal coverage, and the new membership it will bring, in order to survive. The only way the insurance companies will close their doors is if a single-payer system is adopted. Individual or a universal coverage mandate is however, necessary. (More on the disadvantages of a single-payer system later. . .)

One of the main provisions that exists in every major reform measure is the requirement for universal coverage, or an individual mandate. Once that provision is adopted, the private insurers will see their membership grow exponentially, almost overnight.

Since 2000, the number of private insureds has eroded tremendously. The payers lost nearly 9 million customers over the last 7 years. This erosion only exacerbates the problem as the rest of the industry (providers, hospitals, insurers, and even the government) must subsidize their care. The law prohibits the denial of treatment for emergency care. As a result, the insurance companies must raise their rates to keep pace with medical trend. And the uninsured place a heavy burden on the system, which drives up the trend. This in turn, forces more people out of the system. It’s estimated that there are nearly 50 million uninsured individuals right now.

And the recession has only made it worse.

Another big hit to membership will come in the next few years when the baby boomers begin to transition into Medicare. It’s estimated that 80 million people will turn 65 in 2011. Over the next two decades, private insurers stand to loose nearly 200 million members to Medicare.

How are they going to make up for this loss?

Now let’s go back to the Universal or, Individual Mandate. The 50 Million uninsured? They represent future customers. That would certainly help repair the membership erosion the private insurers have experienced. It might also mean that new companies will sprout to accommodate the market growth and capacity. That would breed more competition and could drive prices down for the first time since the early 1990s (when there were far more health insurance companies and HMO enrollment was prevalent).

The insurers finally possess the understanding of how to control medical inflation, and that’s through prevention. That’s another reason why medical tend was negative in the early 90s. It was due to high enrollment into the HMO model, which placed an emphasis on preventative care. Simply tossing the entire population into a single pool- with the idea that spreading the risk around will be sufficient to cover the costs- has failed time and time again. PERS is nearly bankrupt, Medicare will drown, eventually, and most of the Union Trusts are crippled. It can be argued that the cost to provide health benefits brought down the auto makers.

A Single Payer System will only reinforce this concept. In fact, a single-payer system will completely undue any reforms that any interest, be it the insurers or the government are trying to accomplish.

My next entry will focus on how a Single Payer System will bring about this downfall.

In the meantime, the industry should at least acquiesce to the idea of Universal Coverage, and work from there.

-Josh Spitz