Thursday, November 13, 2008

The Baucus Blueprint for a Call to Action for Healthcare Reform, Part 1

Readers of the Disease Management Care Blog will probably want to pay attention to that ‘Sleeper of the Senate,’ Max Baucus (D – Montana), Chair of the all powerful U.S. Senate Finance Committee. He’s released his own Call to Action, a.k.a a ‘blueprint for healthcare reform’ ahead of any proposals by President-Elect Obama or Reformer-Select Ted Kennedy (D - Mass.). It’s not a legislative proposal but a flexible outline backed by a prodigious number of peer-review references that is intended to guide an ‘investment’ intended to improve healthcare quality, reduce costs and put the system on a ‘more sustainable path.’ There won't be any reform without his input, so when he speaks, Capital Hill listens. So should you.

It promotes employer-based insurance, relies on guaranteed issue of ‘actuarially equivalent’ plans, offers up a publicly financed Federal Insurer, uses a Massachusetts style Health Insurance Exchange (HIE) to match insureds with insurers, temporarily lowers the Medicare eligibility age to 55 years (if you can afford the premium that is designed to be cost neutral until the HIE kicks in) and lowers the income eligibility of generic Medicaid to 100% of the Federal Policy Level. It envisions a new governmental oversight entity called the ‘Independent Health Coverage Council' that will be made up of individuals nominated by the President and confirmed by the Senate ’
The DMCB offers up these observations about the insurance implications of the Baucus Blueprint (BB).

Think of this as play or pay with a tax credit sweetener. The theory is that making all persons buy-in will expand the risk pool. By forcing more low-risk players into the DMCB’s ‘risk transfer arena,’ the average price of transferring risk will drop. That should theoretically should decrease the cost of health insurance but the DMCB points out a) that has yet to happen in play or pay Massachusetts and b) the reason insurance is so expensive is because healthcare is expensive.

A Federal Insurer could be either/both a) an insurer of last resort (designed to avoid 'crowd out' by being a little bit more expensive than the other carriers but, in the end, it will cover you) or b) a competitor that forces the other plans to offer lower prices so that they avoid losing the member months of revenue. The BB appears to favor the latter but uses the former.

The BB's guranteed issue and uniform benefit would force all insurers to compete on price. While unstated, the DMCB suspects that this will increase the insurers' efforts to squeeze savings from the health care system; how well this will succeed remains to be seen. There are oodles of other proposals pertaining to quality - more on that later.

To give you an idea of the scope of the Independent Health Coverage Council, it would define what comprises ‘insurance’ and just what ‘affordability’ is. Big problems command big solutions, but that is an astonishing amount of power. This may be a key stumbling block in the filibuster prone Senate.

The Blues have been cautiously not unsupportive of this and AHIP is mulling this over. The DMCB suspects health insurers are grappling with the prospect of a) more premium revenue thanks to more persons being signed up and b) many smaller regional plans going out of business because they can't afford guaranteed issue. Health insurers will ultimately have to decide if resembling regulated utilities is all that bad.

In its next post, the DMCB will discuss the BB's chronic care proposals and some of the implications for disease management. Hint: things are hanging by a thread and the business model needs to evolve.

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