"Scribblings": An Occasional Newsletter from the Legislature 
By Rep. Thomas F. Koch, Barre Town

As the 2010 legislative session approaches, many people are asking what national health care reform will mean for Vermont.  The short answer is that nobody knows.  The House passed a bill last month, which has been described by some as "dead on arrival."  The Senate began debate on Majority Leader Reid’s bill this week.  After Senate debate (presuming that the bill passes, which is not a certainty), a House/Senate conference committee will hammer out a final version.  Nobody knows what that might look like, and nobody knows whether it will pass.  The effect of the bill on Vermont, then, is pure speculation.

One thing everyone agrees on is that the present system is in need of vast improvement.  The question is whether there is sufficient agreement on how to improve the system.  What follow are some of my own thoughts about the various proposals under consideration in Congress.

First, what’s helpful in the bills:

1. The proposals for "guaranteed issue" are needed.  Too often, people apply for health insurance only to be told that they have a pre-existing condition and do not qualify for coverage relating to that condition, or that they must endure a waiting period, or that they cannot obtain coverage at all.  This is wrong, and companies whose business it is to write health insurance should be required to cover all applicants, regardless of existing health conditions.

2.  The problem with that idea, however, is that some people—perhaps many people—will wait to buy insurance until they need expensive care if they know that they cannot be denied coverage whenever they apply for it.  They may even "play the system" by purchasing insurance when they need surgery or some other costly care and then dropping their policies after that care is completed.  That, of course, defeats the concept of insurance—pooling the premiums of many people to cover the costs of care for a relative few.  The solution is to require all people to have coverage at all times, and this is what both the House and Senate bills do.

Frankly, requiring someone to purchase a product that he or she does not want to purchase goes against my grain, but without such a requirement, people will be able to drop in and out of coverage at will, and everybody else will be left paying the bill.  Furthermore, the concept is not entirely new; we already require everyone to have other forms of insurance—automobile liability and workers’ compensation, for example.  Health insurance is not that different.

Enforcing the requirement may prove to be problematic.  The bills provide for fines—probably collected through the income tax system—for those who disregard the requirement to maintain health insurance.  The fines, in fact, pay for a part of the cost of the overall health reform.  But because Congress, for political reasons, won’t be willing to set the fines at a level sufficient to make up for the lost premiums, some people will choose to pay the fine rather than the premium, and when uninsured people still show up at emergency rooms, chances are good that they will not be turned away.

3. The bills provide subsidies for people who cannot afford to pay their premiums.  I have said for many years that if the problem is that people cannot afford to buy insurance, the solution is to give them an appropriate level of financial assistance.  And the proper way to do that is with tax credits or vouchers that can be spent only on specified medical care, including insurance.  These bills adopt the tax credit approach, which is far better than any one-size-fits-all, government-run, system such as an expansion of Medicare or Medicaid.  Whatever approach is taken, however, will be expensive and will constitute a major cost of the reform effort.

4.  Both bills reduce the "doughnut hole" in the Medicare prescription drug program, and the House bill closes the hole completely over a period of years.  While the Medicare Modernization Act of 2002 that created the Part D program has been successful beyond all expectations, the coverage gap remains as a curious, perhaps even ridiculous, benefit design.  It was supposed to reduce unnecessary use of prescription drugs; what it has done is limit access to Part D cost savings for senior citizens who have already tried to conserve and who simply need a lot of medication.

5.  Both bills move people toward preventive care, chronic disease management, and a "medical home" model.  Under Governor Douglas, the Vermont Blueprint for Health has already moved in this direction, and in this area, Vermont is a good example for the rest of the nation.  But while one can take it on faith that prevention and good care will save costs over the long run, demonstration of specific savings is very difficult, and if either Vermont or the nation "books" savings and suggests that by doing so, we are paying for the cost of reform, we are probably kidding ourselves.

Then, the problems in the bills:

a.  First and foremost, these bills do next to nothing to control the cost of health care.  The bills are almost exclusively about access to care and how to pay for care.  This is a fatal error.  As just noted above, we can talk about savings arising from prevention and proper treatment; and we can realistically anticipate a reduction in uncompensated care and improper use of the emergency room.  But when you add 30 million people to the rolls of the insured and tell them that they will have low deductibles and low co-pays and that some third party will pay for the vast majority of their health care expenses, you can surely expect that the demand for services will go up.  And when demand goes up, so does cost.  Health care reform, therefore, will itself prove to be a major driver of the future cost of health care.

b.  President Obama has said that a health care reform bill should not cost more than $900 billion over ten years, and he has promised that any bill he signs "will not raise the national deficit by one dime."  The non-partisan Congressional Budget Office has "scored" the House bill at more than one trillion dollars (a wee bit more than the president’s limit) and the Senate bill at $849 billion.  However, the CBO is only scoring what’s in front of them, and what the Senate bill does is start collecting revenues to pay for the bill in 2010, while the benefits don’t kick in until 2014.  So the CBO score is based on 10 years of revenues and only six years of expenses!  If history (Medicare and Medicaid, for example) is any guide, both bills will end up costing significantly more than current estimates, and that is a very frightening prospect.  Furthermore, big ticket items such as the bill to prevent automatic decreases in physician compensation under Medicare are separate items and not included in the CBO scoring for the Senate’s bill.

c.  The Senate bill revises the formula for determining the amount of federal Medicaid assistance available to each state.  In the case of Vermont and Massachusetts, this has a very disadvantageous effect, because these two states have already done more to expand eligibility for Medicaid than the other 48 states have done.  Governor Douglas has alerted Vermont’s congressional delegation to this perverse result, and they are working on it; however, when it’s 2 against 48, one can only hope.  If this problem does not get resolved, it means that Vermont will lose untold millions of dollars over a period of years.

d.  Neither bill tackles the problem of tort reform.  While the effect of medical malpractice lawsuits is often overestimated, it is seldom disputed that the fear of being sued often causes doctors to order tests and procedures of questionable benefit and in other ways engage in "defensive medicine."  In a system where "every little bit counts," defensive medicine is one of many cost drivers in the health care system.  President Obama has said that he is open to considering some degree of tort reform, though not any caps on monetary awards, but neither the House nor the Senate seems interested.

e.  Neither bill does anything about direct-to-consumer drug advertising—the ads we see on television that urge you to "ask you doctor if this is right for you."  These ads create false demand by convincing patients that they need a particular drug, and patients then virtually demand that their physicians write the appropriate prescription.  The drug companies do all of this advertising for one reason—it works.  And somebody has to pay for the millions (or billions) that these ads cost.  They were, for all practical purposes, banned prior to 1995; they should be effectively banned again, but these bills don’t attack the problem.

f.  In many respects, we don’t really know what these bills do.  Though each is roughly 2,000 pages long, neither provides the kind of detail that I am used to seeing in legislation here in Vermont.  The bill is loaded with authority for the Secretary of Health and Human Services, or one or another panel of experts, to flesh out the intent of Congress after the bill has been signed into law.  This type of legislating by delegation of authority is not acceptable, especially for a bill having such great impact on the lives of ordinary Americans.  In Vermont, I try to read every bill I am asked to vote on (sometimes, especially at the end of the session, the volume is just too great in the time allowed, but I try), and if I don’t know what the final product will look like, I generally vote no.  Here, I’m sure that very few members of Congress—if any—have made any real effort to read these bills; they are relying on staff reports, and when the staff reports say that "the Secretary shall design the program," that’s what I call "pig-in-a-poke legislation."

g.   Finally, the public option.  This past June, I wrote an Op-Ed column expressing my belief that if a public option were properly designed to provide fair competition, it could be a good thing.  Many papers in Vermont (but not the Times Argus) ran this article.  But I have come to believe that fair competition is not what this proposal is about.  Rather, it looks like a modified form of Medicare that uses public funds for capitalization and reserves, opts for comprehensive coverage and low co-pays and deductibles, and underpays providers, thereby shifting costs once again to private insurance.   If I am correct in this assessment, then no private insurer will be able to meet the "competition" provided by the public option, and the public option will become a back door approach to a single-payer system.  That may be an effective approach, but it’s not an honest one.

And then the prognosis:

Your guess is as good as mine.  The House bill passed by only three votes (though Nancy Pelosi probably had a few extra votes that she could have called in if she had needed them.)  The Senate voted to take its bill up for debate with not a single vote to spare, and with at least one more procedural vote requiring 60 votes to go, the outcome is highly doubtful.  If a bill does finally pass, however, its effect on health care nationwide, and on Vermont in particular, will require a lot of future analysis.

There is plenty more to be said on this subject, but I have promised myself that I will limit "Scribblings" to a maximum of four pages.  Further comment will have to wait for another time.  Meanwhile, I wish you Happy Hanukkah, Merry Christmas, and a healthy and prosperous 2010!