Why progressives should embrace HR 3962

Some progressives, motivated in part by Dennis Kucinich’s vote against HR 3926 are expressing disappointment with and even opposition to the health care reform legislation going through Congress.

While HR 3926 is not perfect—and the anti-abortion language added to it is terrible and will, we believe, be removed later in the process—it is a bill progressives should and must support.

In a long post I’ve explained in detail why I think single payer advocates like Kucinich are misguided in opposing the bill. Here, in this short version, I want to summarize the case for progressives giving active support to the legislation.

Two Preliminary Observations

Let me start with two preliminary observations.

Even if Kucinich is right, he’s wrong

First, even if everything Congressman Kucinich says about HR 3692 is true, it is a moral abomination to vote against this bill and kill health care reform this years.

We are talking about real lives of real people who desperately need health care and who suffer and die and go broke because they have no or inadequate health insurance. How can anyone in good conscience vote against legislation that would help thousands of people who desperately need help?

HR 3926 will provide quality, affordable health care for quite literally tens of millions of people who do not have it now. How can anyone vote against that?

It would be one thing if Congressmen Kucinich and Mass had an alternative that could be enacted sometime soon. But, as I’ve pointed out in other writing, single payer has no chance of being enacted in the United States (or in Pennsylvania) now or in the foreseeable future. Handing President Obama a defeat on this legislation, with the result that large numbers of Democrats in Congress are defeated next year, would just delay the time when single payer is on the table, perhaps by a decade or more.

To ask people who need help today to wait is cruel. To have health insurance—as Congressmen Kucinich and Massa, and as almost every supporter of single payer I’ve ever met does—and ask other people to wait until some ideal is attained is worse than cruel. It is a moral abomination.

If it’s a bail out, why don’t the insurance companies want it?

Second, if this legislation is such a bail out for health insurance companies,
if the public option is so meaningless, why are insurance companies fighting so hard to defeat it? Why are they spending almost three quarters of a million dollars a day, to stop it in its tracks?

How HR 3962 Works: Regulation, Employer Responsibility, the Exchange, and Affordability Credits

In their criticisms of HR 3962, Congressman Kucinich and single payer advocates fail to describe the main features of the bill. They focus on the mandate that individuals purchase health insurance—as well as the mandate that business provide health insurance for their employees—and claim that this means that individuals and business will be forced to pay premiums to insurance companies that  will act as rapaciously as they do today.

Changing the business model of private insurance

But while HR 3962 doesn’t eliminate private insurance companies, it will radically change how they do business. Insurance companies won’t be able to deny people coverage if they have pre-existing conditions or charge them more for insurance. Nor will they be able to charge women in childbearing years more. And higher rates for older people will be strictly limited. This modified community rating will  force insurance companies back to an older, socially progressive model of insurance, in which companies sell insurance as a means of spreading the burdens and costs of the bad things that could happen to all of us.

The exchange and the risk pool

In addition, individuals and small businesses will be able to come together in what the legislation calls  a health insurance exchange to buy insurance as a group. That will reduce the extraordinarily high premiums individuals and small businesses now pay to the levels paid by large businesses.

The insurance exchange will also reduce the administrative costs Congressman Kucinich complains about. Administrative costs are far higher in the individual and small business market than in the large business market, because insurance companies design separate policies for each small business, because the administrative costs for small businesses  can’t be spread among a large pool of people, and because so many bureaucrats are needed to determine what an individual is covered for under each policy.

Affordability tax credits

And for individuals and small businesses that still cannot afford health insurance, HR 3962 provides affordability tax credits that subsidize the cost of insurance and limit both the percentage of income people pay for premiums and the out of pocket costs they pay for deductibles and co-pays. Subsidies are gradually phased out as family incomes increases, but people up to 400% of the federal poverty line, or $88,000 for a family of 4, will receive some subsidy.

How HR 3962 Work: The Public Option

Why we need the public option

Regulations on insurance companies aren’t enough to keep insurance companies on the straight and narrow. They can still try to game the system and discourage those who are likely to need health care from getting insurance with them. And, given how concentrated the health insurance market is in so many localities, they will also be inclined to pass on rising health care costs instead of controlling them.

The creation of a public insurance plan will give people an alternative to private insurers who try to game the system and create the competition we need to hold down insurance company premiums, profits and perks.

Congressman Kucinich and single payer advocates say the public plan will be inadequate because the Congressional Budget Office (CBO) has estimated that only six million people with join public health insurance plan because it’s rates might be higher than that offered by private insurance companies.

But, first, competition can be effective in controlling insurance company practices and profits even if the public insurance plan is small.

Second, what Congressman Kucinich does not say you is that the way CBO “scores” legislation is not by any means realistic. It is a highly conservative process that has one and only goal, to provide a very conservative forecast of the consequences of policy changes for the federal budget.

There are many factors, most ignored by the CBO, that will keep premiums in the public plan lower than those offered by private insurers.

A genuine non-profit

To begin with the public health insurance option will not have to make a profit and will not pay its executives obscene salaries.

Administrative cost savings

And precisely because it does not try to deny people coverage and care, because the public option will offer only a small number of insurance plans in the exchange, and because it will be able spread costs over a large pool of insured, the public plan will have lower administrative costs than private insurance.

Lower reimbursement rates

In addition, the public insurance plan, like Medicare, will use its bargaining position to pay doctors and hospitals at lower rates than private insurers. Now progressive have some concern about this. After receiving opposition from rural representatives, Speaker Pelosi jettisoned the idea of basing rates for the public plan on Medicare rates plus 5%. The legislation now calls for “negotiated reimbursement rates” somewhere between Medicare and the average rates for private insurers.

Eliminating Medicare plus 5% from the legislation forced the CBO to dramatically raise its estimate of the rates that the public plan would pay.

But, in the real world, reimbursement rates under the public option are likely to be closer to Medicare rates. The legislation directs the Secretary of Health and Human Services to set reimbursement rates as low as possible in keeping with the goal of access to good health care. If health care providers are willing to accept Medicare rates, we know that they will accept rates close to Medicare rates in order to gain access to the large pool of potential patients in the public plan. So that is where rates in the public option are likely to wind up.

Risk Adjustment

The public option will be also be able to keep its costs and premiums low because it will be protected from adverse selection by “risk adjustment.” The Secretary of HHS is directed to devise a scheme by which insurance companies that insure a pool of healthy people have to compensate companies, including the public plan, that insures a pool of people who are less healthy.  

Risk adjustment is not a new idea. In the Netherlands, a system of private insurance companies covers everyone at basically the same premiums because a risk adjustment scheme keeps cost roughly the same for each company.

The Public Option Will Grow

If, for all these reasons, the public option can charge lower premiums private insurance, as I believe it can, then it will grow larger, and its administrative costs will then be further reduced. And it is going to grow larger over times because, as few people other than the insurance companies (and fired dog lake) seem to recognize, it will be open to larger numbers of people over time. Initially the exchange and thus the public option will open only to individuals and small businesses with 25 or fewer employees. In 2014, businesses with 50 or fewer employees can join the exchange. By 2015, business with 100 employees or fewer can join the exchange although the exchange commission could allow larger businesses to do so as well. So either by administrative action, or by further legislation, the public option can grow.

The pressure for reform

And I think it certainly will grow if, as seems likely, the public option provide more secure insurance at lower prices. The political genius of HR 3926, like that of social security before it, is that it will build its own political pressure for expansion. People forget that when it first went into effect, Social Security covered roughly 17 people. Ok, maybe 25. All government workers and agricultural workers and many others were excluded. But the program was popular and pressure to expand it—and raise social security payments— kept growing.

Conclusion

Given all these feature of HR 3692, there is no reason to see it as a sell-out to insurance companies or as likely to be ineffective. It is not a perfect plan. It certainly is complicated. But is a bold plan that means to dramatically change how health insurance is provided in America.

Every progressive in America—indeed everyone who cares about getting quality affordable health care for all—should be working as hard as possible to get this bill enacted (without the Stupak amendment!)