Will “reform” do more harm than good?

ON THE day before the Senate Finance Committee voted to push its version of health care reform legislation onto the Senate floor, the health insurance lobby issued a report intended to derail the reform train.

Called "Potential Impact of Health Reform on the Cost of Private Health Insurance Coverage," the report, prepared for America's Health Insurance Plans (AHIP) by the accounting firm Price Waterhouse Coopers, predicted huge increases in health insurance premiums if reform legislation modeled on the Senate Finance Committee bill passed Congress.

Response to the report was swift and sharp. The White House called it "hard to take seriously." The administration's health care "czar," Nancy-Ann DeParle, called the report "ludicrous," telling ABC News that the authors were like people who thought the earth was flat. "That's like saying, 'Most people think the earth is round, but if it's flat, here is what it would look like,'" she said.

Even people who support a much more far-reaching overhaul of the health care system than is currently contemplated in Washington called out the AHIP.

Rose Ann DeMoro, executive director of the California Nurses Association/National Nurses Organizing Committee, called it "an outrageous threat by one of the richest industries in America." DeMoro said: "Our legislators should respond to this bullying and stop coddling a useless industry whose sole function is to make enormous profits from the pain and suffering of patients while providing little in return."

The day after AHIP's report hit the airwaves, the Senate committee approved its bill, and the health care reform bandwagon rolled on. Washington pundits who had speculated that the AHIP report would undermine support for health care legislation instead concluded that the insurance lobby had shot itself in the foot.

Of course, when it comes to a fair accounting of health care reform, AHIP is the last organization one would expect to provide objective information. Yet without having to accept its numbers or conclusions, it is worth considering the core of its arguments--because they show how a profit-hungry business would figure out a way to make money from health care reform.

THE REPORT looks at four parts of the Finance Committee's health care plan--the most conservative and business-friendly of all of the plans passed by congressional committees--and shows how, in its view, the legislation would contribute to increases in health care premiums that are higher than projections based on the status quo.

Again, you can dispute their numbers and their conclusions, but in its analysis of health care as a business, the AHIP report operates on many of the same assumptions that Democrat-led health care reformers are.

For instance, its major claim about "Insurance Market Reforms Without a Strong, Workable Coverage Requirement" is that health insurance costs would increase more rapidly if the legislation doesn't require all people to carry health insurance.

This idea--linking the requirement to carry health insurance with consumer reforms making it more difficult for insurance companies to refuse or drop coverage--is central to all of the health reform bills in Congress. The AHIP report's complaint is that Congress may bow to pressure to exempt more people from the "individual mandate," thereby limiting a lucrative new market and requiring insurers to raise premiums to cover the costs of consumer reforms.

In its evaluation of another Democratic proposal, an excise tax on generous health insurance packages--which health reformers have labeled "Cadillac plans"--the report points out that if health premium inflation averages 8 percent a year, by 2019, most health care plans would be considered "Cadillac" plans under the current legislation, and therefore subject to the tax.

What's more, the AHIP report asserts that employers will react to a tax on these plans by cutting back on them--so one effect of the tax would be to accelerate the hollowing out of coverage under employer-based plans.

The report makes similar observations about projected cuts in publicly funded plans, like Medicare, and taxes on different health care industry entities. Because the driving assumption of the report is that health insurers will have to make up profits lost from one part of health reform in some other way, the end result is increased insurance premiums.

The point of considering the AHIP report's details isn't to claim that its self-serving message has been somehow misunderstood. The report does, however, provide a blueprint of how the health insurance industry--which is, after all, the entity that would be raising premiums--may react to health care reform if it passes.

It isn't that hard to see how this would happen. The health care reform legislation moving its way through Congress amounts to a massive bailout of the health insurance industry. With billions of dollars of subsidies flowing into a fundamentally broken system that thrives on private-sector profits, the stage is set for an increase in health premiums across the board.

Many of the cost controls that the administration has touted involve either cuts to programs, or illusory savings from computerization of medical records and reductions in "waste, fraud and abuse."

As long as the administration is unwilling to take on the profits of the medical-industrial complex, it will be faced with a Hobson's choice: either keep raising subsidies to unsustainable levels or keep cutting benefits.

This has been the experience of similar state-level programs, passed in Oregon, Massachusetts and Tennessee, to name a few. In each case, the promise of universal health care gave way to cuts in benefits as the programs' costs spiraled upwards.

EVEN IF AHIP has no credibility in this debate, plenty of people who do have credibility have made similar observations about the likely impact of the health reform legislation.

"During the four years of waiting for the Plan to take effect, costs will continue to rise," wrote Leonard Rodberg, research director of the New York Metro Chapter of Physicians for a National Health Program. "By the time the Plan takes effect, costs are likely to be at least 25 percent greater than now. Even more people will find insurance and health care unaffordable. People will ask, 'What was health reform about?' The disillusionment will be great."

Rodberg also concludes that health insurers will raise premiums to pay for new coverage requirements, and that employers are likely to ditch so-called "Cadillac" insurance plans to avoid the proposed excise taxes. "And, of course," he wrote, "to their undoubted surprise, most [people] will not have access to the public option, even if there is one."

A few liberals have begun to take note of these problems, and it is causing them worry. Instead of health care reform becoming the key to a strengthened social safety net and a long-term Democratic majority, it could become an albatross. As Jonathan Alter of Newsweek wrote:

The key to a political victory on health care isn't just passing a bill, it's controlling insurance premiums. After much-ballyhooed reform, Massachusetts failed to restrain premiums, which are set to increase another 10 percent next year. If the same thing happens nationally after Obama signs a bill, Americans will take it out on Democrats. So assuring that premiums don't skyrocket should be the No. 1 priority as committee chairs get down to the short strokes.

The best antidote to premium gouging, of course, is a public option...To show they really mean business, some gutsy Democrats should also threaten to cap premiums.

This is a 1993 idea from "Hillarycare" that the White House is afraid of. But that's more fighting the last war. It's too late now for the insurance industry to mobilize and block passage. A cap proposal would focus the debate where it belongs--on obscene premium hikes. At a minimum, the Leahy-Schumer amendment to end the insurance industry's state-by-state monopolies must be passed.

A public option, premium caps and trust-busting the insurance cartel would be improvements on the current White House coddling of the medical-industrial complex. But they still would tinker around the edges of a fundamentally broken system.

The conclusion of Rodberg, an advocate of a government-run, single-payer system, is more to the point:

Is there a way out? Not, in my view, as long as Obama sticks with this worthless and unworkable Plan. Only if we were to adopt a much simpler plan that would benefit everyone--a Medicare for All plan--would he be seen as actually addressing the problem and really offering a workable solution. Short of that, he, and all of us, are in real trouble.