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State Public Health Insurance Plans are Models for National Health Reform
Adam Thompson on May 12, 2009 - 12:43pm
Legislators working with Progressive States Network have created a sign-on letter for state legislators in support of bold federal health care reform. The letter articulates key priorities for reform, such as establishing the choice of a public health insurance plan as a critical element of comprehensive reform designed to ensure choice, access and affordability for all consumers. This Dispatch outlines why such a public plan is critical, and highlights state efforts on public insurance plans that can serve as a model for federal reforms. Legislators can sign the letter here, which will be distributed to President Obama and Congress.
Whether or not to provide Americans with the choice of a public health insurance plan has emerged as the line of demarcation in the federal health care reform debate. Proponents, rightfully, argue that the choice of a public plan would provide more affordable options for families and small businesses (particularly in rural America), create much needed competition within the health insurance industry, and serve as a guaranteed back-up for families who lose private coverage. Individuals and small businesses, in particular, would benefit from the cost-cutting bargaining power of a large group, just as large businesses and state governments pool their employees to negotiate better health care rates, and a public plan would not be driven by the profit-motive of private health insurers.
The Need for Choice of a Public Plan within Health Care Reform: Currently, three or fewer insurers control 65% of market share in 36 states. As the Economic Policy Institute (EPI) notes, "A public plan option would force private insurers to compete on efficiency and quality, rather than on their ability to enroll the lowest-cost workers and firms." Additionally, a public plan could use its size and efficiencies to gain quality improvements from providers and bargain for efficient rates. A public health insurance plan would have lower administrative expenses, as with Medicare, Medicaid and other public programs, and would not be out to make a profit, thereby achieving important cost savings for enrollees and further pushing the private market to be more efficient and competitive. A public plan would serve, in EPI's words as a "benchmark for the insurance market."
Public-private competition is a longstanding feature in the vast majority of advanced postindustrial economies... One of public insurance’s key strengths is the ability to set a high standard for cost, quality, and access within a national marketplace, to the benefit of private and public insurers, providers, and enrollees alike. If enrollees are unsatisfied with the public plan, they would be able to easily switch back to private insurers.
As noted health care economist Jacob Hacker, PhD, writes, "A health care system that contains costs and drives value must include a good public plan if the broad goals of reform—universal insurance and improved value—are to be achieved... Public insurance has a better track record at reining in costs, while preserving access; it has pioneered key quality and payment innovations that have often set the standard for private plans; it is essential to set a standard against which private plans must compete to drive value and can be a source of stability for people."
Right-Wing Smears Against Health Care Reform: The Right, including some Republican Congressional leaders, the Wall Street Journal (as in Monday's editorial), and other conservative opinion-leaders are pushing back against creating the choice of a public plan by dusting off the same-old tired attacks around "socialized medicine" that they have used against health care reform since it had its first hearing over 75 years ago.
Frank Luntz, who designed messaging to defeat national health reform back in 1993-1994, has predictably, once again, produced instructions to political allies to help defeat new reforms based on rhetoric that choice of a public health plan would actually reduce patient choices, rather than give them new choices beyond available insurance HMOs and plans. Ignoring the limited choices consumers face due to private insurance rules, opponents of reform are instructed to falsely argue that government would limit, rather than expand, consumer choices.
States Provide American Models for a Public Plan: Inevitably, any attempt to eliminate waste and potential profiteering in the health care industry by creating a publicly-run alternative choice is denigrated as somehow foreign or, worse, "French." Yet, despite the heated rhetoric, the idea of a public health insurance plan is not new to health care in the US. Inevitably, any attempt to eliminate waste and potential profiteering in the health care industry by creating a publicly-run alternative choice is denigrated as somehow foreign or, worse, "French." Along with Medicare, Medicaid, and the Veterans' Administration health program, states have created public plans that co-exist with and compete with the private market, from state employee health plans to health care programs for kids. In a congressional hearing last week, Secretary of Health and Human Services Kathleen Sebelius noted that roughly 30 states have state employee health plans that provide employees with a choice of public or private coverage. When asked by a skeptical committee member what a public plan that competes with private plans would look like, Secretary Sebelius replied:
"Examples of that again are in place across the country. Thirty of the states have state employee health plans where there is a public option for state employees side by side with a variety of private options; created largely to give those state employees in a state like mine, in Kansas, a choice, because much of our state only had one private provider. And we felt giving employees a choice for themselves and their families, a competitive choice, was important. A number of states have constructed their CHIP programs in exactly the same way - where this is a side-by-side option of private provider and a public provider."
Earlier this year, Jeanne Lambrew, who Secretary Sebelius announced on Monday will lead the HHS Office of Health Reform, similarly remarked that creating the choice of a public health insurance plan could be modeled after state employee health plans. Almost 4 million Americans are covered by state employee health plans. And, as noted by Secretary Sebelius, states have created public health plans for kids, like Illinois' groundbreaking AllKids program, which makes a public health plan available to all children in the state.
State Steps to Extend Choice in Public Plans to More Families: While the current debate in DC has focused on the choice of public health insurance plan, this Dispatch will outline how state legislators and health care advocates have already been advancing the priority of a public plan - helping to build grassroots support for creating the choice of a public health insurance plan as part of comprehensive health care reform. Notable state campaigns to extend public plans to more families include Healthy Wisconsin, a guaranteed health care program for all state residents, providing state employee-level benefits and ensuring consumers' choice of providers, which passed the State Senate in 2007, and the Connecticut Healthcare Partnership, allowing small businesses and municipalities to buy coverage through the state employee health plan, which passed the legislature in 2008 but was vetoed by the Governor. This year, these initiatives have been reinvigorated by legislators and joined by other proposals that hinge on creating a public plan, like SustiNet, a comprehensive reform measure which creates a true public health insurance option in Connecticut, the nation's insurance capitol.
Think Progress - Deconstructing Frank Luntz’s Obstructionist Health Care Reform Memo
George Lakoff, Glen W. Smith, Eric Hass - Health Care Reform: Some Basic Principles
Jacob Hacker, PhD - The Case for Public Plan Choice in National Health Reform
Economic Policy Institute - Why a Public Insurance Plan is Essential for Health Reform
Herndon Alliance - The Choice of a Public Health Insurance Plan: It’s about Choice + Competition
Table of Contents
Connecticut Debates the Choice of a Public Health Insurance Plan
For at least the third year in a row, the Connecticut Legislature is debating whether or not to create some form of a public health insurance option in the state. The need for change in Connecticut is highlighted by a New America Foundation report on the "cost of doing nothing." New America found that Connecticut lost $2 billion, or $6,126 per uninsured resident, in lost productivity due to the shorter lifespans and poor health of the uninsured, the third highest level in the country. The report finds that by 2016, employer-sponsored health insurance costs for a family will jump from $14,300 to a staggering $25,000.
The Healthcare Partnership Model: House Speaker Chris Donovan is the lead sponsor of the Connecticut Healthcare Partnership (HB 6582), a plan to self-insure state employees and allow small businesses and municipalities to buy coverage through the state employee health plan. A form of the Partnership first emerged in 2007 and was passed by the legislature last year before being vetoed by Governor Rell.
Supporters of the Partnership note that pooling small groups with the state employee plan, which has more than 200,000 members, would generate significant bargaining power and enable small employers and municipalities to negotiate better insurance rates. While more than 20 states allow similar pooling of state and municipal workers, Connecticut would be the first to allow small businesses to join the plan at such a large scale. The plan would infuse the state's health insurance market with competition and force private insurers to work harder for small group market share. And, by self-insuring the state employee health plan, rather than be full-insured by private insurers, the state will be able to achieve an upfront savings of $70 million dollars and give taxpayers, state employees and many small businesses greater control of their benefits. As Speaker Donovan notes,
"The Healthcare Partnership bill provides businesses with a new choice—the same choice that state employees, legislators and even the Governor enjoy. This will allow businesses to stretch their dollars further, attract talented people, and grow their organizations.”
In fact, the fiscal note for HB 6582 anticipates that small towns and small businesses "will achieve savings from the state's large-group purchasing power, pooled risk and administrative economies of scale." The City of New Haven, for instance, could save over $8.6 million in annual employee health insurance costs by pooling with the state employees and other groups that join the Partnership.
Connecticut Proposal is Picked Up In Other States: Successful passage of the Connecticut Healthcare Partnership in 2008, despite being vetoed, spurred similar proposals in other states, including Iowa and New Hampshire. As part of a multi-faceted health care reform measure, which included health care for all kids, Iowa Sen. Jack Hatch proposed allowing private small businesses, nonprofits, and municipalities to join the state employee health plan - enabling these small groups to benefit from the increased bargaining power of the state employee pool and potentially cut their health care costs. Although the original measure (SF48) was amended down, SF 389 was enacted and includes a commission to consider additional reform initiatives and fulfills the state's commitment to ensure all children have health care by the end of 2010. Similarly, New Hampshire State Rep. Jill Shaffer-Hammond has proposed HB617 to allow small employers to join the state employee health plan. The measure has received favorable attention and remains in committee for consideration.
Public Health Insurance Plan as Part of Comprehensive Reform: In Connecticut this year, there is a parallel measure, SustiNet, which would provide for an even more robust comprehensive public plan to compete in the insurance market, promoted by Universal Health Care Foundation of Connecticut. SustiNet has been introduced as HB 6600 this year and would merge the state employee health plan with other programs into a self-insured plan available to small businesses and individuals who lack access to affordable and quality employer coverage. SustiNet would later be opened up as an option to larger employers in the state.
Unlike private insurance, all SustiNet applicants would be accepted regardless of pre-existing conditions and benefits would be comprehensive, including medical home services, mental health and dental care. To help ensure affordability, premiums would be subsidized based on income, and delivery system innovations are proposed for reducing the growth of health care costs and improving the quality of care using these improvements to influence change in private plans in Connecticut. SustiNet is projected to cut the state's uninsured rate to 2% of the population, roughly 50,000 people. Economic modeling conducted for the foundation by Dr. Jonathan Gruber and The Urban Institute shows that delivery system changes and other cost control measures would reduce the annual growth of health care costs by .2% to 3.2% through 2016. By 2014, SustiNet is projected to save employers $1.35 billion, cut individual health care costs by $540 million and bring in an additional $800 million in federal match to Connecticut. Increased state revenues would be required to cover the cost of subsidies and raising provider rates in the Medicaid program to reduce the cost shift. However, households and employers would save nearly two dollars for every additional dollar spent by the state.
Like the Healthcare Partnership, SustiNet hinges on the choice of a public health insurance plan to ensure all residents have quality and affordable health care and to infuse the market with competition. SustiNet, HB 6600, has received majority favorable reports from four legislative committees and may reach the floor of the House this week.
SustiNet comprehensive reform bill - CT HB 6600
Connecticut Healthcare Partnership - CT HB 6582
Speaker Chris Donovan - Connecticut Healthcare Partnership
Connecticut Healthcare Partnership - City and Town Estimated Savings Totals
Connecticut Healthcare Partnership - Talking Points
Universal Health Care Foundation of Connecticut - SustiNet Fact Sheet
Universal Health Care Foundation of Connecticut - SustiNet, Health Care We Can Count On: A Proposal for Health Care Reform
Healthy Wisconsin Highlights Potential Savings from a Public Plan
Wisconsin legislators have promoted the most comprehensive version of a public plan. In June 2007, the Wisconsin State Senate became the first (and only) legislative chamber in the country to pass a fully-funded comprehensive health care reform package that would guarantee health care for all residents and enhance their choice of provider. Although it did not pass the state Assembly, Healthy Wisconsin stands out for its guarantee of affordable health care, cost containment provisions, and consumer choice -- demonstrating the potential cost savings and quality improvements achieved from a large public plan.
Sponsored by Sen. Jon Erpenbach, Healthy Wisconsin would guarantee all residents who are not otherwise in a federally-based health plan, like Medicare or Medicaid, with portable comprehensive benefits modeled after the health plan provided to state legislators. Health care would be financed with payroll deductions -- 9-12% of social security wages for employers and 2-4% of social security wages for employees -- instead of premiums. Residents would be able to choose from various networks of providers who would compete on metrics of quality, price, and access.
Costs would be cut system-wide through administrative efficiency, the negotiating power achieved by pooling all eligible residents, and improved systems for preventive care and chronic care management. A 2008 report by Citizen Action of Wisconsin, "Good Deal: How Healthy Wisconsin Improves the Bottom Line for Wisconsin Families", estimated that the average household would save 40% to 62% under the new program compared to the current disjointed health care system -- an annual savings of $1,320 to $4,180 each year. A Lewin Group study shows that employers currently providing coverage at some level would save $700 million dollars in the first year of the program and the state would save $1.3 billion each year for the next ten years.
A New Standard for Reform: Nationally, Healthy Wisconsin marked a new standard and model for state health care reform, as evidenced by similar legislation proposed in Washington in 2008. Sponsored by Sen. Karen Keiser and as originally proposed, the Washington Health Partnership would have created a public-private purchasing pool in which consumers could choose from public or private plans - achieving health care for all residents and administrative efficiency while enhancing health care choice. Earlier this year, the actuarial firm Mathematica Policy Research reported to Sen. Keiser's health committee that her plan would generate $1.6 billion in new economic activity, save state taxpayers $330 million in spending, and reduce employer health care expenditures by $2.35 billion and family out-of-pocket spending by $1.03 billion. While the measure (SB 5945) was amended down to create a reform advisory group rather than the comprehensive Health Partnership program before passing the legislature, it articulates key priorities for reform, including the choice of public or private health plans. The new reform advisory group will monitor state and federal progress towards health care reform and propose specific measures to achieve the priorities outlined by the bill, including quality and affordable health care for all by 2014.
In New York, Assemblymember Richard Gottfried has introduced New York Health Plus, a similar program of guaranteed health care benefits for all state residents. A7854 would be funded in part through a Medicare-like payroll deduction, all residents and employers would be enrolled in NY Health Plus and would have the choice of public or private health plans. Coverage would be paid for by the state and residents and employers would be able to opt out of the program in exchange for a tax credit to purchase private insurance.
The emergence of these proposals underscores the growing consensus that the private market on its own is unable to provide for access to quality and affordable health care and that health care in America must include, in the very least, the choice of a public health insurance plan.
Citizen Action of Wisconsin - Healthy Wisconsin Resource Center
Citizen Action of Wisconsin - Good Deal: How Healthy Wisconsin Improves the Bottom Line for Wisconsin Families
Families USA -Healthy Wisconsin: Good Medicine for Wisconsin's Economy
The Lewin Group - Healthy Wisconsin - Your Choice, Your Plan: Cost and Coverage Impacts
Mathematica Policy Research - Analytic Support for WA Citizens’ Work Group on Health Care: Evaluation of Health Care Reform Proposals
Progressive States Network - Healthy Wisconsin: Model Policy, Model Advocacy
Other State Initiatives Creating the Choice of a Public Health Plan
Comprehensive Reform in Oregon: In 2007, the legislature passed SB 329 creating a new authority to develop a comprehensive health care reform proposal. In November of 2008, the Oregon Health Fund board released a detailed report outlining a comprehensive health care reform initiative. House Bill 2009 and Senate Bill 856A include several quality improvement and cost reduction initiatives as well as measures for ensuring access to coverage for all Oregonians. Both measures create an insurance exchange, where consumers would be able to choose among private health plans or a public plan. A statewide public opinion poll funded by the Robert Wood Johnson's State Coverage Initiatives program and released last week found that 81% of residents favor establishing a
"central marketplace for insurance that provides one-stop shopping for individuals and small businesses to compare rates, benefits and quality among plans, to help find one that best suits their needs. In addition to private insurance plans, consumers would also be able to choose a public health plan option."
A Public Health Plan for Kids: Several states have acted to ensure all children have access to health care coverage. Illinois was first to the table with its AllKids program, creating a public plan option for children in families unable to afford private coverage and with sliding scale premiums based on family income. Other states, like WA, IA, NY, NJ, and MA, have created similar programs by expanding eligibility for SCHIP and, in some cases, allowing families with income above eligibility levels to buy into the state plan at full cost. In addition to Iowa's health care reform of 2009, Delaware is considering HB 139 to allow children in families ineligible for the DE Healthy Children Program, those with incomes above 200% of poverty, to buy into the state program. Children must be uninsured for at least 3 months before becoming eligible - a provision that limits this as a true public option.
Illinois AllKids health care program
Oregon Health Fund Board - Aim High: Building a Healthy Oregon, Overview of Recommendations
Support Grows for the Choice of a Public Health Insurance Plan
According to a January 2009 Lake Research Partners public opinion poll conducted on behalf of Health Care for America NOW!, 73% of "voters overwhelmingly want everyone to have a choice of private health insurance or a public health insurance plan." The Herndon Alliance has highlighted key messages for why the public supports a choice of a public health insurance option that will help ensure all Americans have access to quality and affordable health coverage.
Newspapers, from the New York Times to the Des Moines Register, back the creation of a public health insurance option as "exactly what the country needs" (DMR). President Obama and his Administration's support for a public health insurance plan remains steadfast, but equally if not more important is the growing commitment from members of Congress and state legislators to comprehensive health care reform that includes the choice of public or private health insurance.
Congressional Support for a Public Plan: Representing 117 members of Congress, leaders of the Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus sent joint letters to President Obama and Congressional Leadership in the House and Senate asserting that "our support for enacting legislation this year to guarantee affordable health care for all firmly hinges on the inclusion of a robust public health insurance plan like Medicare." And, a group of 21 US Senators, at last count, sent a letter to key committee chairs announcing their support for a public health insurance option and outlined how it could help reduce costs, improve quality, and achieve health care for all.
State Resolutions Supporting the Public Plan: Several state legislatures and chambers have passed resolutions supporting federal reform and, specifically, the choice of a public health insurance option. The Arkansas Legislature passed HCR1019 which calls for a "national solution to healthcare reform for America" and includes a "choice of health insurance plans, including the right to keep current insurance, choose another private plan, or join a public health insurance plan." A similar resolution, HR313, is moving through the Illinois Legislature. Earlier this year, the Iowa Senate passed SR13 which articulated many priorities for federal reform including guaranteeing affordable coverage for all US residents "using private market and publicly financed plans."
Political Support for Reform Yields Industry Concessions: The mere prospect of federal reform creating a public plan option has forced the health care industry to make a string of concessions to President Obama and Congressional health care leaders, a point the Des Moines Register noted in its editorial supporting the choice of a public plan.
And there's an added bonus to creating a public plan: private-sector plans will do better by patients, because they'll have more competition. Just talk of creating a government plan has the industry offering to cut rates and welcoming oversight. Imagine how nice it will play when Congress actually creates such an option.
As part of its campaign to prevent Congress from creating a public plan, the health insurance industry lobby last week offered to end gender-based rating -- where women pay higher rates for health insurance. The lobby had previously said it would stop denying coverage to sick people and would stop charging higher premiums for Americans with a history of health problems. The caveat, of course, is that the industry would agree to these concessions if all Americans are required to have insurance coverage. Such a mandate absent the choice of a public plan and robust affordability measures would be akin to a subsidy for the private, for-profit health insurance industry.
The industry's latest concession is a "voluntary" commitment from key stakeholders -- health insurers, drug makers, hospitals, and doctors -- to reduce the growth of health care costs by $2 trillion over the next ten years.
Using Choice of a Public Plan to Institutionalize Industry Commitments to Cost Reductions: These industry concessions are significant and welcome, yet voluntary commitments do not provide government and taxpayers with authority to ensure commitments are kept once the political focus on reform subsides. Reform, whether promised or legislated, must be backed up by the law.
Although the health insurance lobby rejects the "premise that to keep the plans honest you need a public program," Congress increasingly recognizes that insurance reform alone, including the concessions made by the health insurance industry, is not, indeed, enough to keep the private industry "honest." As the 21 (and counting) US senators wrote in their letter:
"An insurance market that allows for healthy, fair, and robust competition between publicly-administered and privately-administered insurance, allowing those who are satisfied with their coverage to keep what they have. Let Americans choose which option is best for them."
An alternative to private insurance will help keep that industry honest, while providing a mechanism for advancing quality-enhancing and cost-cutting strategies essential to the future viability of our health care system.
Lake Research Partners - Memo: Voter Support for a Public Health Insurance Plan
Herndon Alliance - The Choice of a Public Health Insurance Plan: It’s about Choice + Competition
Congressional Progressive Caucus - Caucuses Unite Behind Public Health Insurance Plan Option
US Senators Outline How a Public Health Insurance Option Could Reduce Costs, Improve Quality of Care, and Ensure Universal Coverage by Protecting Access
Legislators Sign-on to Letter to Congress and President Obama
To promote health care reforms that ensure affordability, choice, and equity and to help highlight the role states have played as innovators in health care reform, legislative health care leaders and the Progressive States Network are circulating a sign-on letter from state legislators to Congress and President Obama. As the letter states, "a key priority for reform is the choice of a public health insurance plan that is available to businesses, individuals, and families."
Endorsing the letter already are chairs of health care committees from twelve states, including Illinois, Iowa, Maine, New Hampshire, New Jersey, New Mexico, North Carolina, Oregon, Vermont, Washington, West Virginia, Wisconsin, along with other legislative leaders and members from a total of twenty-two states. The letter was developed in consultation with national health care reform advocates, including the the AFL-CIO, AFSCME, Community Catalyst, Families USA, Herndon Alliance, National Women's Law Center, Northeast Action, SEIU, and Universal Health Care Action Network.
The goal is to highlight both the unique role states play in health care and administering key programs like Medicaid and SCHIP, as well as the lessons that federal reformers should learn from states' experience in debating and enacting reforms in recent years. A key lesson, as the letter states, is the need for a "robust federal-state collaboration" to address the fact that "the private sector alone has proven incapable of creating a high-quality, fair, and accountable health care system that works for all families."
Assuring that Congress learns from the best state health care models, including the choice of a public plan, needs to be a key part of the debate on national health care reform.
Progressive States Network - State Legislators for Progressive Health Care Reform: Letter to Congress and President Obama