By Monica Sanchez

Much of the debate on the question of affordability is focused on how to make health insurance affordable for individuals. For example, according to The Washington Post, “How to make insurance more affordable to the estimated 30 million uninsured people who would be required to buy coverage under the Baucus proposal is emerging as a central challenge.”

That framing of the problem, however, misses the true challenge: making quality health care — not insurance — affordable for us all, as patients, employers, consumers and taxpayers.

I explained why the focus should be on guaranteeing everyone affordable health care and not just affordable insurance in a previous post.

But since the debate continues to center on the price of insurance, let me elaborate on the costly consequences of that focus.

As The Washington Post put it:

“Lawmakers in both parties raised concerns Thursday that the health-care reform bill offered by Senate Finance Chairman Max Baucus a day earlier would impose too high a cost on middle-class Americans and said they will seek to change the legislation to ease that potential burden…

“Some Senate Democrats, along with a key moderate Republican, Sen. Olympia J. Snowe (Maine), are now discussing ways to increase assistance for individuals and families… Sen. Charles E. Grassley (Iowa), the ranking Republican on Baucus’s committee, is suggesting government assistance to insurance companies to help them control premium costs.”
So basically, the focus is on how to help people pay for outrageously expensive private health insurance though government subsidies — meaning taxpayer money. And the added possibility of funneling more taxpayer money to private health insurance companies to help them keep premiums down. Where is the focus on actually lowering the cost and inflation rate of medical care?

Just how expensive will that health insurance be without lowering the cost of care? The New York Times makes the startling numbers clear:

“A key demographic to consider is the large number of Americans earning between 300 percent and 400 percent of the federal poverty level, which for a family of four translates to between $66,150 and $88,200 a year. (These are the numbers for 2009, and they get adjusted each year.)

“Under the Baucus proposal, folks in this category would not be eligible for subsidies to help purchase insurance unless the cost of premiums exceeded 13 percent of income, or $8,599.50 to $11,466…

“Also, remember that premiums do not include out-of-pocket expenses such as co-payments and deductibles. These costs would be capped at $5,950 for individuals and $11,900 for families. A number of health expenses, especially out-of-network services, might not count toward this out-of-pocket maximum.

“So under the Baucus plan, a couple with two children earning just over $88,000 could be on the hook for up to $23,366 in premiums and out-of-pocket expenses, and perhaps more.

“That amounts to more than 26 percent of income.” [Emphasis added]
So they believe that forcing you to spend one-fourth of your family’s annual income to get needed health care is affordable? So much for your kid’s college education!

And those are just the costs in the near future. Consider that premiums for employer-sponsored health insurance, which covers more than 60 percent of people under 65, have risen 131 percent (PDF) over the past ten years (from $5,791 to $13,375); and that the bill has no realistic way to slow these skyrocketing costs because it does not include a public health insurance plan option.

While most people want to know what the cost of premiums will be in the new health insurance exchange, few are speculating what the inflation rate on those premiums and out-of-pocket costs will be. As it is, premiums for a family of four with employer-sponsored health insurance are expected to rise to nearly $25,000 a year (PDF) by 2016.

That means: we as employers will find it very difficult to continue to provide health benefits; we as consumers will have to pay higher premiums or a greater portion of the premium for our health insurance; and we as taxpayers will have to shovel more and more money at the insurance companies to help people afford the health insurance we are forcing them to buy. In addition, we as patients will have to fork out more out-of-pocket for the health care we need even if we have health insurance, because the Baucus bill allows high-deductible plans with low actuarial values (meaning insufficient coverage).

As Wendell Potter, the former health insurance company insider, put it:

“‘The Baucus framework is just an absolute joke,’ said Potter, Cigna’s former head of corporate communications who has been speaking out against insurance industry practices. ‘It is an absolute gift to the industry. And if that is what we see in the legislation, (America’s Health Insurance Plans chief) Karen Ignagni will surely get a huge bonus.’

“Potter said the proposal would not provide affordable coverage. It gives the industry too much latitude to charge higher premiums based on age and geographic location, fails to mandate employer coverage, and pushes consumers into plans with limited benefits, Potter said.”
Even if we ensure the subsidies in the final bill are generous and keep up with health care inflation enough to truly make insurance affordable for individuals, we will be left with a system that provides private insurance companies absolutely no incentive to keep costs down. After all, the government will just keep handing them more taxpayer money to help people ‘afford’ their unaffordable and inadequate policies.

As costs continue to rise, more employers will have to drop coverage, which will lead to more uninsured individuals having to buy insurance in the exchange, more government subsidies to help them afford that coverage, and less incentive to the insurance companies to curb costs. A vicious cycle that only benefits insurance companies.

To create competition among health insurance plans, and thus help lower overall costs, the Baucus bill proposes the creation of health care co-operatives. But co-ops have little hope of doing that, as Senator Rockefeller has already clearly demonstrated.

Private insurers certainly are not worried about co-ops giving them any serious competition. As Wayne S. DeVeydt, WellPoint Executive Vice President & Chief Financial Officer, recently explained when answering questions about reform at the Morgan Stanley Global Healthcare Conference Unplugged (Remarks begin at 38:00):

“Let me address the co-op first. And as you know, Doug, it’s difficult to talk about health care reform without at least having a platform of where you are going to start. So let me start with the platform of what the government says a co-op will be and what it won’t be. What they’ve said is that it will be just another alternative for competition and that it will not have an unfair advantage against private companies and public companies. And that it will be forced to compete without having the benefit of the government to go out and force pricing.

“Assuming that is the environment that exists today, what I would say is that exists already. We have many not-for-profits that we compete with in all of our states today. Most of the Blues plans today in the other states are not-for-profit Blues. In California, we compete with two very significant not-for-profits: Kaiser Permanente as well as Blue Shield. So, you look at that environment and you say I’m not really sure I completely understand the value that the co-op will bring from that perspective, if it is truly a level playing field.”
Even the Congressional Budget Office has pointed out (PDF) that:

“The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.”
Co-ops can’t do it, but a public health insurance plan can. We know that because Medicare — the government-run public health insurance plan that has been serving people over 65 and those with long-term disabilities for over four decades — has been better able to keep costs down (PDF) than private insurers have:

“The annual rate of ‘excess growth’ in health spending for elderly people, nearly all of whom are covered by Medicare, has plummeted since the 1970s whereas ‘excess growth’ in health spending for the non-elderly, most of who m have private insurance, has risen sharply, according to a study published in Health Affairs. Excess spending growth is the amount spent per person above the amount the economy grows (GDP and accounting for population aging). It is best for health care spending not to exceed the rate of growth of the economy otherwise it can become unaffordable. For the elderly, excess spending growth was just 0.3 percent from 1996-2004, whereas excess spending growth among the non-elderly was 3.4 percent.”
That is why Senators Rockefeller and Schumer are each introducing an amendment to add a public health insurance plan option to the Baucus bill. Senator Rockefeller explained the need for a public option as follows:

“Without the steady, positive influence of a public plan option in the marketplace, we will never truly solve the health care crisis in this country. Private health insurance has a long history of cutting people off or charging too much for too little… Private insurance companies want to have their cake and eat it too. They want health care reform to earn them maximum profits if they start covering millions of uninsured Americans. But they are not willing to abide by the fair rules, oversight and cost containment that Americans deserve. Shared responsibility — that includes insurers — is the only answer and a public plan is the only real solution.”
Remember, affordability must be about making health care affordable for everyone — employers, consumers, patients and taxpayers — now and well into the future. Private insurers have had their chance to do it on their own and they have failed miserably. We need the government to step in and give us a health insurance plan option that answers to the public and not to investors.

Today, the Senate Finance Committee will hold its first vote on including a public insurance option in health care reform legislation. It is crucial that every senator hears his or her constituents demanding a public health insurance option to ensure access to quality, affordable health care for all.