More Value, Private Coverage Essential To Health Reform, Former CBO Head Says

Health care reform should focus on controlling costs and promoting value while expanding access to affordable private insurance, according to a paper released May 18 by the Manhattan Institute’s Center for Medical Progress.

In the paper, author Douglas Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office, carved out a major role for states committed to increasing and improving coverage and argued against expanding government insurance programs.

In addition, lawmakers should eliminate the tax exclusion for employer-sponsored health benefits and replace it with a flat tax credit of $4,500 per year for anyone with private coverage, regardless of its source, according to Holtz-Eakin, who also served as an economic adviser to 2008 GOP presidential candidate Sen. John McCain (R-Ariz.).

In a conference call for reporters about the paper, Holtz-Eakin said there is a “clear and obvious case” for overhauling the health care system and stressed the importance of bipartisan agreement to ensure sustainable reform.

He said Republicans must accept that expanding coverage will be part of reform, while Democrats should not push for a new public insurance plan.

The new public plan, which would compete alongside private offerings, is too controversial and could erode employer-sponsored coverage or create an unfair marketplace for private insurers, according to Holtz-Eakin.

“You want to avoid those lightning rods if at all possible,” he said.

Payment Reforms

The paper, Forging a New Plan For Health Care: Principles and Priorities for Sustainable Reform, contains four reform principles:
• promote high-value care that slows cost growth;
• create a process for a steady rise in coverage rather than a fast, large-scale expansion;
• ensure private money flows to private insurance; and
• improve access to information with quality benchmarks, comparative effectiveness research, and health information technology.

To promote value, the paper recommended implementing Medicare and Medicaid payment reforms that reward care coordination and prevention, bundling payments, and reducing payment for readmissions and low-quality care, as well as reducing Medicare subsidies for higher-income beneficiaries.

“The easiest place to pull the lever is to start in Medicare,” Holtz-Eakin said.

The paper also called for a crackdown on Medicare and Medicaid fraud and medical malpractice reform as a way to promote value in the health care system.

For comparative effectiveness research, the paper recommended creating a small federal research agency that would certify which studies and trials meet scientific integrity standards and summarize and disseminate the results-without making coverage decisions.

Tax Policy, State Commitments

To steadily expand coverage while maintaining the private insurance system, the paper called for eliminating the tax exclusion, as well as securing coverage expansion commitments from states under which “the federal government would provide the income-tax resources to each state that was meeting its coverage objectives in proportion to the uninsured population.”

States that sign “Health Insurance for All” agreements would be subject to specific targets for meeting coverage goals and receive federal help to provide sliding-scale, income-based subsidies to those purchasing private coverage.

In addition, states signing those agreements would need to enact insurance reforms and establish state-level insurance exchanges for consumers seeking coverage, according to the paper.
The proposal also would require the federal government to make changes to Medicaid by moving the responsibility for long-term care expenses to Medicare and allowing states to apply Medicaid funds to the purchase of private insurance.

As a fallback mechanism, employees in states signing the Health Insurance for All agreements but not meeting coverage goals “would be permitted to demand 40 percent of their salary in a health-insurance match,” according to the paper.

The fallback proposal “engages private employers in every state in the effort to meet coverage goals-the best fallback plan is one that is never used. Second, it makes a contingent commitment of private resources to solve the private insurance failure and puts control into the hands of employees,” according to the paper.