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Why both parties should embrace ObamaCare’s state exchanges

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(The Week, July 18, 2012)

By Bill Frist, M.D.

Largely lost in the fight over ObamaCare is a worthy provision that lets states develop insurance systems that are right for them — but they must act soon.

When the new health care reform law was being debated in 2009 and 2010, everyone talked about “death panels.” When challenged in court, everyone debated the individual mandate. After last month’s Supreme Court decision, the conversation has now switched to Medicaid. During all of this, however, we have largely ignored what is perhaps the most innovative, market-driven, and ultimately constructive part of the law: State exchanges.

Originally a Republican idea, the state insurance exchanges mandated under the Affordable Care Act (ACA) will offer a menu of private insurance plans to pick and choose from, all with a required set of minimum benefits, to those without employer-sponsored health insurance. These exchanges are expected to bring health insurance to an additional 16 million Americans. Unlike the Medicaid expansion, these Americans will gain private insurance, and can choose the plan that’s right for them.

The exchanges should facilitate competition among private insurers as they design new benefit packages and cut prices to stay ahead of the game. While I’m slow to favor a mandate, these exchanges will offer those who can benefit from insurance a broad array of tailored options and varying prices that should help them find it. Helping more Americans find and compare the private insurance they need and can afford should be an easy principle both political parties agree on.

As a doctor, I strongly believe that people without health insurance die sooner. Sure, they can eventually go to an emergency room. But it is often too late. They wait longer to get a breast lump checked out. They wait until their nagging cough turns into a fulminant pneumonia. They skip preventive care and then show up to the ER with severe, costly, late-stage symptoms that are harder and more expensive to treat.

State exchanges are the solution. They represent the federalist ideal of states as “laboratories for democracy.” We are seeing 50 states each designing a model that is right for them, empowered to take into account their individual cultures, politics, economies, and demographics. While much planning has yet to be done, we are already seeing a huge range in state models. I love the diversity and the innovation.

Helping more Americans find and compare the private insurance they need and can afford should be an easy principle both political parties agree on.

Want a more conservative, small-business focused exchange that bans abortion coverage in all its plans? Try Utah and its state exchange, originally founded under Gov. Jon Huntsman. Think that President Obama missed a huge opportunity to steer the nation towards a single payer system? Try Vermont, which plans to ultimately transform its state exchange into a single payer system, Green Mountain Care, that will offer coverage to all state residents. With soaring health care costs one of, if not the most, dangerous threats to America’s greatness, a new round of national health care experimentation is exactly what we need.

But the clock is ticking. While the exchanges must be fully operational by January 1, 2014, they are also required to submit a blueprint for approval by mid-November of this year, which will indicate if they plan to run their own exchange or will participate in a federal-state partnership. While almost all of the states have at least planned for an exchange, roughly half took a wait-and-see approach as they awaited the Supreme Court ruling. This means that in the coming weeks we will see a frenzy of state activity and legislation as governors rush to meet this deadline. Enacting some sort of exchange establishment legislation is expected to be crucial to receiving federal approval for a state-run exchange. And though some GOP governors refuse to set up an exchange of their own, I see little advantage for states to default to the federally designed, one-size-fits-all exchange when they can design and run their own.

The silver lining is that with much planning left to do, there is still time to get involved and design the exchange in your state. I urge everyone — citizens, small businesses, health industry stakeholders, churches, large employers — to actively participate in shaping your exchange so that it reflects your state’s values, economy, and common sense. Then, starting in 2014, we can see a variety of big ideas and small tweaks all working together to show our nation what works and what doesn’t.

Simply put, state exchanges represent a distinctly American opportunity to improve our local communities and at the same time help our nation avert a major crisis. Let’s take the plunge.

Dr. William H. Frist is a nationally acclaimed heart transplant surgeon, former U.S. Senate Majority Leader, the chairman of Hope Through Healing Hands and Tennessee SCORE, professor of surgery, and author of six books. Learn more about his work at BillFrist.com.

This article was originally featured in The Hill http://theweek.com/article/index/230655/why-both-parties-should-embrace-obamacares-state-exchanges

Premium Support is the Only Way to Fix America’s Medicare Mess

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(The Week, March 27, 2012)

By Bill Frist, M.D.

To save Medicare — and rein in our national debt — we must transform the entitlement program into a defined-contribution system

Nothing is scarier than losing your health.

A close second, however, is getting sick and not being able to afford the care you need. For seniors, Medicare has been the entitlement program that for 47 years has dependably provided health security and peace of mind.

But today, demographics are shifting. Fewer workers are contributing to the pay-as-you-go system that by 2030 will cover double the number of beneficiaries it does now. Those reaching 65 this year, on average, will take out in services more than twice what they paid in over their lifetime. That is simply unsustainable. Medicare cannot last as currently configured.

Absent real changes, Medicare will be unable to meet the needs of seniors in the future.

And looming behind all this is our nation’s debt, skyrocketing on autopilot from $15 trillion today to $22 trillion in eight years. The higher the debt, the slower our economy grows, and the fewer jobs are created. Though a lot of people think Social Security is the culprit, it is not. As a percentage of GDP, it is our two government health programs, Medicare and Medicaid, which, left unchecked, will disproportionately balloon over the next 50 years.

For these reasons, the single most important reform that our next president must address is Medicare modernization.

Absent real changes, Medicare will be unable to meet the needs of seniors in the future.

This week marks the two-year anniversary of the President Obama’s health reform initiative. But that law did little to reform Medicare. Instead, it primarily addressed an entirely different issue, increasing access and expanding Medicaid so that one out of every four Americans will be on Medicaid in 36 months. Structurally, President Obama did not change Medicare at all.

If demographics, determined years in advance, define the impending bankruptcy of Medicare, why haven’t our elected leaders acted? Well, in fact, both President Clinton and President Obama, under mandates by Congress, appointed high-profile presidential commissions to address the issue of entitlement reform and Medicare modernization.

The irony is that both bipartisan commissions, one in 1998 and the other in 2010, demonstrated majority support for the exact same type of fundamental reform for Medicare, a plan that maximized security for our seniors, choice for the individual, and longterm sustainability of the program.

It’s called premium support. Here is how it would work:

When you become eligible for Medicare at 65, you choose a health plan from a menu of integrated private plans that all cover the basic benefit package provided under traditional Medicare today. They can vary in depth and scope of additional coverage. Or you can choose to keep traditional Medicare instead of choosing one of the more modern plans. It’s your choice. All the plans and the exchange system through which they are selected are regulated by the federal government to guarantee security, fairness, and accountability for the individual and a level playing field for the plans.

Your premium for the coverage will be paid partly by the government (known as a defined contribution or premium support). For example, hypothetically, this year the government might pay $8,000, and you pony up a supplementary sum — the total would depend on the additional benefits of the plan you selected. Your personal contribution would be means-tested, with more aggressive subsidies paid for those without resources to afford the basic coverage. The premium support level would be adjusted by income, geography, and health status. You would be able to afford it.

Is such a transformation of Medicare risky? Not really.

The government has a whole lot of experience successfully managing such an exchange, transparently ensuring its equity and value. It has been doing so with the FEHBP (Federal Employees Health Benefit Plan) for the past 52 years. This system has insured all federal employees, currently covering 9 million people, including me when I was a senator — making it the largest employer-sponsored group health insurance program in the world.

The advantages of premium support are many.

Each senior is empowered with a choice of comprehensive plans, similar to what each member of Congress enjoys. Plans can rapidly adopt improved innovations in benefits and coverage rather than wait years for Washington to pass another law. And increased price transparency demanded by active consumers interested in making a value-based choice of plans will empower 50 million Americans to powerfully participate in reducing waste, continually squeezing the fat out of the system.

Premium support would reduce total spending by stimulating price competition among plans (just as has been observed with the Medicare prescription drug coverage structure created in 2003). Beneficiaries become more cost conscious in choosing a plan that best suits their needs.

No longer would doctor and hospital reimbursement be determined by Washington-based price fixing (and arbitrary, blunt, across-the-board cuts) but rather, by value to beneficiaries. No longer will federal centralized pricing of 155,000 service codes based on episodic and unpredictable review be necessary. A side benefit would be a reduction in the costly and distorting power of lobbyists and Washington-based special interests who thrive on managing this centralized price setting to their advantage.

Premium support makes Medicare sustainable longterm, and goes a long way toward reversing the debt and entitlement problems that threaten America’s future.

And what are the naysayers worried about? First, they say providing seniors with more choice is just too confusing. But seniors can keep what they have in traditional Medicare if they want. Second, they argue premium support simply shifts costs and does nothing to reduce the overall price of care. But aligning reimbursement with value and quality rather than quantity will minimize this shift.

The premium support concept is neither novel nor new. Initially proposed in a bipartisan spirit by two congressmen in 1983, endorsed by two prominent health policy economists in 1994, supported by a majority of both of the last two presidential commissions, and more recently proposed by members of both political parties in Congress, premium support is the leading solution to achieve Medicare modernization for seniors and fiscal solvency for our country.

Dr. William H. Frist is a nationally acclaimed heart transplant surgeon, former U.S. Senate Majority Leader, the chairman of Hope Through Healing Hands and Tennessee SCORE, professor of surgery, and author of six books.

 

This article was originally featured in The Week http://theweek.com/article/index/226065/premium-support-is-the-only-way-to-fix-americas-medicare-mess