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NJ Daily / HEALTH

CBO Estimates Show Public Plan With Higher Savings Rate

September 25, 2009

In a bid to wrangle concessions from the Blue Dog Coalition on healthcare reform, House leaders Thursday released CBO estimates for liberals' preferred version of the public option that show $85 billion more in savings than for the version the Blue Dogs prefer.

Rep. Stephanie Herseth Sandlin, D-S.D., a Blue Dog co-chair, said any possible new momentum toward a public option tethered to Medicare rates is, in part, "because of the cost issue" and the updated CBO score.

The original House bill required the public plan to pay providers 5 percent more than Medicare reimbursement rates. But as part of a package of concessions to Blue Dogs, the House Energy and Commerce Committee accepted an amendment that requires the HHS Secretary to negotiate rates with providers. That version of the plan will save only $25 billion.

 

In total, a public plan based on Medicare rates would save $110 billion over 10 years. That is $20 billion more than earlier estimates, a spokesman for House Speaker Pelosi said.

The numbers are based on oral communications between CBO staff and Pelosi's office, a Pelosi spokesman said. They do not represent an official CBO estimate.

House leaders are pushing the Blue Dogs to accept the additional savings from the Medicare-tied public plan. But Herseth Sandlin said Blue Dogs see it as a "false choice," and said House leaders recognize that Blue Dogs continue to have some concerns about that.

The public plan saves money because it pushes down premium prices. Lower premium prices across the country would mean the government would have to pay less in subsidies to low-income people who buy insurance through the exchange, according to CBO. Medicare rates are typically lower than those paid by private insurers, so using that formula would allow the public plan to charge considerably lower premiums to stay solvent. If the government has to negotiate the same way insurance companies do, public plan premiums likely won't be as low -- hence less savings.

Blue Dogs argue this would be bad for physicians. "We can't save costs on the backs of people who represent constituent patients and providers who've been at a competitive disadvantage," Herseth Sandlin said.

She also said discontent with a Medicare-based public option goes outside the Blue Dogs. "I think they [leadership] realize that outside of Blue Dogs, there are people who are not happy with pegging it to Medicare and believe there are other adjustments we can make to bringing the costs down," she said.

Along those lines, the Caucus is also discussing additional ways to bring down the cost of the bill, which was originally scored at $1.1 trillion. President Obama has set a target of $900 billion.

Under serious consideration is taxing high-value insurance plans, a provision included in the Senate Finance Committee's version of the legislation. The "Cadillac" tax would raise approximately $200 billion under the Finance formulation.

"I think the discussions now have been to communicate to the members that [the Cadillac tax] is something the president has embraced; therefore, it is very likely to be part of some finished product," said Rep. Rob Andrews, D-N.J., after a Thursday Caucus meeting. "And we need to begin to think about how we feel about that, how it can best be shaped."

The Caucus is also concerned about how insurers will act in the years between the legislation's enactment and its implementation, slated for 2013, Andrews said. Members are concerned insurance companies will raise premium prices in an effort to raise money before regulations kick in. He cited the credit card industry as an example.

"There is discussion about ways between enactment of the bill, and the date the competition exchange would kick in, what we could do to mitigate that problem -- some mechanism to restrain undue premium growth," he said.

House leaders are set to meet today to continue their push toward drafting a merged bill, but it is not expected to be finalized today.

"We still have a lot to clean up," said Rules Chairwoman Louise Slaughter.

Andrews said House leaders are continuing to present "the concepts and conceptual framework" and are listening to how rank-and-file members feel.

"The culmination of that process will be a presentation of a bill for the Caucus to look at," Andrews said. "The second stage of the process is to go count votes for that bill. I think that will begin in earnest very soon, two weeks or so."

Based on those counts, he said, there will be modifications made that are deemed necessary to get to a majority to pass the bill.

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