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Sebelius: 'What Is the Alternative?' Sebelius: 'What Is the Alternative?'

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Sebelius: 'What Is the Alternative?'

HHS Secretary Kathleen Sebelius(Chip Somodevilla/Getty Images)

photo of Ronald Brownstein
September 25, 2010

Almost exactly six months after the passage of the landmark health care reform act and on the heels of an ominous U.S. Census Bureau report on health-insurance coverage, National Journal Live hosted Health and Human Services Secretary Kathleen Sebelius for an update on the law. Sebelius sat down with National Journal Group Editorial Director Ronald Brownstein on September 20 to discuss the progress that HHS has made in implementing the law and the policy and political challenges it faces. Edited excerpts of the conversation follow.

NJ The Census Bureau reported last week that the number of Americans without health insurance increased by 4.3 million last year to 50.7 million. What are the implications of those numbers for your efforts to implement the health care law?

SEBELIUS There's no question that having this enormous number of Americans uninsured just points out the urgency of doing something different than what we were doing. Frankly, we were on a bit of a death spiral. Fewer employers year in and year out would offer coverage. As prices went up, insurance premiums were rising at three times the rate of wages, so a lot of employees found it more and more difficult to even take up the coverage if they were offered coverage, and those in the individual and small-group market found it really difficult to get coverage. With the economic downturn, it's an even more precarious time for most Americans.


NJ Seven million fewer people last year were receiving coverage through their employer than the year before. Is that essentially driven by this very deep recession, or is something larger going on?

SEBELIUS Well, I think you're seeing both. There's no question that the huge plunge in the economy, that 8 million job losses, translated into a lot of health-coverage losses, so that accelerated the gap. But I think that the system was broken, fundamentally broken. And it wasn't just the insurance piece of the puzzle. What the Affordable Care Act does is give an opportunity to begin to transform, reform the delivery system, and produce health benefits for Americans that will be very different from what we're seeing. We spend two and a half times what any nation on Earth spends on health care, and our health results look like we're a developing country.

NJ You have a series of regulations that are going into effect this week. What are people going to see and feel the most?

SEBELIUS The bill is designed in a way that tries to put some stability around the existing market before you get to 2014, where arguably there's a new market. Starting on or after September 23, health plans will no longer be able to rescind policies, which unfortunately was a pretty frequent practice. You can no longer have lifetime limits on policies, and although that affects a fairly small number of people, the people whom it affects are really in life-or-death situations, where again their insurance coverage runs out when they desperately need it. All policies have to be open to adult children, so parents will be able to keep their children on a family policy until the age of 26, and that applies to new policies, grandfathered policies, every other policy. [Regarding] preventive care: New policies, on or after September 23, will start being offered without co-pays or co-insurance, which is going to be huge for a lot of people. And all plans must have a transparent, easy-to-access, easy-to-follow third-party appeal.

NJ As you know, a number of insurers are citing these kinds of provisions and filing for rate increases around the country. What can you do, if anything, about those rate hikes?

SEBELIUS If you look at the trends, companies were implementing double-digit rate hikes year after year after year. What I think is very important is for companies to have accurate trend lines--what are the actuarial projections for these provisions versus what they were going to essentially do anyway.

NJ So do these new rules justify any rate increases?

SEBELIUS We have two separate actuarial studies estimating a 1 to 2 percent premium impact gradually to come into effect [because of the law], because again, some of the provisions are for existing plans. Rigorous rate review works. We have provided resources to the state commissioners across the country to begin to beef up operations.

NJ Based on your actuarial analysis, what do you expect will be the outcome of these requests for rate increases?

SEBELIUS I think the rate increases are likely to continue to be somewhat substantial, because the cost trends [are] fairly substantial. It has little to do with the passage of the act; it has to do with their marketplace. Particularly in the individual market, healthy folks drop their coverage when the economic squeeze occurs. If you are sicker or have a sick family member, you don't have that luxury, so you're keeping it. So their risk experience is becoming more expensive. What we have to do is get healthier people back into the marketplace.

NJ When will we begin to see some of the significant payment and delivery reforms go into effect, and how should the medical community--providers, hospitals, doctors, and others--be preparing for that now?

SEBELIUS We lose not only billions of dollars but millions of lives every year in this country because we are not providing the right care to the right person at the right time. What I find again, traveling around, is that [providers] are very excited about the opportunity to work in accountable-care organizations, which will be putting together nursing homes, hospitals in a care strategy that will drive better outcomes but then allow those systems to share the cost savings along with the medical system. And the implementation of electronic medical records, which was part of the Recovery Act investment but provides a way to virtually integrate a lot of the delivery system, is a huge step forward in terms of patient safety and patient protocol. Only about 20 percent of hospitals in this country and about 10 percent of physicians practicing use any kind of integrated electronic system. Imagine banking if we didn't have ATM cards and if people were still writing paper checks.

NJ Should providers be changing the way they do business now, or should they be thinking about new business combinations to prepare for these changes?

SEBELIUS Actually, providers are doing just that. We have an opportunity--I think it's in early October--to assemble the first national discussion on accountable-care organizations, putting the rules together. We have a lot of people who say, "I'm ready, count us in," so I think we're going to see a very enthusiastic uptick in that. The notion that we pay the same for any kind of procedure at any time for any cost is really kind of the strategy today, and I think that's going to begin to change fairly dramatically.

NJ Not that you pay any attention to politics anymore, in your new position--


NJ John Boehner, the House Republican leader, said that if his party does win a congressional majority it will provide the administration "not one dime" to implement the health care reform law.

SEBELIUS Well, I think that the conversation Mr. Boehner needs to have is not with me or the folks at HHS; it's with his constituents and people across the country, because by January, there will be millions of Americans who will be receiving direct benefits from the passage of the law. All that will be jeopardized by the lack of ongoing implementation funding. The notion that we will repeal--I think the question is, "And go back to what?" Leaving 50-plus million Americans with no health coverage, with rates continuing to dramatically increase year in and year out with no safety-net system, with no focus on the future, and with, frankly, an increase in the deficit?

NJ Are you considering other possible cost-containment options at this point?

SEBELIUS The pilot [projects] in the bill can be greatly accelerated if they work. That's step one. There's an enormous amount of patient-centered research going on--what works, what doesn't, at what cost--that will help inform particular providers about making good choices. I'm a huge believer [in] electronic health records. That has a huge potential impact on cost in a very positive fashion. Medicare and Medicaid are [also] the two biggest insurance companies, really, in the world, and if we can use those payment systems [to] figure out cost-effective strategies to provide better care at lower costs, we will have a very dramatic and very rapid impact.

NJ If a Republican majority makes a serious effort to roll back the law next year, are you confident that your allies from this year will stick with you?

SEBELIUS The debate that I hope we'll engage in the next six weeks in districts across the country, but then certainly in the new Congress whatever the makeup, is, "What is the alternative?" I participated actively in the conversations for a year and a half in Congress, and what's striking to me was that there was never really an alternative put forward. We don't like this proposal, we don't want to go down this path, but no strategy for what to do about the now 50 million Americans who are uninsured. No real strategies about cost control and containment; no strategies about how to go after fraud--all the ideas that were put on the table were essentially incorporated. So I think there's got to be a realism about this debate. We have a very broken health system.

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