What's Coming in the Obama Proposal

by Jonathan Cohn | February 22, 2010

When the administration proposes a final vision for health care reform, in advance of Thursday's bipartisan meeting, it will propose giving the federal government more authority to block exorbitant premium increases, at least for people buying coverage on their own (rather than through an employer).

The proposal, first reported in the New York Times and then described in more detail by a senior administration official, has the potential to help protect consumers from precisely the sort of increases Anthem Blue Cross of California has proposed for some of beneficiaries. As I wrote early Monday morning,

Anthem backed off that proposal, at least temporarily, following a public outcry and a letter of protest from Health and Human Services Secretary Kathleen Sebelius. But, under the new plan, the HHS Secretary could do more than complain about rate hikes. The Secretary could actually reject increases if they were "unreasonable." ...
Both the House and Senate bills had provisions giving HHS some authority to review rate increases. But, as far as I can tell, the administration proposal would go farther, in part by establishing a seven-member commission to advise HHS on how to judge rates. The commission would include consumer advocates, a physician, various experts, plus one (but apparently only one) representative from the insurance industry.
How much good can this sort of review do? It's hard to say for sure. But regulators in some states already have this authority--and, in at least some cases, they use it. Last week, a deputy insurance commissioner in Arkansas described to me how his department rejected a request from Blue Cross to raise some premiums by 28 percent, forcing the plan to raise premiums by only 11 percent. In Maine, as Columbia Journalism Review's Trudy Lieberman has reported, aggressive regulators have come down pretty hard on some insurers, although insurers have learned to fight back by suing the state's officials.

To be clear, this is not a huge new initiative. Rather, it's an effort to strengthen a regulatory backstop, in case all the other efforts to cut costs and restrain premium growth don't work. And this sort of move will inevitably raise questions about implementation and economic efficiency--legitimate questions worth exploring in the coming days. But, as I wrote, these regulations are already in place in many states. And they seem to do some real good.

What else will the administration offer on Monday? Administration officials say the proposal will incorporate new anti-fraud initiatives taken straight from Republican bills. In addition, the officials say, the proposal will repeal the "Cornhusker kickback." Instead of picking up the full cost of Nebraska's--and only Nebraska's--Medicaid expansion, the federal government will simply pick up a greater share of Medicaid costs for all states.

The political logic of each move is clear enough. The former is designed to demonstrate bipartisanship; the latter is designed to eliminate a legislative deal that turned off so many voters.

But each move also has a legitimate policy logic. States often struggle with Medicaid funding during economic downturns, in part because balanced budget laws force them to cut spending at precisely the time that demand for Medicaid (and other public services) is increasing. The bigger the burden the federal government can bear, the better. And while I don't know the details of the fraud provisions, the idea of clamping down even harder on Medicare and Medicaid fraud sounds reasonable enough on its face.

Again, none of this is earth-shattering. But, then, this proposal isn't supposed to be earth-shattering. It's supposed to define a compromise that can win majorities in the House and Senate, while helping to reassure a public that's disenchanted--but still pretty misinformed--about the bill. At this point, in other words, the real challenge is mostly political.

The administration will be unveiling its full bill at 10 a.m. More to come then.

Update: More from Igor Volsky at Wonk Room.

Source URL: http://www.newrepublic.com//blog/the-treatment/breaking-whats-coming-the-obama-proposal