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California Offers Examples of Public Plans in House Hearings

One of the central issues in the health care reform debate is whether to include a government-run health plan in overhaul legislation, and a number of officials for California groups weighed in on the question when they testified in House hearings last week.

Speaking before the House Energy and Commerce Health Subcommittee, Robert Freeman — executive director of CenCal Health in Santa Barbara and San Luis Obispo counties and an administrative committee member of the California Association of Health Insuring Organizations — and Howard Kahn, CEO of the public L.A. Care Health Plan, said that California’s experience with public plans offers an example that members of Congress should consider as they work on health care reform legislation.

Kahn, who addressed the committee on Thursday, said that L.A. Care has not required a government bailout or special subsidy in its 12-year history of administering benefits for beneficiaries of Medi-Cal, California’ Medicaid program. 

According to Kahn, L.A. Care competes against Health Net in Los Angeles County and currently has 64% of the Medi-Cal managed care market share in the county. He said that seven other public health plans in nine California counties compete directly with a private plan in the Medi-Cal managed care market and that 2.5 million beneficiaries receive services through public plans in these so-called Two-Plan Model counties.

Another public plan model in California is the county-organized health system.  Testifying a day before Kahn, Freeman said that COHS plans in California administer benefits for more beneficiaries than Medicaid programs in 25 other states.

Both Kahn and Freeman asserted that public plans are more transparent and do more to strengthen the health care safety net than private insurers.  However, Peter Lee of the Pacific Business Group on Health voiced large employers’ concerns that a national public plan could lead to cost-shifting and exacerbate existing gaps in payments to health care providers from public programs and private health care purchasers.

Testifying before the House Ways and Means Committee on Wednesday, Lee, executive director for national health policy at PBGH, said businesses are concerned about a public option because of the possibility that reimbursement rates would be artificially low.  Lee asserted that Medicare and Medicaid payments are so low that they prompt health care providers to raise prices for private purchasers. 

Lee called on lawmakers to use reform legislation to address the payment gap and reduce incentives to provide more health care services that are related to the fee-for service model.

Whether reform legislation includes a public plan will depend largely on the vote tallies.  So far, most Republicans are lined up against a public plan, but Democrats haven’t taken it off the table.  President Obama has spoken in favor of a public plan but hasn’t said whether he’d sign reform legislation that didn’t include one.

Congress is in recess this week and will be back in session on Monday.  In the meantime, here’s a rundown on other House testimony, action in the Senate, efforts to shape the debate and other health care reform news.

House Hearings

  • During a House Energy and Commerce Health Subcommittee hearing on Thursday, physicians, insurers and business groups said that although they support health care reform, they object to the House Democrats’ health care reform proposal, CQ HealthBeat reports. America’s Health Insurance Plans President Karen Ignagni said that fundamental problems exist in the proposal, most notably the public option. Ignagni cited an AHIP study that found that if half of all privately insured California residents switched to a public plan that paid Medicare rates, hospitals in California would experience a $3.5 billion annual reduction in revenue (Norman, CQ HealthBeat, 6/25).
  • The Obama administration only will support a health care reform proposal that is deficit neutral over 10 years, White House Office of Management and Budget Director Peter Orszag said Thursday during a House Budget Committee hearing, CQ HealthBeat reports (Reichard, CQ HealthBeat, 6/25).
  • Last week, HHS Secretary Kathleen Sebelius told members of the House Energy and Commerce Committee that the Obama administration is in agreement with the principles of a Democratic draft health care proposal, CQ HealthBeat reports. However, Sebelius said that she cannot yet answer questions about the administration’s position on specifics such as employer mandates or Medicaid expansion costs. She added that Obama is open to “good ideas” about how to finance health care reform so long as they are deficit-neutral (Norman, CQ HealthBeat, 6/24).
  • At a hearing last week, House Ways and Means Committee Chair Charles Rangel (D-N.Y.) said that House Democrats will offset all costs associated with their health reform bill after the Congressional Budget Office scores the draft legislation, CongressDaily reports. “We will only do what we can afford,” Rangel told Republican members of the committee (Cohn, CongressDaily, 6/24).

Senate Action

  • Last week, Sen. Chris Dodd (D-Conn.) said that the Health, Education, Labor and Pensions Committee will not mark up key sections of its overhaul legislation until after the July 4 recess, CongressDaily reports. He said the panel is waiting on CBO scores for three different employer mandate proposals and has not finalized a public option proposal for scoring. On June 23, the committee finished work on prevention and wellness provisions (Hunt, CongressDaily, 6/24).
  • On Thursday, Sen. Charles Schumer (D-N.Y.) detailed his proposal for a government-run public health plan similar to the one President Obama proposed during his campaign, the AP/Long Island Newsday reports. Schumer said the plan will give U.S. residents more options and drive down consumer costs. Schumer said it is not yet clear how much the plan would cost (Ochs, AP/Long Island Newsday, 6/26).
  • Last week, Senate Finance Committee member Olympia Snowe (R-Maine) said she and Schumer have been working on a health reform provision that would implement a public option if private insurers are unable to make affordable coverage available to more U.S. residents. She said they are devising “a guaranteed affordable care mechanism” that would serve as a fallback for the private coverage system. She noted that the plan likely could function alongside the insurance cooperative model proposed by Sen. Kent Conrad (D-N.D.) (Edney, CongressDaily, 6/23).
  • Sen. Ron Wyden (D-Ore.) recently submitted a plan to Finance Committee Chair Max Baucus (D-Mont.) that would grant people with standard health insurance an above-the-line income tax deduction that would equal the proposed tax-exemption cap for employer-sponsored health benefits, CQ Today reports. The tax deduction would apply to everyone with health insurance, not just those with employer-sponsored plans, and would result in a tax cut for an estimated 35.5 million taxpayers, according to the Joint Committee on Taxation (Wayne, CQ Today, 6/25).


  • Senate Democrats plan to pass health care reform legislation by the end of the year. However, if work is not completed by the end of the July, the session might be extended and the August recess could be delayed, Senate Majority Whip Dick Durbin (D-Ill.) said Wednesday. Senate Democrats have yet to post their year-end adjournment date, which typically occurs in October (Pierce, Roll Call, 6/25).

What It’s Going To Cost

  • In a conference call with a bipartisan group of seven senators last week, CBO Director Douglas Elmendorf said that some version of an employer mandate would be necessary in health reform legislation to control costs and ensure the continued existence of the employer-sponsored coverage system, CongressDaily reports (Edney/Cohn, CongressDaily, 6/25). The senators met in Baucus‘ office for a conference call with Elmendorf, during which they discussed possible funding mechanisms for the committee’s health care reform bill, CQ Today reports (Armstrong, CQ Today, 6/24).

Administration Message

  • The Obama administration is willing to consider alternatives to a public option in order to pass health care reform this year, White House Chief of Staff Rahm Emanuel said Thursday, CQ Today reports. One possible alternative would be Sen. Conrad‘s proposal for a system of publicly owned health insurance cooperatives, according to Emanuel (Bettelheim, CQ Today, 6/25).
  • Last week, Emanuel and White House Office of Health Reform Director Nancy-Ann DeParle met with Democrats on the Senate Finance and HELP committees to discuss how the panels are proceeding in drafting health reform legislation, The Hill reports. Senators said no decisions were made about what the bills should contain, when they should be moved or whether Democrats should continue attempts to achieve bipartisanship (Young, The Hill, 6/23).
  • In a question and answer piece in Slate last week, Orszag discussed issues surrounding health care reform. Topics include the need for Medicare reform, deficit reduction, long-term health care savings, health care providers, health care savings proposed by President Obama, bipartisan efforts on health care reform and health spending offsets (Dickerson, Slate, 6/25).

Influencing the Debate

  • NPR’s “All Things Considered” on Thursday looked at the role played by health care industry lobbyists in congressional efforts to overhaul the nation’s health care system. From 1998 to 2008, the number of registered lobbyists on health care more than doubled, to 3,627, according to the Center for Responsive Politics. Organizations lobbying on health care spent $484.4 million in 2008, more than two-and-one-half times what they spent in 1998. The segment profiled three lobbyists who have attended Senate hearings on overhaul bills (Overby/Seabrook, “All Things Considered,” NPR, 6/26).
  • Business groups opposed to Democratic health reform plans ran print advertisements this week in Capitol Hill publications, suggesting that “the type of advertising war that helped doom the last effort to overhaul the nation’s health care system is heating up,” USA Today reports. The U.S. Chamber of Commerce bought a full-page ad in Roll Call that criticized the proposed employer mandate and public insurance option. The National Federation of Independent Business and the Republican National Committee are among the groups pushing back on Democrats’ health reform proposals (Wolf, USA Today, 6/26).
  • On Thursday, Conservatives for Patients’ Rights announced a new ad campaign targeting 14 lawmakers participating in the reform debate (CongressDaily, 6/26).
  • Some advocates have ratcheted up criticism of Democratic senators for not moving forcefully or quickly enough on health reform, the Washington Post reports. Recently, bloggers and grassroots organizations such as, Health Care for America Now and the Service Employees International Union have targeted Democratic Sens. Dianne Feinstein (Calif.), Mary Landrieu (La.), Ben Nelson (Neb.), Arlen Specter (Pa.) and Ron Wyden (Ore.) (Connolly, Washington Post, 6/28).

Related Topics

Health Care Costs Health Industry Insurance Medi-Cal Road to Reform The Health Law