Sebelius Sees Room for U.S. Health Cooperative, Few GOP Votes

By Alex Nussbaum and Edwin Chen

June 27 (Bloomberg) -- Health and Human Services Secretary Kathleen Sebelius said she’s open to the idea of a medical- insurance cooperative and counts no more than 10 Republican votes in the Senate for overhauling the U.S. system of care.

The former Kansas governor, 61, said in an e-mailed statement yesterday that the Obama administration “remains open to all serious ideas” that give all Americans “real health- care choice.” Those also include government-backed insurance based on Medicare, the program for the elderly and disabled.

Separately, she told Bloomberg News in an interview she expects both houses of Congress to approve overhaul legislation and send a final measure to the president by October. The Senate bill will have enough Republican votes to keep passage from being strictly along party lines, she said. President Barack Obama is seeking broad bipartisan support.

“I think there are five to 10 who may well be there for the final vote,” she said on Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend. The Senate has 40 GOP members, and legislation expanding benefits for children won by a vote of 66 to 32 in January. “I’m encouraged by the number of people who say we need to do something,” Sebelius said.

An insurance cooperative owned by its customers is one option being weighed by the Senate Finance Committee. Obama stands by the need for a competitor to private insurance companies, she said. On June 2, in a letter to the Senate Health and Finance committees, Obama said he “strongly” supports giving Americans the choice of government-backed insurance to compete with private coverage.

Designing a Plan

‘You could theoretically design a co-op plan that had the same attributes as a public plan,” Sebelius said in a meeting with Bloomberg editors and reporters. In that meeting, she also said the co-op would have to be national in scope and rejected the idea of state-based insurance cooperatives. Her e-mail backed off from the comment on state-based cooperatives.

“The situation on health care is changing hourly,” she said in the e-mail. She said that in her earlier interview comments she was “reacting to information about state co-ops which appears to be changing since there are no final numbers yet.”

“The administration remains open to all serious ideas including national and state co-ops as well, public plans modeled on Medicare, as long as such plans achieve the president’s goals of reducing cost, improving quality and giving Americans real health-care choice,” Sebelius said.

Overall Goals

Democratic lawmakers are trying to create a plan to cover the 46 million people who lack insurance while curbing the growth in health-care costs, which this year are projected by U.S. government economists to consume 18 percent of the gross domestic product. Obama said in his June 2 letter that government competition will keep U.S. health-insurance companies “honest.” Sebelius rejected the argument voiced this month by Senate Republican Leader Mitch McConnell of Kentucky that a government plan would lead to a “monopoly” on coverage.

Senator Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee, proposed nonprofit cooperatives as a potential compromise for Republicans who oppose Obama’s call for a government-run health plan. The co-op envisioned by Conrad would be governed by a national board and split into regional or state affiliates, said his spokesman, Chris Thorne, in an interview. The affiliates would be able to form partnerships to increase their bargaining power, he said.

Conrad ‘Encouraged’

Conrad said he was “encouraged” by the comments from Sebelius.

“There are a number of Republicans who have expressed interest in co-ops,” he said yesterday by telephone.

While negotiations in Congress are continuing, Conrad said, he envisions state affiliates negotiating with local doctors and hospitals while the national board would bargain with drugmakers and other medical providers, using its wider scope to win lower prices for its members.

Sebelius, a former state insurance commissioner, said she expects the final bill will include some kind of nonprofit entity to compete with private insurers, whether a co-op or government-run program.

“I really don’t think that there’s a likelihood that private insurers will be driven out of business,” she said. “What will happen is competition. And they may not make as much money as they’re making currently.”

‘Lines in the Sand’

Obama has no “lines in the sand,” Sebelius said, though the Democratic administration remains worried that a Senate proposal to penalize employers whose workers end up on Medicaid, the government-run plan for the poor, would discourage hiring of low-income Americans, she said.

Obama also would prefer not to tax employee health benefits, one option being weighed in the Senate to pay for an overhaul projected to cost at least $1 trillion, Sebelius said.

“The tax exclusion is one of the incentives for employers to provide coverage,” she said.

The secretary said she would like to see Congress remove the restriction on using cost-effectiveness studies to pick which drugs and medical devices are paid for by Medicare. New Hampshire Republican Judd Gregg, a member of the Senate health committee, argues along with other Republican opponents that such comparative effectiveness research would be use to ration care.

“I am a believer that you should use evidence-based research to make decisions to figure out what strategies work, then have incentives to use the best possible -- not only lowest cost, but most effective -- treatment protocol,” Sebelius said.

The administration set aside $1.1 billion in the economic stimulus bill signed by Obama in February for such research and argues that it would significantly drive savings.

Comparative Research

Sebelius said that even with current law prohibiting the use of comparative research to make Medicare decisions, the information would trickle down.

“That doesn’t mean comparative effectiveness can’t be used to inform providers, can’t be used for some information for consumers in terms of best strategies on what’s out there and do some cost comparison,” Sebelius said.

Final legislation will probably include a provision enlarging the role of the Medicare Payment Advisory Commission, a group that advises Congress, she said.

Created in 1997 by a Republican Congress, the commission this month proposed to change incentives in Medicare to reward the value of care doctors deliver instead of the volume of patients they see.

In early June, Obama expressed support for legislation by Senator Jay Rockefeller, a West Virginia Democrat whose bill would make the commission, known as MedPAC, an executive agency.

“The Senate is embracing, and it’s something the president feels strongly about, some kind of enhancement for MedPAC, the advisory group that makes cost recommendations and typically gets ignored by Congress year in and year out,” she said.

To contact the reporters on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net : Edwin Chen in Washington at echen32@bloomberg.net .

Last Updated: June 27, 2009 00:01 EDT

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