Kennedy Seeks Public Health-Care Plan That Finances Itself

By Nicole Gaouette

July 1 (Bloomberg) -- Senator Edward M. Kennedy’s committee will propose creating a government-backed alternative to private insurance designed to pay for itself after getting federal start-up money.

A summary of the provision written by the Massachusetts Democrat’s Health, Education, Labor and Pensions Committee describes a public insurance plan that could be quickly available around the U.S. with payment rates set by the Health and Human Services Department. The summary was provided by a person close to the committee.

President Barack Obama said in a June 2 letter to the chairmen of the health and finance committees that government- backed insurance is necessary to make affordable coverage available to everyone and keep private insurers “honest.” The administration is pushing for an expansion of health care that won’t add a “dime to the deficit,” Health and Human Services Secretary Kathleen Sebelius said June 28.

“We’re very pleased with it,” Richard Kirsch, the national campaign director of Health Care for America Now, a Washington-based coalition of more than 1,000 groups advocating government-backed insurance, said in a telephone interview. The health committee’s proposal would have “national reach and the ability to lower rates and provide real options to the insurance industry.”

America’s Health Insurance Plans and the BlueCross BlueShield Association, two health-insurance trade groups, told Kennedy in a letter June 19 that a government-run plan “would dismantle employer-based coverage, significantly increase costs for those who remain in private coverage, and add additional liabilities to the federal budget.”

Producing a Bill

“We share the concerns that providers, players and patients have about the impact that a government-run program would have,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, in a telephone interview yesterday. “Current government plans underpay for services, those costs get passed through the health-care system and employers and consumers pay higher premiums as a result.”

Republican leaders have attacked Obama’s health-care proposal and opposed a new government insurance plan. Senator Mitch McConnell of Kentucky, the minority leader, said June 28 on “Fox News Sunday” that “it looks like” the administration may pay for the overhaul, in part by “cuts to Medicare and to seniors.”

The Senate Finance Committee, whose Democratic chairman is Senator Max Baucus of Montana, is working on an overhaul proposal that would include an alternative to insurance supplied by companies such as Cigna Corp. of Philadelphia and Minnetonka, Minnesota-based UnitedHealth Group Inc.

Administration Open

Sebelius, in an interview last week with Bloomberg News, said she was open to the idea of medical-insurance cooperatives as well as government-backed insurance based on Medicare, the U.S. health plan for the elderly and disabled. Senator Kent Conrad, a North Dakota Democrat and chairman of the Budget Committee, proposed cooperatives as a potential compromise. Lawmakers are seeking to find a plan to meet Obama’s main goals of expanding health coverage for the estimated 46 million uninsured and slowing the pace of increasing medical costs.

House Democrats proposed a government-backed plan that would pay for itself after initial funding and would have payments linked to Medicare rates for the first three years.

The Senate health committee had aimed to produce a bill before the July 4 recess that Congress is taking this week. Under Senator Christopher Dodd of Connecticut, who is acting head of the panel while Kennedy receives treatment for brain cancer, three controversial sections of the bill were left unfinished in an attempt to reach a compromise with Republicans.

The public plan option was one such section, along with a section on generic copies of biologics, expensive and complicated drugs made from living organisms. A third section dealt with an employer mandate to provide workers with insurance.

Computer ‘Gateway’

The summary of the committee’s proposal says a public plan would be part of a computer “gateway” where consumers can compare different plans, including private offerings. All participating plans would follow the same rules for defining benefits, protecting consumers and setting premiums “that are fair and based on local costs,” the plan says.

The government would pay the first three months of claims, which would be considered a loan to be repaid over time. If necessary the plan may qualify for “risk corridor protections” to offset or reclaim excessive losses.

Payment rates may not be more than the local average private rates and could be less, the draft says. These rates would be negotiated by the health secretary.

Each state would create an advisory council to recommend savings and strategies for quality improvement. Health-care providers would be under no obligation to participate in the plan, the draft says.

“Premiums would be set to make it self sufficient,” according to the summary. “This would make the health insurance option quickly available in all areas of the country.”

To contact the reporter on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net .

Last Updated: July 1, 2009 00:01 EDT

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