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Many years ago, I had the (somewhat demanding) honor of serving as a Brigade Intelligence Officer in the 1st Cavalry Division when then-MG Wesley K. Clark commanded the Division.  One of GEN Clark's maxims stays with me to this day:

"There are two kinds of plans: those that won't work  . . . and those that might."

As it is presently constructed, the Senate and House versions of Health Care Reform are "a plan that won't work."  Bringing in elements from the French and German health care systems and more room for market forces could create "a plan that might work."  


As an attorney who frequently represents health care clients, I think the best argument for reform is the fact that the single greatest cause of personal bankruptcies is medical expenses, but that physicians, who are never secured creditors,  rarely collect more than pennies on the dollar from bankruptcy estates. The second best argument is that many people who are self-employed in lucrative endeavors can't afford health care coverage because of preexisting conditions, more likely the reason why many of the uninsured make more than $65,000.00 per year than the idea that they are bargaining with doctors.  In fact, the third best reason for reform is that Medicare conditions of participation and contracts with Preferred Provider Organizations ("PPOs") make it more likely a doctor or a hospital will try to collect its Usual, Customary and Reasonable ("UCR") rate from the uninsured.


The Congressional Budget Office's projections of the proposed Bills' costs and their estimate that these Bills will still leave tens of millions uninsured, have vastly reduced popular support and have made "Blue Dog" Democrats concerned, both for their constituents' welfare and their own political futures.  Additionally, provisions in the Bill can be read as requiring mandatory enrollment in the "Public Option," if an individual losses a job, changes a job or leaves employment to start his or her own business, none of which is unlikely in the current economy and all of which undermine public support.

While insurance is not portable under the current system, indeed that is another of the things that require reform, an individual being laid off can currently keep his or her current insurance under COBRA for a period at the Group rate (but usually without employer contribution); obtain the same or similar insurance coverage under a new employer's plan; or obtain his or her own similar individual insurance (or start his or her own Plan, depending on the scope of the new business) upon becoming self-employed or starting a business.

The proposed Bills also talk about creating a "Public Option" insurance entity that would be funded by the government to increase "competition."  The structure would be similar to our Medicare system and Canadian and Australian Medicare: government funded social insurance.  Since there are already numerous payors (including, but not limited to, national players such as the Blues, Aetna, GHI, and scores of regional payors such as MVP, CHPHP and HIP) there is already competition.  Additionally, our Part A (Hospital) Medicare Trust fund will be exhausted by 2017 by current estimates, which is hardly a model to emulate.

There are some other alternatives proposed in these Bills.
The state level insurance exchanges mentioned in the proposed Bills, seem to have all the efficiency and charm of the DMV.  A similar entity under Massachusetts Health Care Reform, led by then-Governor Romney, which was called "Massachusetts Connector," has not reduced costs.   Since this idea in the proposed Bills appears to use existing payors, it can't be said that this is a system of social insurance, however, the fact that the government will set reimbursement rates for what will likely be a metastasizing Public Option, and because the probable expansion of the Public Option will likely bar insurers from the market who do not want to either: 1) take the government rate; or 2) compete with a program that, not only does not need to make a profit, but can lose large sums of money with out being forced into bankruptcy, does not bode well for genuine reform.  The proposed Bills will likely limit both patient choice and competition, both of which are critical to reducing costs.

Additionally, it is not altogether clear that such a change, depending on its scope, would even be constitutional.  In 2005, the Canadian Supreme Court ruled that laws in Quebec (similar to laws in other Canadian Provinces) that barred private payors from offering coverage for procedures and services covered under Canadian Medicare was an unconstitutionally inequitable, as lack of a "private option" drove up wait times to an unconscionable level.  At the time, Canada was one of only three nations that barred private health insurance. (See, e.g., Chaoulli v. Quebec [Attorney General], 2005 SCC 35, [CanLII];   A woman I talked to at the National Health Care Day of Service, a French Canadian who had managed her brother's pediatric practices in both NY and Quebec, said this change was a godsend.  A Public Option as broad as that proposed could be found wanting on this basis or a related one of interference with privacy.

As a recent Op-ed in the Wall Street Journal posited, under the privacy rights decisions made by the US Supreme Court in Griswold and Roe, it is unclear whether the Government (as opposed to a private actor, such as a payor) can interfere with a Doctor-Patient relationships dealing with issues of like gravity to the decision to have (or abort) a child.  (See David B. Rivkin, Jr. & Lee a. Casey, Is Government Health Care Constitutional?, Wall St.J., June 22, 2009  Under regulatory takings cases, mostly coming out of environmental law, it is not clear that such a change to the law would not constitute a regulatory taking, that would require the payors to be compensated, another enormous outlay of money.  (See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992); Dolan v. City of Tigard, 512 U.S. 374 (1994) ("Under the well settled doctrine of "unconstitutional conditions," the government may not require a person to give up a constitutional right in exchange for a discretionary benefit conferred by the government where the property sought has little or no relationship to the benefit."  It is worth noting that one of the attorneys for Mr. Dolan was one John Roberts).

Given these potential problems, how should reform proceed?


In some ways, much of the health care reform question is one of agency.  Who is the best and least conflicted (hence most legitimate) agent to deal with payors for patients?

In my opinion, instead of State-level insurance exchanges, we should move to the French and German models of using not-for-profit entities, in these French and German models generally Unions, as the basis for health care coverage.  Unlike these systems, our Co-ops should aggressively negotiate rates with payors, instead of the government setting the rates.

An employment-based system health care system creates a conflict between an employer's fiduciary duties under the Employee Retirement Income Security Act ("ERISA") to his or her Plan's participants and beneficiaries and his or her fiduciary duties under State Law  to his or her shareholders or partners.  This leads to counter-intuitive decisions by the Supreme Court which state that an ERISA Fiduciary must be selfless in dealing with the Plan's participants and beneficiaries but that the same individual can, as the business's CEO, end the Plan for business reasons.

Increasingly, employers do not provide health insurance benefits to employees.  This reflects both the costs involved and the trend towards the use of contingent employees, such as independent contractors, rather than W-2 employees as well as the increased use of part-time employees, who traditionally are not provided health insurance benefits.  While the proposed Bills require employers to provide insurance or pay fines, the Massachusetts experience has been that employers are willing to pay a low fine rather than offer insurance.  If the fine were higher, it might cause the employer either to outsource or to leave the jurisdiction entirely.  Trying to continue employment-based insurance, when market forces are arrayed against it, is likely a fool's errand in a world where anything can be done anywhere.

The better system would be to move to a system where people would be able to get the advantages of present employer-based insurance, group rates, reduced coverage limitations for pre-existing conditions and greater choice, through membership in not-for-profits such as unions, professional organizations (e.g., ABA, AMA, MGMA, ACHE, etc.) and fraternal/charitable organizations (e.g., Knights of Columbus, Veterans of Foreign Wars and the Chamber of Commerce).  Many of these entities already offer insurance, but these offerings suffer from many of the problems which exist in the individual health insurance market generally: limits on the ability to cover those with preexisting conditions; high costs due to lack of a true group rate; and limited choice.  Unions can offer ERISA Plans, however, they are limited by the somewhat draconian Multiple Employer Welfare Arrangement ("MEWA") Rules promulgated by the US Department of Labor, which (like ERISA) would need to be heavily modified to implement this concept.

By placing health insurance under the ambit of membership in these Co-op groups, access, quality and cost would be handled by an entity with an undivided loyalty to the participants and beneficiaries in the Plans offered.  Since there would be multiple groups, and individuals could change affiliation during open enrollment periods as in the current employment-based system, there would be competition between these groups, which would reduce costs and increase efficiency.

These entities would specialize in managing cost, quality and access by leveraging access to large numbers of members in return for concessions from payors on cost and coverage.  This same model is used by PPOs to obtain discounts from physicians and other providers.   Since numbers create power, there would be a bias toward adding individuals who are not currently insured.  This type of aggressive management typifies the best managed self-insured plans, such as GE.  However, in this case, it would be the entities raison d’être, rather than a cost-control measure.


As to finance, members’ dues should be part of the answer.  Giving individuals a tax credit would partly defray this expense.  Additional, rather than a fine, businesses that contributed to those Co-ops to which their employees belonged would also receive a tax credit.  Since this system would likely enable the Federal Government to replace the Medicaid and State Child Health Plus ("SCHIP") programs, the current cost to the Federal Government should be contributed each year to fund these tax credits and the program.   In order to temper cost inflation, this payment should be capped at FY 2009 levels.   States should be encouraged to apply their savings from Medicaid and SCHIP to supporting those Co-ops that operate in-state.

The Federal Employee Health Benefit Program ("FEHBP") is already run in somewhat this manner.  FEHBP might be extended to replace other federal health care programs, notably TRICARE , which covers military families, retirees and military personnel on detached service.  This program might also be used to replace some parts of the VA’s health care services, although some of these are sufficiently specialized to remain separate.  Savings from these changes might also be used to support the new system.

To create greater cost savings and efficiencies, it might make sense to assert the Commerce Clause to the health care sector to a greater degree.  For example, current restrictions on the practice of Physician’s Assistants ("PAs") and, especially,  Nurse Practioners (NPs") in some states  might be challenged as a  restraint on  interstate commerce.

In the same way, Corporate Practice and Fee Splitting laws which limited the implementation of the Physician Practice Management ("PPM") Company (such as PhyCor) in large states like NY back in the late 1990s should be examined as possible burdens on interstate commerce.  It is possible that the PPM idea would never have worked, anything that makes doctors less entrepreneurial tends to fall prey to the twin problems of lower productivity and high overhead, but the concept potentially brought professional management and access to capital markets to health care that had not been seen before and should not have failed because of conflicts of law.  

As many on the Conservative side of the political spectrum suggest, it might make sense to end restrictions on the purchase of insurance across state lines.


A common meme on the Left is that ordinary peoples’ care is already rationed by greedy HMO bureaucrats, so Government rationing should not be an issue.  However, this is untrue.

That controversy occurred in the late 1990s and the early part of this decade and it resulted in the market victory of PPO products that don’t limit access to specialists, don’t generally require a "gate-keeper physician" and allow "out of network encounters" with Physicians outside the payor’s network in return for paying a higher fee.   Americans value health care choice and that put an end to the type of aggressive Managed Care Organizations ("MCOs")/HMO that Helen Hunt railed against in the 1997 film, As Good as It Gets.  Unfortunately, this also put an end to the cost control that these more aggressive MCOs brought to the system.

It also reduced the amount of money paid to physicians, hospitals and other providers for each CPT/DRG.  Most PPO fee schedules are not that more robust than the Medicare Fee Schedule, the Wall Street Journal to the contrary.  These PPOs operate on a volume discount given to these PPOs by providers in return for patient volume.  One reason for the apparent "churning" seen in the recent New Yorker article on McAllen Texas is that Medicine, especially for Primary Care Docs such as  Family Practice Docs, Internists and Pediatricians, has become a volume business .  In general, these savings have not been passed on to the insured.  Evening this playing field is another reason why these Co-ops are a "plan that might work."

In contrast, the issue of the Federal Government rationing care is a new . . .  and potentially unpopular  . .  . idea that has not yet been tested.  In practice, Medicare rarely rations care, one reason why the Hospital Insurance Fund ("Part A") will likely be insolvent by 2017.  A "Public Option" would likely have to ration care, as this is typically a function of social insurance programs like  Australian and Canadian Medicare.

Post Hurricane Katrina and the Iraq war, few Americans across the political spectrum trust the Federal Government to make these decisions, especially for their spouses, children and parents.    This is especially true with these proposed Bills that specifically exempt members of Congress and allow them to keep their enhanced version of FEHBP for some years after implementation.

The Federal government we have lacks this credibility due to recent events and it is likely that no government would have this credibility; they are too far removed from patients, their families and their doctors.  If this is the case, who would have this credibility?

Your neighbors, your physician and family would.  What these Co-ops do is to give people a prospective voice into what plans would be offered and which benefits would available.  It would offer a forum where physicians and other providers could be heard.  In short, these entities would be designed to have a legitimate right to make these hard decisions.

Finally, these not-for-profit organizations would be Constitutionally legitimate, under the Tenth Amendment, as a group of individuals asserting a right not reserved to the Federal Government under the Constitution.  Health Care access is not a right under the US Constitution.  However, the Rights that are dealt with by the Constitution are a microcosm of the Rights reserved to the States and to the people.  

In contrast, creating a frame work of law for people to improve public health is a duty of all governments, at all levels.  In this case that duty is best meet by allowing the emergence of these health care Co-ops.      

Originally posted to John Minehan on Wed Jul 22, 2009 at 02:59 PM PDT.

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Comment Preferences

  •  Sad to say, I couldn't follow your plan.... (1+ / 0-)
    Recommended by:
    John Minehan

    not that you didn't express it clearly, but it was too detailed.  I happen to agree that the present plan as it is shaping up, even with the most desired aspects that are left on the table (a weaken public option) will fail.

    It will fail because the underlying dynamic, which is the law of supply and demand is being ignored.  The supply of health care, specifically the gatekeeping primary physicians, are at 100% capacity, with no ability to be increased in the short term, since a decade is the minimum training period.

    Adding to the demand, without increasing supply, has one effect in a free market, which doctors represent, which is to raise prices.  This means their scarce services will be more directed to the wealthy, with dramatically less physician hours available for a larger number of patients.

    It will be a disaster.

    My idea of a better plan follows the model of our primary school systems.  In this arena we have public schools and private schools.  Those with the financial ability can use the private sector, but all other have public schools, where teachers and all ancillary schools,facilities,materials are paid by taxpayers.

    We could have a separate public health sector, with physicians whose training is subsidized, but who agree to devote their career to this sector.  Will the service be inferior to the private sector, most likely yes, as is the case in Schools.

    This public health system can be built up over time, providing more, and more extensive care as the supply of physicians etc becomes available.

    It could become attractive enough, with no overhead of billing, that it would be preferred to the vast majority of Americans, but it would work, and not be based on illusions, as the current plans are.

    •  This is similar to what has evolved in (0+ / 0-)

      in Canada after the 2005 Supreme Court decision allowing private insurance.  However, we have this with Medicaid and SCHIP and it still does not quite work, for reasons that are unclear to me.

    •  This will reduce the income of physicians, by (0+ / 0-)

      increasing supply, something Docs have not been willing to do since the Flexener report.

      Also, since the name of the game is patient volume, especially in primary care, I am not sure the issue is supply of physicains as opposed to the productive use of those physicians.  Having something to manage that might be useful, like the Co-ops.  

  •  Our current system is so screwed up (1+ / 0-)
    Recommended by:
    John Minehan

    that it would defy any insurance patch -- including single payer.  I say we nationalize the whole freaking mess.

    "Dulled conscience, irresponsibility, and ruthless self-interest already reappear. Such symptoms of prosperity may become portents of disaster!" FDR - 1937

    by Marie on Wed Jul 22, 2009 at 04:02:28 PM PDT

  •  We're doing a public option (0+ / 0-)

    That's the plan. Democrats and the voting public had choices, and they decided upon the guy advocating a public option.

    Is it the best option is every aspect? Heck no. Even the President has acknowledged that point.

    I sit doable given the current political and economic circumstances? Heck yeah, if those that care about meaningful reform get on the same page.

    The idea that we are either going to get the best system that works, or we'll just sit around and complain does nothing but increase the chances of failure.

    The policy goal right now is a strong government-run public option. It is a critical and necessary step to where we need to be.

    Let's all start thinking about how to push Democrat resistance rather than continue pointing out the deficiencies that have already been well chronicle.

    It's fight time, not fretting time!
    Join us please and help as you are able.

    "Most people would sooner die than think; in fact, they do so." ...Bertrand Russell

    by sebastianguy99 on Thu Jul 23, 2009 at 12:36:13 AM PDT

    •  Public option is DOA. The public (0+ / 0-)

      really does not support it.  I was at my local congressman's office last week to support it.  Forty people where there to oppose it.

      We need to scrape this and start from scratch.

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