Hello, Bulwark readers! Remember when, a few days ago, I wrote about how Democrats and their advisers were having a series of conversations about a new agenda for health care reform? Well, some of those conversations are further along than I was able to report at the time, and the people leading one of them are about to put forward a proposal. They’ve shared it with me exclusively, and I’m now sharing it with you. I’m hoping this will be the first of many such articles in which I can write about the ideas that politicians hope can be the basis of a post-Trump governing agenda. Now is the time to pitch and debate such ideas, because it takes a while to figure out what works as policy and politics. Partly for that reason, I’m going to describe these ideas and then the obvious questions about them without injecting too much of my opinion—at least for now. Serious proposals are inevitably complex and full of tradeoffs. It’s tough to assess them quickly, especially when they include genuinely novel concepts. By the way, if you happen to be somebody who is working on such a plan—for health care or any other domestic policy area, from the left or the right or somewhere in between—I’d love to hear about it! You can email me at cohn@thebulwark.com. And if you happen to be somebody who likes reading about these nitty-gritty policy efforts, you should consider becoming a Bulwark+ member to support our efforts in covering them. We’d love to have you aboard: –Jonathan Exclusive: Top Dem Think Tank Unveils Next Big Health Care PushA new “patients’ bill of rights” from the Center for American Progress.
A PROMINENT THINK TANK with close ties to the Democratic establishment is about to unveil a proposal designed to do just that. On Wednesday morning, the Center for American Progress will introduce a set of proposals to limit what hospitals and insurance companies can charge, while also limiting the ability of insurers to deny coverage that doctors recommend to their patients. The proposals, which CAP senior staff shared exclusively with The Bulwark, aren’t fully fleshed out in the way, say, a bill in Congress would be. It’s a starting point for future legislation—a set of ideas that political leaders could debate and refine, tout on the campaign trail and, eventually, attempt to pass into law. CAP is widely known as the unofficial policy incubator for moderate-to-liberal Democrats, which means its proposals are likely to get a serious hearing in Washington. Veterans of past Democratic administrations are heavily represented in the group’s upper ranks. Many would probably end up back in the executive branch—or with jobs on Capitol Hill—if Democrats get control of either or both in upcoming elections. And insofar as CAP’s agenda is indicative of where the party establishment’s brain is right now—or, at least, where CAP current leaders would like it to be—this new proposal signals a few important shifts in thinking about health care. For one thing, the focus of this new agenda is very clearly on improving affordability for everybody, rather than getting coverage for those who are uninsured. “If you want to address people’s concerns about health care, their concerns are driven by high health care costs,” CAP president Neera Tanden told me in an interview. “It’s important to put forward ideas that will help the 91, 92 percent of Americans who have insurance.” Tanden said the decision to focus on costs didn’t mean CAP was backing off its commitment to universal coverage. “We believe health care is a basic human right,” she told me. Nor did Tanden suggest deemphasizing the importance of reversing GOP cuts to Medicaid and the Affordable Care Act, which together are projected to leave tens of millions of Americans either with more expensive coverage or altogether uninsured. But, Tanden and her colleagues said, it was important to address the cost issues as soon as possible. They also said it was important to address sources of everyday frustration for those who are already insured, especially when it comes to denials of treatment that, in the worst of cases, can make it difficult for people to get the care they need. “It doesn’t mean we shouldn’t talk about expanding coverage—that’s always going to be a part of the agenda,” Topher Spiro, a CAP senior fellow who oversees health policy, told me. “It’s just a recognition that we’re at a breaking point on costs . . . and we need to take that on.” The CAP plan seeks to accomplish that by having the federal government get a lot more aggressive about using its regulatory power to hold down costs. Mainly it targets hospitals, by attempting to set a ceiling on what they can charge, and insurers, by putting new limits on their ability to raise premiums. There’s also a set of provisions that would change the way insurers review recommended treatments for approval, in some cases removing altogether their right to block specific treatments. CAP is billing the proposal as a “patients’ bill of rights,” on the theory that it would protect patients from both unfairly high costs and unfair scrutiny of their medical care.¹ And like any such proposal, it’s sure to draw objections from serious people who think it would do too much or too little, or simply wouldn’t work well. But whatever its virtues or flaws—both worthy subjects of future debate—the proposal represents an important departure from the status quo. To see how and why, it helps to understand a sharp turn in policy that took place about fifty years ago.
PICK ANY PEER COUNTRY you want—Germany, France, Japan, the Netherlands—and you’ll discover they spend far less on health care than we do, in both the collective sense (i.e., measured as a percentage of their total economic output) and the individual sense (i.e., measured as each individual’s financial obligation). The reason is that their national health systems do more than simply guarantee coverage for everybody. They use government leverage to limit or set prices for what hospitals, drug makers, and every other provider of health care can charge patients. The United States has at times attempted to regulate prices in similar ways, even without a national health plan in place. And that has included efforts—mostly at the state level—to restrict what hospitals could charge. But by the late 1980s and into the 1990s, nearly every state had taken its hospital price regulations off the books.² One reason was that the whole concept of government meddling with prices on health care—or any good for that matter—had fallen out of political fashion. It was the height of the Reagan era, although this thinking was by no means limited to Republicans and conservatives. Plenty of Democrats and liberals agreed, following the cues of trusted advisers who believed that competition among providers of health care, as well as among insurers, was the best way to drive down prices while promoting more efficient, higher-quality medical care. You can see that thinking in the way American health care works today—including through the Affordable Care Act, which attempts to tap market forces by, for example, having insurers compete for customers on HealthCare.gov. But while there’s a respectable case that the law as a whole really did restrain health spending, relative to what it might have been, in recent years costs have once again started to increase more quickly. A likely culprit in this is an increase in costs from hospitals, which are the single biggest component of overall health spending. And there’s lots of evidence that consolidation is driving that increase, because larger, newly merged hospitals have a lot more power to demand high fees—in some cases, acting like monopolies. That realization has prompted many analysts—even card-carrying economists who a decade or two ago would have been content to let the free market do its thing—to suggest it’s time for the federal government to intervene more directly. “Markets in the U.S. have become broken,” Zack Cooper, a Yale economist who has published groundbreaking research on the effects of hospital mergers on pricing, told me.³ “I don’t think it’s a lack of faith in the virtues of competition. I think it’s a question of whether a large share of markets can generate competitively set prices. And there’s evidence to suggest they can’t.” The CAP proposal takes that thinking and runs with it, by calling on the federal government to prohibit hospitals in “concentrated markets” from charging fees that are more than three times what Medicare currently pays. Nonprofit hospitals with higher charges could lose their tax-exempt status under the CAP proposal, while for-profit hospitals could face some kind of financial penalties. A separate set of proposals would seek to limit what some insurers could charge, while strengthening existing restrictions designed to limit how much of their money goes to profits and overhead. The proposal leaves out lots of important details—including, for example, exactly how officials would determine what qualifies as a “concentrated” hospital market where the government’s rules would kick in. It doesn’t take a ton of imagination to guess the kind of scrutiny it’d draw from the left, where critics would probably say the proposal is too complex and tries to dodge the broader restructuring necessary for real relief. It is similarly easy to imagine attacks from the right, where critics would say regulations are bound to push prices either too high or too low, forcing excessive spending or shortages or some combination of the two. But whatever the merits of those arguments, it says something that the analysts whom CAP consulted on the plan include some of the best known figures in the field. Several told me they thought the package was a sensible, promising step toward getting health care costs under control. “It’s not bad economics, it’s good economics—it’s letting the market work until it doesn’t,” MIT economist Jonathan Gruber, who played a key role in shaping the Affordable Care Act, told me.⁴ “This is the lesson I teach my students in basic economics: You trust markets until markets stop working. And at that point, you start to think about regulation.” THE OTHER BIG WAY THE CAP PROPOSAL envisions breaking with status quo thinking is by limiting the ability of insurers to restrict access to care by requiring approval in advance—or, as it’s known in the business, “prior authorization.” If you’ve ever had to see a specialist or get a procedure, you’re probably familiar with how difficult this process can be. It’s been the rule rather than the exception ever since the 1990s, when private insurers adopted the practice as a way to scrutinize health care decision-making. The theory behind it was that the old system, in which insurers paid for whatever doctors ordered up, created incentives to seek and get care that might be unnecessary or even harmful. Prior authorization represented a strategy for deterring that practice, in a way that would not only improve care but hold down costs. And there’s certainly evidence it’s worked that way, at least some of the time. But there’s also evidence that prior authorization can push health care spending higher, by adding a bunch of costly administrative work. And that’s not to mention the potential for insurers to apply standards arbitrarily or excessively. They can deprive people of care they actually need to stay healthy—which can, as a side effect, increase overall health care spending by creating even worse medical problems in the future. Prior authorization “can powerfully delay coverage, and sometimes deny coverage outright,” said Miranda Yaver, a University of Pittsburgh health policy professor whose forthcoming book, Coverage Denied, examines how prior authorization veered from its original purpose.⁵ The CAP plan proposes to change these practices—in part, by prohibiting prior authorization altogether for certain kinds of emergency, routine, and chronic care, as Massachusetts recently announced it was doing. Insurers could still review other kinds of claims. And for the types of care that data shows are frequently overused (like some kinds of back surgeries) the insurers could still review claims before payment. But they’d have to run it through outside organizations that follow clinical guidelines. Like CAP’s proposals for regulating hospital and insurance prices, the proposals to change prior authorization leave lots of unanswered questions—like precisely what would qualify as an emergency case exempt from review. And here too, it’s easy to imagine analysts from a variety of perspectives raising serious concerns—including whether, by taking away a tool insurers have used to hold down health care spending, this proposal might actually drive up costs. But one of the experts CAP consulted on the proposal is Zirui Song, who in addition to being a health policy professor at Harvard is also a practicing physician. And one thing he likes about the proposal, he told me, is the way it recognizes that different sorts of care call for different sorts of scrutiny. “When I think about improving the system of prior authorizations, it’s less of a yes or no [question] . . . and more about making sure decisions align with the clinical evidence base,” Song said. ULTIMATELY THE CHALLENGE in attempting to translate something like the CAP policy into legislation isn’t just about getting the policy right. It’s figuring out the politics too. And as much as this proposal is designed to meet the moment, by addressing worries about costs that voters say are a top concern, it would almost certainly run into stiff resistance from insurers and hospitals. But industry opposition isn’t always insurmountable. Just a few years ago, Joe Biden and the Democrats managed to enact new regulations on prescription drug prices, despite hard-core pushback from the pharmaceutical industry. It helped that the idea was inherently popular. But it also helped that the process of crafting that legislation started years before Biden took office, because it meant there was time to work out the substance and the presentation. Something similar could be starting now.
1
The phrase itself is far from new. A set of proposals to regulate insurance practices back in the 1990s had the same name. The proposals got a lot of attention at the time, enough that the concept even became part of a storyline on The West Wing. To be clear, the new CAP proposal is more ambitious than those proposals were, even if it’s still way less ambitious than ideas like “Medicare for All” that envision a complete overhaul of the health care system.
2
An exception is Maryland, whose “all-payer” rate regulation continues to operate today.
3
An important caveat in Cooper’s research—and plenty of other relevant literature—is that sometimes prices in hospitals are unusually high because the quality of care is better, or they produce better results. It’s when hospital markets have high levels of consolidation—that is, when there’s not much competition—that the relationship between prices and quality seems to break down.
4
Another economist CAP consulted is Harvard’s Michael Chernew, who has also published some of the most widely cited research on health care pricing—and who recently coauthored a Health Affairs article raising (and answering) some of the biggest questions about how price regulation would work in practice.
5
For more on the debate over prior authorization, see this recent essay by KFF president Drew Altman. You’re a free subscriber to The Bulwark—the largest pro-democracy news and analysis bundle on Substack. For unfettered access to all our newsletters and to access ad-free and member-only shows, become a paying subscriber.We’re going to send you a lot of content—newsletters and alerts for shows so you can read and watch on your schedule. Don’t care for so much email? You can update your personal email preferences as often as you like. To update the list of newsletters or alerts you received from The Bulwark, click here. Having trouble with something related to your account? Check out our constantly-updated FAQ, which likely has an answer for you.
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