06/2001: The Pulse
Consumer-Driven Health Care Takes Off
The defined contribution approach is increasingly being called "consumer-driven," which shifts the focus away from employer payment and toward the role of the worker/patient. The phrase “consumer-driven” also better includes all the steps that lead up to, but do not quite reach, "true" defined contribution.
For instance, I spoke recently at the annual conference of the Midwestern Business Group on Health (MBGH). This is an important organization comprised of about 100 of the biggest employers in the Midwest. To be a member, a company must employ at least 8,000 workers. The entire day-and-a-half program was devoted to defined contribution and consumer-driven health care.
I don't know if the conference material will be made available, but call 773/380-9090 for more information. And I will e-mail you my PowerPoint slides if you send a request to GMScan@earthlink.net.
Several of these vendors have formed a new association, the Consumer Driven Health Care Association. Each of the eight member companies has a somewhat different business model and is targeting different market segments. Most, if not all, of them are actually on the street selling product.
The chairman of the new association is Howard Wizig, president of Vivius, who said the purpose of the group is to promote awareness and understanding of the emerging consumer-driven health care industry. Members of the new association are:
Definity Health (http://www.definityhealth.com)
Destiny Health (http://www.destinyhealth.com)
Source: Contact Amy Pak at 612/872-3739, or firstname.lastname@example.org for a copy of the news release announcing the Association’s formation.
EBRI Reviews Defined Contribution
The Employee Benefit Research Institute (EBRI) is getting more even-handed about defined contribution.
According to an EBRI press release, the March issue of EBRI Notes provides an overview of the defined contribution issue, including recent surveys and articles and an analysis of where the issue is today and where it might go. The news release suggests the article considers both the pluses and minuses of the DC approach.
Source: An executive summary of EBRI Issue Brief # 231 is available at http://www.ebri.org/ebripubs.htm.
Wye River Group: The Next “Jackson Hole”?
The National Journal ran a major article on the Wye River Group. The article explains the Wye River business executives and policy analysts have been meeting for two years to discuss health care reform, and now are "enlisting the participation of influential lawmakers" and members of the Bush administration.
Reporter Marilyn Werber Serafini compares the group to the Clinton-era Jackson Hole Group, which advocated managed competition. She says Wye River is looking at such issues as defined contribution, tax credits, and "health marts."
Source: Summarized in the March 20 issue of American Health Line, the National Journal.
MSA Gets Needed Face Lift
House Ways and Means Committee Chairman Bill Thomas (R-California) is filling the shoes of predecessor Bill Archer, taking on the role of number one advocate for medical savings accounts.
Thomas announced he would be introducing a stand-alone MSA expansion bill. William Lipinski (D-Illinois) will be the bill’s the primary cosponsor. The bill, similar to those that passed each house last year, will:
- Make MSAs permanent and eliminate the group size restriction.
- Lift the 750,000 enrollment cap.
- Allow employer and employee funding.
- Lower the allowable deductible to $1,000 for individuals and $2,000 for families.
- Allow MSAs to be offered as part of a cafeteria plan.
- Allow contributions equal to 100 percent of the deductible.
- Allow PPOs to cover preventive care below the deductible.
MSAs are a hot topic even in Korea, according to the Korea Herald. The newspaper reports that, in the face of a collapsing health care system with a $3 billion (US) deficit, the country’s political parties are searching for solutions.
The opposition Grand National Party has called for mandatory MSAs for all Koreans, along with DRGs and PPOs to control outlays. MSAs were initially proposed by the Health and Welfare Ministry, according to the newspaper’s source.
But critics warn MSAs would run counter to the idea of income-based premiums, currently an important part of the country’s health care system.
Source: The Korea Herald, March 22, 2001.
Market Advocates Make Their Case
The Health Subcommittee of the House Ways and Means Committee held a hearing on the uninsured. The committee heard testimony from Paul Fronstin, Jon Gabal, Lynn Etheredge, Mark Pauly, and Steve Larson.
Ranking member Pete Stark (D-California) made an opening statement that laid out the view of the far left on tax credits. Stark said he much preferred to expand government programs, but could go along with a tax credit provided four criteria are met:
- The tax credit must be refundable.
- It must be worth at least 75 percent of the cost of coverage.
- It must be paid to the insurer, not to the consumer.
- And it must include "significant regulation of the health insurance marketplace.”
Stark also said he didn't want to spend "billions of dollars on tax breaks for those who already have insurance."
Boiled down, Stark wants, and has always wanted, "Medicare for all." Frankly, he would burden any tax credit proposal so that it couldn't possibly work.
In other, more productive, presentations at the hearing:
Gabel and Fronstin both presented base-line information about the uninsured. Etheredge presented an idea for "flexible benefits tax credits." He made the important, but often neglected, point that most of the nation’s uninsured are without coverage for a short period of time, so he would have the credit available for other cafeteria-plan type purposes.
Pauly laid out a number of design features for tax credit plans. He emphasized we cannot know exactly how the market will respond, so legislators should avoid trying to anticipate and prevent every possible thing that might go wrong.
Larson, Maryland's Insurance Commissioner, thinks insurance companies are bad, more regulations are good, and association health plans are dangerous. His remarks didn’t shed much light on how to help the uninsured.
Source: All the testimony is available at: http://waysandmeans.house.gov/health/107cong/hl-4wit.html
Remember the VEBA?
Keep an eye on VEBAs.
Often overlooked in discussions about consumer-driven health care is the idea of "Voluntary Employee Benefit Associations" (Internal Revenue Code Section 501(c)(9) plans). Particularly attractive for public employees, VEBAs enable the use of MSAs and defined contribution under current law.
The Austin American-Statesman reports one such program is being considered in Texas for its 522,000 school employees under a proposal offered by State Rep. Paul Sadler (D-Henderson). Although the article doesn't cite VEBAs as the vehicle, it is pretty clear from the description that’s what’s being proposed.
Source: "Health Plan for Teachers Would Divide Funds 3 Ways,” Austin American-Statesman, April 3, 2001. http://www.austin360.com/statesman/editions/tuesday/news_9.html
Greg Scandlen is senior fellow in health policy at the National Center for Policy Analysis in Dallas, Texas. To sign up for his free weekly e-newsletter send an email to HealthPolicyWeekemail@example.com. Scandlen can be contacted at GMScandlen@aol.com.