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Lewin vs Stark: How Many Americans Will End Up on the Public Plan?

Posted By Conn Carroll On July 22, 2009 @ 1:05 pm In Obamacare | Comments Disabled

Earlier this week, in conjunction with The Lewin Group [1], we released [2] an analysis [3] of the House health bill showing that if the public plan component became law:

  • Approximately 103 million people would be covered under the new public plan and, as a consequence, about 83.4 million people would lose their private insurance. This would represent a 48.4 percent reduction in the number of people with private coverage.
  • About 88.1 million workers would see their current private, employer-sponsored health plan go away and would be shifted to the public plan.
  • Yearly premiums for the typical American with private coverage could go up by as much as $460 per privately-insured person, as a result of increased cost-shifting stemming from a public plan modeled on Medicare.

Long-time single payer advocate Rep. Pete Stark (D-CA) [4] has since responded to the Lewin study claiming “The Congressional Budget Office Trumps the Lewin Group.” [5] The Lewin Group now has a point by point rebuttal of Stark’s statement [6]. The is the text of the Lewin response, also available here [6]:

Stark Claim #1. Enrollment: The CBO predicts 12 million people in the public plan compared with the Lewin estimate of 103.4 million people.
Lewin Response: As explained above, we estimate that the public plan will save more than CBO assumed. The CBO also assumes that eligibility for the public plan is never extended beyond firms with fewer than 20 workers, while we assume the Commissioner would exercise his/her authority to extend eligibility to all employers so that all can take advantage of the projected premium savings.

Stark Claim #2: The CBO estimates an increase in employer-sponsored insurance of 2.0 million people while we estimate that 88 million workers and dependents enroll in the public plan.
Lewin Response: In Figure 4 of our paper, we show that the number of people with coverage sponsored by employers increases by 1.4 million people. The difference is that we estimate that about 88 million people would be in firms that decide to purchase coverage for their workers in the exchange and then elect the public plan option.

Stark Claim #3: Lewin assumes that providers would participate in the public plan regardless of what it pays.
Lewin Response: We assume that provider participation in the public plan would be similar to participation under Medicare, where the same payment levels are used (In fact payments in the public plan for physicians will often be Medicare plus five percent). We also assumed that providers would not be subject to the same utilization management controls that are used by private plans. The cost of the resulting increase utilization of health services in the public plan is reflected in our public plan premiums and discussed in Appendix A of our paper.

Stark Claim #4: Lewin estimates that premium savings in the public plan will be lower than CBO assumes, because private insurers will step up their cost containment efforts.
Lewin Response: The assumption that private insurers could close the premium gap with enhanced cost containment is unrealistic in the context of how insurers control costs.
a. Insurer bargaining leverage is diminished under the program. Insurers typically negotiate “volume” discounts with providers. Thus the more people a plan covers the more bargaining leverage it has in obtaining these discounts. Because millions of people move to the public plan, private plan enrollment drops, thus diminishing private insurer bargaining leverage.
b. Consolidations across hospitals and physician groups have eliminated provider competition in some areas, thus reducing the plan’s ability to leverage discounts. For example, a plan has little leverage in negotiating discounts if there are no other hospital systems in the area.
c. The effectiveness of provider networks is diminished by the program. Key to the effectiveness of networks is the plan’s ability to channel patients to the providers who are participating in the plan’s cost containment efforts. However, provider network formation is experienced by patients as restrictions on access. Increased reliance on these approaches would further alienate patients resulting in a greater shift to the public plan.
d. Intensification of insurer utilization management practices would also further alienate patients and providers.

Stark Claim #5: Experience with FEHBP and other programs show that price is not the only factor in choosing a health plan.
Lewin Response: This is basically true, although in the FEHBP experience, the coverage provided differs across each plan offered. There are differences in co-insurance, covered services and network availability etc. This differs from the exchange model where people pick among competing plans with virtually the same co-pays and coverage. This will increase the relative importance of price and quality indicators in selecting a plan.

Also, as discussed in Appendix A of our paper, we do account for differences in price response by age and health status, which controls for some of these issues raised by the critique. For example, we account for the fact that when faced with a lower cost coverage option, older and sicker individuals are less likely to change coverage than are younger and healthier people.

Stark Claim #6: Lewin assumes that the Commissioner exercises his/her option to extend public plan eligibility to all employers.
Lewin Response: At this time, the only thing in the House bill that results in savings for workers is the public plan. If the Commissioner does not extend eligibility to all, most people would see no cost containment. In our next study, we show the impacts with and without extending eligibility to firms with over 20 workers.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/07/22/lewin-vs-stark-how-many-americans-will-end-up-public-plan/

URLs in this post:

[1] The Lewin Group: http://www.lewin.com/Home/

[2] we released: http://www.foundry.org/2009/07/20/obamacare-you-will-lose-your-current-insurance-period-end-of-story/

[3] an analysis: http://www.lewin.com/content/publications/Lewin-HouseBillAnalysis-Heritage.pdf

[4] Long-time single payer advocate Rep. Pete Stark (D-CA): http://www.thenation.com/doc/20060206/stark

[5] “The Congressional Budget Office Trumps the Lewin Group.”: http://www.stark.house.gov/images/stories/111/press/lewinvscbo.pdf

[6] a point by point rebuttal of Stark’s statement: http://www.lewin.com/content/publications/Clarification-Lewin_Heritage_Analysis.pdf

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